PART I. FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=2&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of Five Point Holdings, LLC for the three and nine months ended September 30, 2023 and 2022, including balance sheets, statements of operations, comprehensive income (loss), capital, and cash flows, along with detailed notes explaining the company's business, accounting policies, segment performance, and other financial disclosures [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The company's total assets increased slightly from December 31, 2022, to September 30, 2023, driven primarily by an increase in cash and cash equivalents. Total liabilities saw a minor decrease, while total capital increased, reflecting improved financial health | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | **ASSETS** | | | | Inventories | $2,252,783 | $2,239,125 | | Cash and Cash Equivalents | $218,264 | $131,771 | | Total Assets | $2,934,547 | $2,885,784 | | **LIABILITIES AND CAPITAL** | | | | Total Liabilities | $988,164 | $992,737 | | Total Capital | $1,921,383 | $1,868,047 | [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a significant turnaround from net loss to net income for both the three and nine months ended September 30, 2023, primarily driven by a substantial increase in land sales revenue and equity in earnings from unconsolidated entities | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total Revenues | $65,923 | $15,416 | $92,973 | $25,695 | | Total Costs and Expenses | $54,627 | $21,098 | $96,107 | $79,078 | | Equity in (Loss) Earnings from Unconsolidated Entities | $(622) | $(4,265) | $52,554 | $(4,654) | | Net Income (Loss) Attributable to the Company | $6,603 | $(4,439) | $25,638 | $(26,680) | | Basic EPS (Class A Share) | $0.10 | $(0.06) | $0.37 | $(0.39) | | Diluted EPS (Class A Share) | $0.09 | $(0.07) | $0.37 | $(0.39) | [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The company reported comprehensive income for the three and nine months ended September 30, 2023, a significant improvement from comprehensive losses in the prior year periods, primarily reflecting the positive shift in net income | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Income (Loss) | $14,158 | $(9,531) | $54,979 | $(57,272) | | Other Comprehensive Income—Net of tax | $41 | $13 | $122 | $39 | | Comprehensive Income (Loss) Attributable to the Company | $6,628 | $(4,431) | $25,714 | $(26,656) | [Unaudited Condensed Consolidated Statements of Capital](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Capital) Total capital increased from December 31, 2022, to September 30, 2023, primarily due to net income and share-based compensation expense, partially offset by tax distributions to noncontrolling interests | Metric | Balance Dec 31, 2022 (in thousands) | Balance Sep 30, 2023 (in thousands) | | :-------------------------------- | :---------------------------------- | :---------------------------------- | | Contributed Capital | $587,733 | $590,551 | | Retained Earnings | $33,386 | $59,024 | | Total Members' Capital | $618,131 | $646,661 | | Noncontrolling Interests | $1,249,916 | $1,274,722 | | Total Capital | $1,868,047 | $1,921,383 | - **Net income** for the nine months ended September 30, 2023, was **$54,979 thousand**, contributing to the **increase in retained earnings and total capital**[24](index=24&type=chunk) - **Share-based compensation expense** for the nine months ended September 30, 2023, was **$2,610 thousand**[24](index=24&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated significant net cash from operating activities for the nine months ended September 30, 2023, a substantial improvement from cash used in operating activities in the prior year, primarily due to land sales and distributions from unconsolidated entities | Metric | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net Cash Provided by (Used in) Operating Activities | $65,064 | $(175,023) | | Net Cash Provided by Investing Activities | $29,946 | $2,307 | | Net Cash Used in Financing Activities | $(8,517) | $(6,367) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $86,493 | $(179,083) | | Cash, Cash Equivalents, and Restricted Cash—End of period | $219,256 | $87,709 | - **Operating activities benefited from $60.6 million in land sales** at Valencia and **$22.0 million in incentive compensation payments** from the Great Park Venture in 2023[196](index=196&type=chunk) - **Investing activities were positively impacted by $29.0 million return of investment** from Great Park Venture in 2023[199](index=199&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's accounting policies, business structure, segment information, related party transactions, debt, commitments, and other financial instruments, offering crucial context to the condensed consolidated financial statements [Note 1. BUSINESS AND ORGANIZATION](index=10&type=section&id=Note%201.%20BUSINESS%20AND%20ORGANIZATION) Five Point Holdings, LLC is a Delaware limited liability company focused on owning and developing mixed-use planned communities in California. It operates through Five Point Operating Company, LP, and has a complex organizational structure involving Class A and Class B common shares, noncontrolling interests, and equity interests held by major owners like Lennar Corporation and Castlelake, LP - The Holding Company owns **approximately 62.6%** of the outstanding **Class A Common Units** of the Operating Company as of September 30, 2023[35](index=35&type=chunk) - **Class A Common Units** of the Operating Company can be exchanged for Class A common shares or cash, and **Class A units** of the San Francisco Venture can be exchanged for **Class A Common Units** of the Operating Company[35](index=35&type=chunk)[63](index=63&type=chunk) [Note 2. BASIS OF PRESENTATION](index=11&type=section&id=Note%202.%20BASIS%20OF%20PRESENTATION) The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information, consolidating entities where the Holding Company has a controlling interest or is the primary beneficiary of VIEs. Management's estimates and assumptions are used, and actual results may differ - The company consolidates subsidiaries where it has a **controlling interest** and Variable Interest Entities (VIEs) where it is the **primary beneficiary**[37](index=37&type=chunk) - These condensed consolidated financial statements are **unaudited** and should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2022[38](index=38&type=chunk) [Note 3. REVENUES](index=13&type=section&id=Note%203.%20REVENUES) Consolidated revenues significantly increased for both the three and nine months ended September 30, 2023, primarily driven by land sales in the Valencia segment and increased management services revenue in the Great Park segment | Revenue Source | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Land sales | $60,694 | $72 | $60,685 | $643 | | Land sales—related party | $— | $2,817 | $595 | $4,529 | | Management services—related party | $4,502 | $12,108 | $29,512 | $18,358 | | Operating properties | $727 | $419 | $2,181 | $2,165 | | Total revenues | $65,923 | $15,416 | $92,973 | $25,695 | - The **decrease in contract assets by $6.8 million** for the nine months ended September 30, 2023, was mainly due to receipt of marketing fees and **$24.6 million in incentive compensation payments** from the Great Park Venture[43](index=43&type=chunk) [Note 4. INVESTMENT IN UNCONSOLIDATED ENTITIES](index=14&type=section&id=Note%204.%20INVESTMENT%20IN%20UNCONSOLIDATED%20ENTITIES) The company holds equity method investments in Great Park Venture, Gateway Commercial Venture, and Valencia Landbank Venture. The Great Park Venture significantly contributed to equity in earnings in 2023 due to substantial land sales, while Gateway Commercial Venture reported a net loss [Great Park Venture](index=14&type=section&id=Great%20Park%20Venture) The Great Park Venture, in which the company holds a 37.5% Percentage Interest, reported significant net income for the nine months ended September 30, 2023, primarily from land sales, a substantial improvement from a net loss in the prior year. The company's share of earnings from this venture was $53.1 million | Metric | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Land sale and related party land sale revenues | $372,472 | $39,020 | | Net income (loss) of Great Park Venture | $169,519 | $(19,658) | | Equity in earnings (loss) from Great Park Venture | $53,072 | $(5,634) | - The Great Park Venture made aggregate distributions of **$25.5 million** to Legacy Interests and **$218.0 million** to Percentage Interests during the nine months ended September 30, 2023, with the company receiving **$81.8 million** for its **37.5% share**[45](index=45&type=chunk) [Gateway Commercial Venture](index=15&type=section&id=Gateway%20Commercial%20Venture) The Gateway Commercial Venture, where the company holds a 75% interest, reported a net loss for the nine months ended September 30, 2023, primarily due to interest expense, contrasting with a small net income in the prior year. The company's equity in loss was $1.0 million | Metric | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Rental revenues | $6,329 | $6,248 | | Net (loss) income of Gateway Commercial Venture | $(1,357) | $129 | | Equity in (loss) earnings from Gateway Commercial Venture | $(1,018) | $97 | - The company is subject to certain guaranties of the Gateway Commercial Venture's mortgage note, including an interest and carry guaranty and a springing guaranty of **50%** of the outstanding balance under specific conditions[54](index=54&type=chunk) [Valencia Landbank Venture](index=16&type=section&id=Valencia%20Landbank%20Venture) The company holds a 10% equity method interest in the Valencia Landbank Venture, which facilitates residential lot purchases and options for homebuilders. The company recognized $0.5 million in equity in earnings for the nine months ended September 30, 2023 | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Company's investment in Valencia Landbank Venture | $1,400 | $1,900 | | Equity in earnings (9 months ended Sep 30, 2023) | $500 | N/A | | Equity in earnings (9 months ended Sep 30, 2022) | N/A | $900 | [Note 5. NONCONTROLLING INTERESTS](index=16&type=section&id=Note%205.%20NONCONTROLLING%20INTERESTS) Noncontrolling interests represent equity interests in the Operating Company and San Francisco Venture held by other partners, which can be exchanged for Class A common shares or cash. The company's ownership in the Operating Company increased to 62.6% due to share-based compensation activities [The Operating Company](index=16&type=section&id=The%20Operating%20Company) The Holding Company's ownership in the Operating Company increased to approximately 62.6% as of September 30, 2023. Holders of Class A Common Units can exchange their units for Class A common shares or cash, and tax distributions are made to partners based on estimated income tax liabilities - The Holding Company's **ownership interest** in the Operating Company **increased to approximately 62.6%** as of September 30, 2023[56](index=56&type=chunk) - **Class A Common Unit** holders have the right to exchange units for Class A common shares (**one-for-one**) or cash, which is currently exercisable[57](index=57&type=chunk) | Tax Distributions (in thousands) | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | | Management Partner | $2,059 | $4,033 | $435 | | Total Tax Distributions | $2,059 | $4,033 | $435 | [The San Francisco Venture](index=17&type=section&id=The%20San%20Francisco%20Venture) The Operating Company owns all Class B units of the San Francisco Venture, while Class A units, held by Lennar and Castlelake, are economically equivalent to Operating Company Class A Common Units and can be redeemed for them - **Class A units** of the San Francisco Venture are substantially economically equivalent to **Class A Common Units** of the Operating Company and can be redeemed for them on a **one-for-one basis**[62](index=62&type=chunk)[63](index=63&type=chunk) [Redeemable Noncontrolling Interest](index=17&type=section&id=Redeemable%20Noncontrolling%20Interest) The San Francisco Venture has 25.0 million Class C units outstanding, issued to an affiliate of Lennar, which are redeemable for cash up to $25.0 million upon certain conditions related to reimbursements from a Mello-Roos district - **25.0 million Class C units** were outstanding at September 30, 2023, and December 31, 2022, with a maximum redemption amount of **$25.0 million**[64](index=64&type=chunk) - **Redemption** is contingent on the company receiving reimbursements from the Mello-Roos community facilities district, **up to 50%** of reimbursements received[64](index=64&type=chunk) [Note 6. CONSOLIDATED VARIABLE INTEREST ENTITY](index=17&type=section&id=Note%206.%20CONSOLIDATED%20VARIABLE%20INTEREST%20ENTITY) The Holding Company consolidates the Operating Company and its subsidiaries, including the San Francisco Venture, FP LP, and FPL, all identified as VIEs where the company is the primary beneficiary due to its power to direct significant activities and receive economic benefits - The San Francisco Venture is consolidated as a VIE because the Operating Company has **unilateral power** over its significant economic activities and receives **99% of distributions**[66](index=66&type=chunk) | San Francisco Venture (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :----------------------------------- | :----------- | :----------- | | Total combined assets | $1,350,000 | $1,310,000 | | Total combined liabilities | $65,700 | $67,300 | | FP LP and FPL (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | | Combined assets | $1,000,000 | $1,100,000 | | Combined liabilities | $68,700 | $77,200 | [Note 7. INTANGIBLE ASSET, NET—RELATED PARTY](index=18&type=section&id=Note%207.%20INTANGIBLE%20ASSET,%20NET%E2%80%94RELATED%20PARTY) The intangible asset, related to incentive compensation from the Great Park Venture's development management agreement, decreased due to amortization. Amortization expense is recognized as part of management services costs | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Gross carrying amount | $129,705 | $129,705 | | Accumulated amortization | $(98,676) | $(89,448) | | Net book value | $31,029 | $40,257 | - **Intangible asset amortization expense** was **$9.2 million** for the nine months ended September 30, 2023, and **$5.4 million** for the nine months ended September 30, 2022[76](index=76&type=chunk) [Note 8. RELATED PARTY TRANSACTIONS](index=19&type=section&id=Note%208.%20RELATED%20PARTY%20TRANSACTIONS) Related party assets and liabilities include contract assets, operating lease assets/liabilities, and reimbursement obligations. Management fee revenues from the Great Park Venture decreased for the three months but increased for the nine months ended September 30, 2023, due to variable incentive compensation | Related Party Item (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------- | :----------- | :----------- | | **Assets:** | | | | Contract assets | $75,595 | $79,863 | | Total Related Party Assets | $91,103 | $97,126 | | **Liabilities:** | | | | Reimbursement obligation | $58,708 | $62,990 | | Total Related Party Liabilities | $81,547 | $93,086 | | Management Fee Revenues (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Management services—related party | $4,400 | $12,000 | $29,200 | $18,000 | - The Great Park Venture made a Legacy Incentive Compensation payment of **$2.6 million** and a Non-Legacy Incentive Compensation payment of **$22.0 million** to the company during the nine months ended September 30, 2023[79](index=79&type=chunk) [Note 9. NOTES PAYABLE, NET](index=20&type=section&id=Note%209.%20NOTES%20PAYABLE,%20NET) The company's notes payable primarily consist of 7.875% Senior Notes due 2025. The $125.0 million unsecured revolving credit facility was amended in October 2023, extending its maturity to April 2026, with no outstanding borrowings as of September 30, 2023 | Debt Instrument (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :----------------------------- | :----------- | :----------- | | 7.875% Senior Notes due 2025 | $625,000 | $625,000 | | Unamortized debt issuance costs and discount | $(3,198) | $(4,349) | | Notes payable, net | $621,802 | $620,651 | - The **$125.0 million** unsecured **revolving credit facility's maturity date was extended to April 2026** (potentially accelerated to **July 2025** if senior notes are not refinanced)[83](index=83&type=chunk) - As of September 30, 2023, there were **no borrowings or letters of credit outstanding** on the revolving credit facility[82](index=82&type=chunk) [Note 10. TAX RECEIVABLE AGREEMENT](index=20&type=section&id=Note%2010.%20TAX%20RECEIVABLE%20AGREEMENT) The company has a Tax Receivable Agreement (TRA) with certain unit holders, obligating it to pay 85% of realized cash tax savings from specific tax attributes. The liability for expected payments was $173.2 million as of September 30, 2023, with no payments made during the reported periods | TRA Liability (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | | Payable pursuant to tax receivable agreement | $173,208 | $173,068 | - **No TRA payments were made** during the nine months ended September 30, 2023 or 2022[84](index=84&type=chunk) [Note 11. COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=Note%2011.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is subject to various commitments and contingencies, including performance bonds for development obligations, guarantees for the San Francisco Venture, letters of credit, and legal proceedings, notably the Hunters Point Litigation | Commitment (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------ | :----------- | :----------- | | Performance bonds | $307,200 | $315,000 | | San Francisco Venture guarantees | $198,300 | $198,300 | | Letters of credit | $1,000 | $1,000 | | Operating lease liabilities | $11,791 | $15,705 | [Performance and Completion Bonding Agreements](index=20&type=section&id=Performance%20and%20Completion%20Bonding%20Agreements) The company had outstanding performance bonds of $307.2 million as of September 30, 2023, primarily related to its Valencia community, to ensure completion of development obligations - **Outstanding performance bonds totaled $307.2 million** as of September 30, 2023, down from **$315.0 million** at December 31, 2022[86](index=86&type=chunk) [Candlestick and The San Francisco Shipyard Disposition and Development Agreement](index=21&type=section&id=Candlestick%20and%20The%20San%20Francisco%20Shipyard%20Disposition%20and%20Development%20Agreement) The San Francisco Venture has agreed to reimburse the San Francisco Agency for costs and expenses and may share profits from development. It also has outstanding guarantees of $198.3 million for infrastructure and park obligations - The San Francisco Venture has outstanding guarantees of **$198.3 million** benefiting the San Francisco Agency for infrastructure and park/open space obligations[88](index=88&type=chunk) [Letters of Credit](index=21&type=section&id=Letters%20of%20Credit) The company had $1.0 million in outstanding letters of credit at September 30, 2023, secured by $1.0 million in restricted cash, to secure various development and financial obligations - **Outstanding letters of credit totaled $1.0 million** at September 30, 2023, secured by **$1.0 million** in restricted cash and certificates of deposit[89](index=89&type=chunk)[94](index=94&type=chunk) [Legal Proceedings](index=21&type=section&id=Legal%20Proceedings) The company is involved in the Hunters Point Litigation, a putative class action alleging fraudulent misrepresentation by a contractor regarding toxic waste remediation. The company believes it has meritorious defenses and insurance/indemnification rights - The Bayview Action lawsuit alleges **fraudulent misrepresentation** by Tetra Tech regarding toxic radiological waste testing and remediation at The San Francisco Shipyard[90](index=90&type=chunk) - Plaintiffs seek **damages and an injunction** to prevent development activities at The San Francisco Shipyard[90](index=90&type=chunk) [Note 12. SUPPLEMENTAL CASH FLOW INFORMATION](index=22&type=section&id=Note%2012.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Supplemental cash flow information includes cash paid for interest, noncash lease expense, and noncash investing/financing activities. A reconciliation of cash, cash equivalents, and restricted cash is also provided | Metric (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Cash paid for interest | $26,668 | $26,902 | | Noncash lease expense | $3,086 | $3,453 | | Adjustment to TRA liability | $140 | $(1,058) | | Cash, Cash Equivalents, and Restricted Cash (in thousands) | Sep 30, 2023 | Sep 30, 2022 | | :------------------------------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $218,264 | $86,379 | | Restricted cash and certificates of deposit | $992 | $1,330 | | Total | $219,256 | $87,709 | [Note 13. SEGMENT REPORTING](index=22&type=section&id=Note%2013.%20SEGMENT%20REPORTING) The company operates through four reportable segments: Valencia, San Francisco, Great Park, and Commercial, each focusing on distinct mixed-use planned communities or commercial developments in California. Segment results are reconciled to consolidated balances, with unconsolidated ventures removed - The **Valencia segment** includes the Valencia community and agricultural operations in northern Los Angeles County, California[95](index=95&type=chunk) - The **San Francisco segment** covers the Candlestick and The San Francisco Shipyard communities on bayfront property in San Francisco[96](index=96&type=chunk) - The **Great Park segment** includes Great Park Neighborhoods in Orange County and management services provided to the Great Park Venture, where the company holds a **37.5% equity interest**[97](index=97&type=chunk) - The **Commercial segment** encompasses the Gateway Commercial Venture's operations at the Five Point Gateway Campus and property management services[98](index=98&type=chunk) [Note 14. SHARE-BASED COMPENSATION](index=24&type=section&id=Note%2014.%20SHARE-BASED%20COMPENSATION) The company's 2023 Incentive Award Plan increased available Class A common shares for issuance. Share-based compensation expense decreased for the three and nine months ended September 30, 2023, compared to the prior year, which included significant restructuring-related expenses - The 2023 Incentive Award Plan increased the aggregate number of Class A common shares available for issuance by **7,500,000**[102](index=102&type=chunk) | Metric (in thousands, except shares) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Nonvested at January 1 | 2,166 | N/A | | Granted | 3,947 | N/A | | Vested | (744) | N/A | | Nonvested at September 30 | 4,463 | N/A | | Share-based compensation expense | $2,600 | $5,500 | - For the nine months ended September 30, 2022, **$3.0 million of share-based compensation expense** was included in restructuring expense due to a modification of awards for former officers[103](index=103&type=chunk) [Note 15. EMPLOYEE BENEFIT PLANS](index=24&type=section&id=Note%2015.%20EMPLOYEE%20BENEFIT%20PLANS) The company maintains a frozen defined benefit Retirement Plan. Net periodic cost for the plan was $21 thousand for the three months and $62 thousand for the nine months ended September 30, 2023, an increase from a net benefit in the prior year | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net periodic cost (benefit) | $21 | $(112) | $62 | $(336) | - The **Retirement Plan** was **frozen in 2004** and does not include a service cost component[105](index=105&type=chunk) [Note 16. INCOME TAXES](index=24&type=section&id=Note%2016.%20INCOME%20TAXES) The company recorded no significant income tax provision or benefit for the three and nine months ended September 30, 2023 and 2022, due to the application of a valuation allowance against its net deferred tax assets, largely stemming from a history of book losses - **No significant income tax provision or benefit was recorded** for the three and nine months ended September 30, 2023 and 2022, after applying a **valuation allowance**[107](index=107&type=chunk) - The **effective tax rates** differ from the **21% federal statutory rate** primarily due to the **valuation allowance**, disallowance of executive compensation, and income/losses passed through to other partners[107](index=107&type=chunk) - The company continues to record a **full valuation allowance** against its federal and state net deferred tax assets due to a history of book losses[108](index=108&type=chunk) [Note 17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS AND DISCLOSURES](index=25&type=section&id=Note%2017.%20FINANCIAL%20INSTRUMENTS%20AND%20FAIR%20VALUE%20MEASUREMENTS%20AND%20DISCLOSURES) The carrying amounts of most financial instruments approximated their fair values. However, the fair value of the company's notes payable, net, was lower than its carrying value at both September 30, 2023, and December 31, 2022 - The **carrying amount** of most financial instruments, excluding notes payable, **approximated fair value**[109](index=109&type=chunk) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Fair value of notes payable, net | $590,400 | $525,500 | | Carrying value of notes payable, net | $621,800 | $620,700 | [Note 18. EARNINGS PER SHARE](index=25&type=section&id=Note%2018.%20EARNINGS%20PER%20SHARE) The company uses the two-class method for EPS calculation, allocating net income/loss between Class A and Class B common shares. Diluted EPS calculations consider convertible and exchangeable securities, with Class A basic EPS at $0.10 for Q3 2023 and $0.37 for the nine months - The company uses the **two-class method** for earnings per share, allocating **net income/loss** between Class A and Class B common shares, which have different distribution rates[111](index=111&type=chunk) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic EPS (Class A common shares) | $0.10 | $(0.06) | $0.37 | $(0.39) | | Diluted EPS (Class A common shares) | $0.09 | $(0.07) | $0.37 | $(0.39) | - **Diluted EPS calculations** consider convertible Class B common shares, exchangeable Class A units of the San Francisco Venture, and exchangeable Class A Common Units of the Operating Company[113](index=113&type=chunk) [Note 19. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=28&type=section&id=Note%2019.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Accumulated other comprehensive loss attributable to the company primarily consists of unamortized defined benefit pension plan net actuarial losses, totaling $2.9 million at September 30, 2023, with a full valuation allowance against related tax benefits | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | Accumulated other comprehensive loss attributable to the Company | $2,900 | $3,000 | | Accumulated other comprehensive loss included in noncontrolling interests | $1,800 | $1,900 | - **Reclassifications from accumulated other comprehensive loss to net income (loss) related to amortization of net actuarial losses were approximately $76,000** for the nine months ended September 30, 2023[115](index=115&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting a significant shift from net losses to net income, driven by increased land sales and effective cost management. It details operational achievements, segment-specific results, liquidity, and capital structure changes for the three and nine months ended September 30, 2023 [Overview](index=29&type=section&id=Overview) Five Point Holdings, LLC conducts all business through its operating company, Five Point Operating Company, LP, which directly or indirectly owns equity interests in various development entities across California, including Valencia, San Francisco, Great Park, and Gateway Commercial Ventures - The company, through a wholly owned subsidiary, is the sole managing general partner and owned **approximately 62.6%** of the operating company as of September 30, 2023[118](index=118&type=chunk) - The operating company consolidates and controls the management of Five Point Land, LLC, and The Shipyard Communities, LLC, but accounts for its interests in the Great Park Venture and Gateway Commercial Venture using the **equity method**[118](index=118&type=chunk)[119](index=119&type=chunk) [Operational Highlights](index=30&type=section&id=Operational%20Highlights) The company achieved consolidated net income for Q3 and the nine months ended September 30, 2023, a significant improvement from prior year losses, by focusing on revenue generation, cost control, and capital management. Key activities included land sales at Valencia and public financing reimbursements at Great Park Venture | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :----------------------------- | :------------------------------ | :----------------------------- | | Consolidated Net Income (Loss) | $14,200 | $55,000 | $(9,500) | $(57,300) | | SG&A Expenses | $11,900 | $38,400 | $12,000 | $41,500 | - **Closed the sale of 146 homesites** on approximately **26 acres** at Valencia for **$60.6 million** in Q3 2023[121](index=121&type=chunk) - **Total liquidity was $343.3 million** at September 30, 2023, including **$218.3 million in cash** and **$125.0 million available** under the revolving credit facility[123](index=123&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) The company experienced significant revenue growth and a shift from net loss to net income for both the three and nine months ended September 30, 2023, primarily due to increased land sales at Valencia and improved equity in earnings from unconsolidated entities, particularly the Great Park Venture | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total Revenues | $65,923 | $15,416 | $92,973 | $25,695 | | Total Costs and Expenses | $54,627 | $21,098 | $96,107 | $79,078 | | Equity in (Loss) Earnings from Unconsolidated Entities | $(622) | $(4,265) | $52,554 | $(4,654) | | Net Income (Loss) Attributable to the Company | $6,603 | $(4,439) | $25,638 | $(26,680) | [Three Months Ended September 30, 2023 and 2022](index=31&type=section&id=Three%20Months%20Ended%20September%2030,%202023%20and%202022) Revenues surged by 327.6% to $65.9 million, driven by Valencia land sales. Cost of management services decreased by 68.3% due to lower intangible asset amortization. Equity in loss from unconsolidated entities improved, and net income attributable to the company turned positive - **Revenues increased by $50.5 million (327.6%)** to **$65.9 million**, primarily due to land sales at the Valencia segment[128](index=128&type=chunk) - **Cost of management services decreased by $5.1 million (68.3%)** to **$2.4 million**, mainly due to a **decrease in intangible asset amortization expense**[129](index=129&type=chunk) - **Equity in loss** from unconsolidated entities **improved from $(4.3) million to $(0.6) million**, primarily due to the Great Park Venture[131](index=131&type=chunk) [Nine Months Ended September 30, 2023 and 2022](index=32&type=section&id=Nine%20Months%20Ended%20September%2030,%202023%20and%202022) Revenues increased by 261.8% to $93.0 million, largely from Valencia land sales and Great Park management services. Selling, general, and administrative expenses decreased by 7.4%. Equity in earnings from unconsolidated entities significantly improved to $52.6 million, reversing a prior-year loss - **Revenues increased by $67.3 million (261.8%)** to **$93.0 million**, driven by land sales at Valencia and increased management services revenue at Great Park[134](index=134&type=chunk) - **Selling, general, and administrative expenses decreased by $3.1 million (7.4%)** to **$38.4 million**, mainly due to lower employee-related and selling/marketing expenses[136](index=136&type=chunk) - **Equity in earnings from unconsolidated entities was $52.6 million**, a **significant increase from a loss of $4.7 million**, primarily due to net income from Great Park Venture land sales[139](index=139&type=chunk) [Segment Results and Financial Information](index=34&type=section&id=Segment%20Results%20and%20Financial%20Information) The company's four reportable segments—Valencia, San Francisco, Great Park, and Commercial—show varied performance. Valencia and Great Park segments were key revenue drivers, with Great Park showing a substantial profit turnaround. San Francisco and Commercial segments reported losses [Valencia Segment](index=37&type=section&id=Valencia%20Segment) The Valencia segment experienced a significant increase in land sales revenues for both the three and nine months ended September 30, 2023, due to the sale of 146 homesites. This led to corresponding costs of land sales, while SG&A expenses decreased - **Total land sales revenues increased by $57.8 million to $60.7 million** for the three months ended September 30, 2023, due to the sale of **146 homesites**[153](index=153&type=chunk) - For the nine months ended September 30, 2023, **total land sales revenues increased by $56.1 million to $61.3 million**[155](index=155&type=chunk) - **Selling, general, and administrative expenses decreased by $2.0 million (18.6%)** to **$8.6 million** for the nine months ended September 30, 2023, mainly due to lower community-related selling and marketing expenses[157](index=157&type=chunk) [San Francisco Segment](index=38&type=section&id=San%20Francisco%20Segment) The San Francisco segment, developing Candlestick and The San Francisco Shipyard, continues to face delays in land transfers from the U.S. Navy due to environmental retesting allegations. The segment's development plans are designed for flexibility, but future impacts remain uncertain - **Development at Candlestick and The San Francisco Shipyard is not subject to San Francisco's Proposition M growth control measure**, allowing flexibility in commercial space construction[160](index=160&type=chunk) - **Land transfers from the U.S. Navy at The San Francisco Shipyard are delayed due to allegations of misrepresented sampling results** by contractors, leading to reevaluation and additional testing[161](index=161&type=chunk) - The company **may be named in lawsuits seeking damages** related to alleged contamination at The San Francisco Shipyard[162](index=162&type=chunk) [Great Park Segment](index=39&type=section&id=Great%20Park%20Segment) The Great Park segment, including the Great Park Neighborhoods and management services to the Great Park Venture, saw a significant increase in land sales revenues for the nine months ended September 30, 2023, leading to a substantial profit turnaround. Management fee revenues also increased due to higher variable incentive compensation - **Land sales and related party land sales revenues increased to $372.5 million** for the nine months ended September 30, 2023, from **$39.0 million** in the prior year, primarily from the sale of **798 homesites**[172](index=172&type=chunk) - **Management fee revenues increased** for the nine months ended September 30, 2023, mainly due to a **rise in variable incentive compensation revenue recognized ($20.2 million vs. $9.0 million YoY)**[176](index=176&type=chunk) - **Segment profit for the nine months ended September 30, 2023, was $184.3 million**, a **significant improvement from a loss of $14.0 million** in the prior year[147](index=147&type=chunk) [Commercial Segment](index=42&type=section&id=Commercial%20Segment) The Commercial segment, encompassing the Gateway Commercial Venture and its Five Point Gateway Campus, reported a segment loss for both the three and nine months ended September 30, 2023. The company holds a 75% interest but has limited control over major decisions - The **Commercial segment reported a segment loss of $(358) thousand** for the three months and **$(1,036) thousand** for the nine months ended September 30, 2023[147](index=147&type=chunk) - The company holds a **75% interest** in the Gateway Commercial Venture, but major decisions require **unanimous approval** by an executive committee, **limiting the company's control**[182](index=182&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity improved significantly with $218.3 million in cash and $125.0 million available on its revolving credit facility as of September 30, 2023. Short-term cash needs include development expenditures and debt service, while long-term needs focus on future development and potential vertical construction. The company is evaluating alternatives for its senior notes due in 2025 - **Consolidated cash and cash equivalents increased to $218.3 million** at September 30, 2023, from **$131.8 million** at December 31, 2022[186](index=186&type=chunk) - The company had **$125.0

Five Point Holdings, LLC (NYSE:FPH) Q3 2023 Earnings Conference Call October 19, 2023 5:00 PM ET Company Participants Dan Hedigan - Chief Executive Officer Kim Tobler - Chief Financial Officer Conference Call Participants Arun Seshadri - BNP Paribas Alan Ratner - Zelman & Associates Myron Kaplan - Private Investor Ben Fader-Rattner - Space Summit Capital Kyle Chung - Private Investor Operator Greetings and welcome to the Five Point Holdings LLC Third Quarter 2023 Conference Call. As a reminder this call is ...

Five Point Holdings, LLC (NYSE:FPH) Q2 2023 Earnings Conference Call July 20, 2023 5:00 PM ET Company Participants Dan Hedigan - Chief Executive Officer Leo Kij - Interim Chief Financial Officer Conference Call Participants Alan Ratner - Zelman & Associates Terrance Balkaran - Diameter Capital Arun Seshadri - BNP Paribas Operator Greetings, and welcome to the Five Point Holdings, LLC Second Quarter 2023 Conference Call. As a reminder, this call is being recorded. Today's conference may include forward-looki ...

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis of financial condition and results [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, capital, and cash flow statements, and detailed notes [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202023%20and%20December%2031%2C%202022) This section presents the company's unaudited condensed consolidated balance sheets for June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :-------------- | :------------------ | | Total Assets | $2,913,903 | $2,885,784 | | Inventories | $2,254,935 | $2,239,125 | | Cash and Cash Equivalents | $193,203 | $131,771 | | Total Liabilities | $980,577 | $992,737 | | Notes payable, net | $621,419 | $620,651 | | Total Capital | $1,908,326 | $1,868,047 | [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20months%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022) This section presents the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 Statements of Operations Highlights (Three Months Ended June 30, in thousands) | Metric | 2023 | 2022 | YoY Change | | :------------------------------------------ | :----- | :----- | :--------- | | Total Revenues | $21,349 | $5,393 | +295.9% | | Total Costs and Expenses | $24,190 | $17,229 | +40.4% | | Equity in Earnings (Loss) from Unconsolidated Entities | $52,128 | $643 | +8070.8% | | Net Income (Loss) Attributable to the Company | $23,571 | $(5,111) | **N/A (swing to profit)** | | Basic EPS (Class A) | $0.34 | $(0.07) | **N/A (swing to profit)** | Statements of Operations Highlights (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | YoY Change | | :------------------------------------------ | :----- | :----- | :--------- | | Total Revenues | $27,050 | $10,279 | +163.2% | | Total Costs and Expenses | $41,480 | $57,980 | -28.5% | | Equity in Earnings (Loss) from Unconsolidated Entities | $53,176 | $(389) | **N/A (swing to profit)** | | Net Income (Loss) Attributable to the Company | $19,035 | $(22,241) | **N/A (swing to profit)** | | Basic EPS (Class A) | $0.28 | $(0.32) | **N/A (swing to profit)** | [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20for%20the%20three%20months%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022) This section presents the unaudited condensed consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2023 and 2022 Comprehensive Income (Loss) Highlights (Three Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------------ | :----- | :----- | | Net Income (Loss) | $50,555 | $(10,972) | | Other Comprehensive Income | $40 | $13 | | Comprehensive Income (Loss) Attributable to the Company | $23,596 | $(5,103) | Comprehensive Income (Loss) Highlights (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------------ | :----- | :----- | | Net Income (Loss) | $40,821 | $(47,741) | | Other Comprehensive Income | $81 | $26 | | Comprehensive Income (Loss) Attributable to the Company | $19,086 | $(22,225) | [Unaudited Condensed Consolidated Statements of Capital](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Capital%20for%20the%20three%20months%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022) This section presents the unaudited condensed consolidated statements of capital for the three and six months ended June 30, 2023 and 2022 - Total Capital increased from **$1.87 billion** at December 31, 2022, to **$1.91 billion** at June 30, 2023[25](index=25&type=chunk) - Net income attributable to the company for the six months ended June 30, 2023, was **$19.04 million**[25](index=25&type=chunk) - Share-based compensation expense for the six months ended June 30, 2023, was **$1.69 million**[25](index=25&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202023%20and%202022) This section presents the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 Cash Flow Highlights (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :-------------------------------------------------- | :------- | :-------- | | Net cash provided by (used in) operating activities | $37,925 | $(133,531) | | Net cash provided by investing activities | $29,676 | $1,387 | | Net cash used in financing activities | $(6,169) | $(5,498) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $61,432 | $(137,642) | | Cash, cash equivalents, and restricted cash—End of period | $194,195 | $129,150 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited condensed consolidated financial statements [1. BUSINESS AND ORGANIZATION](index=10&type=section&id=1.%20BUSINESS%20AND%20ORGANIZATION) This section describes Five Point Holdings, LLC's business, organizational structure, and share classes - Five Point Holdings, LLC is an owner and developer of mixed-use planned communities in California, conducting operations through Five Point Operating Company, LP[31](index=31&type=chunk) - The company has Class A and Class B common shares; Class A and B holders are entitled to one vote per share, but Class B distributions are **0.0003 times** the amount paid per Class A common share[32](index=32&type=chunk) - Noncontrolling interests represent equity interests in consolidated subsidiaries held by partners in the Operating Company and members in The Shipyard Communities, LLC[33](index=33&type=chunk) [2. BASIS OF PRESENTATION](index=11&type=section&id=2.%20BASIS%20OF%20PRESENTATION) This section outlines the basis for preparing the condensed consolidated financial statements - The company consolidates the accounts of the Holding Company and its subsidiaries where it has a controlling interest, and variable interest entities (VIEs) where it is deemed the primary beneficiary[37](index=37&type=chunk) - The accompanying condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information, Form 10-Q, and Article 10 of Regulation S-X[38](index=38&type=chunk) - Management's preparation of financial statements involves estimates and assumptions, and actual results could differ from these estimates[39](index=39&type=chunk) [3. REVENUES](index=13&type=section&id=3.%20REVENUES) This section details the company's consolidated revenues by segment for the three and six months ended June 30, 2023 and 2022 Consolidated Revenues by Segment (Three Months Ended June 30, in thousands) | Segment | 2023 | 2022 | | :-------------- | :----- | :----- | | Valencia | $413 | $2,568 | | San Francisco | $162 | $122 | | Great Park | $20,670 | $2,602 | | Commercial | $104 | $101 | | **Total Revenues** | **$21,349** | **$5,393** | Consolidated Revenues by Segment (Six Months Ended June 30, in thousands) | Segment | 2023 | 2022 | | :-------------- | :----- | :----- | | Valencia | $1,716 | $3,727 | | San Francisco | $324 | $302 | | Great Park | $24,799 | $6,046 | | Commercial | $211 | $204 | | **Total Revenues** | **$27,050** | **$10,279** | - Contract assets decreased by **$7.9 million** for the six months ended June 30, 2023, primarily due to the receipt of marketing fees and **$24.6 million** in incentive compensation payments from the Great Park Venture, partially offset by additional earned incentive compensation revenue[43](index=43&type=chunk) [4. INVESTMENT IN UNCONSOLIDATED ENTITIES](index=14&type=section&id=4.%20INVESTMENT%20IN%20UNCONSOLIDATED%20ENTITIES) This section describes the company's equity method investments in unconsolidated entities - The company owns a **37.5% Percentage Interest** in the Great Park Venture and accounts for it using the equity method[45](index=45&type=chunk) Great Park Venture Net Income (Loss) (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :-------------------------------- | :------- | :------- | | Net income (loss) of Great Park Venture | $170,900 | $(1,355) | | The Company's share of net income (loss) | $64,088 | $(508) | | Equity in earnings (loss) from Great Park Venture | $53,484 | $(1,094) | - The company owns a **75% interest** in the Gateway Commercial Venture, accounted for using the equity method due to limited control, and recognized an equity in loss of **($667 thousand)** for the six months ended June 30, 2023[52](index=52&type=chunk)[54](index=54&type=chunk) [5. NONCONTROLLING INTERESTS](index=16&type=section&id=5.%20NONCONTROLLING%20INTERESTS) This section explains the nature and impact of noncontrolling interests on consolidated financial statements - The Holding Company owned approximately **62.6%** of the outstanding Class A Common Units of the Operating Company as of June 30, 2023, consolidating its financial results and recording a noncontrolling interest for the remaining **37.4%**[58](index=58&type=chunk) - Holders of Class A Common Units of the Operating Company and Class A units of the San Francisco Venture have exchange rights for Class A common shares or cash, which can increase the Holding Company's ownership[59](index=59&type=chunk)[65](index=65&type=chunk) - A Redeemable Noncontrolling Interest of **$25.0 million** relates to Class C units in the San Francisco Venture, which are required to be redeemed upon certain reimbursements or at the Venture's option[66](index=66&type=chunk) [6. CONSOLIDATED VARIABLE INTEREST ENTITY](index=17&type=section&id=6.%20CONSOLIDATED%20VARIABLE%20INTEREST%20ENTITY) This section identifies and describes the company's consolidated variable interest entities (VIEs) - The Operating Company, San Francisco Venture, FP LP, and FPL are identified as Variable Interest Entities (VIEs), with the company determined to be the primary beneficiary, leading to their consolidation[67](index=67&type=chunk)[68](index=68&type=chunk)[73](index=73&type=chunk) - As of June 30, 2023, the San Francisco Venture had total combined assets of **$1.34 billion** (primarily inventories) and total combined liabilities of **$67.3 million**[69](index=69&type=chunk) - As of June 30, 2023, FP LP and FPL had combined assets of **$1.1 billion** (primarily inventories) and total combined liabilities of **$71.8 million**[74](index=74&type=chunk) [7. INTANGIBLE ASSET, NET—RELATED PARTY](index=18&type=section&id=7.%20INTANGIBLE%20ASSET%2C%20NET%E2%80%94RELATED%20PARTY) This section details the intangible asset related to incentive compensation provisions and its amortization - The intangible asset relates to the contract value of incentive compensation provisions from the Amended and Restated Development Management Agreement (A&R DMA) with the Great Park Venture[77](index=77&type=chunk) Intangible Asset, Net (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Net book value | $31,656 | $40,257 | - Intangible asset amortization expense was **$8.6 million** for the six months ended June 30, 2023, included in the cost of management services[78](index=78&type=chunk) [8. RELATED PARTY TRANSACTIONS](index=19&type=section&id=8.%20RELATED%20PARTY%20TRANSACTIONS) This section outlines significant transactions and balances with related parties Related Party Assets (June 30, 2023, in thousands) | Asset Type | Amount | | :-------------------------------------------------- | :----- | | Contract assets | $73,826 | | Operating lease right-of-use asset | $15,245 | | Other | $862 | | **Total Related Party Assets** | **$89,933** | Related Party Liabilities (June 30, 2023, in thousands) | Liability Type | Amount | | :-------------------------------------------------- | :----- | | Reimbursement obligation | $58,998 | | Payable to holders of Management Company's Class B interests | $4,116 | | Operating lease liability | $11,776 | | Accrued advisory fees | $7,625 | | Other | $1,169 | | **Total Related Party Liabilities** | **$83,684** | - Management fee revenues from the Great Park Venture increased to **$24.8 million** for the six months ended June 30, 2023, from **$6.0 million** in the prior year, primarily due to variable incentive compensation revenue[82](index=82&type=chunk) [9. NOTES PAYABLE, NET](index=20&type=section&id=9.%20NOTES%20PAYABLE%2C%20NET) This section provides details on the company's notes payable, net, including senior notes and credit facility Notes Payable, Net (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | 7.875% Senior Notes due 2025 | $625,000 | $625,000 | | Unamortized debt issuance costs and discount | $(3,581) | $(4,349) | | **Total Notes payable, net** | **$621,419** | **$620,651** | - In June 2023, the Operating Company amended its **$125.0 million** unsecured revolving credit facility, replacing LIBOR with SOFR as the benchmark interest rate[84](index=84&type=chunk) - As of June 30, 2023, there were no borrowings or letters of credit outstanding on the Operating Company's revolving credit facility[84](index=84&type=chunk) [10. TAX RECEIVABLE AGREEMENT](index=20&type=section&id=10.%20TAX%20RECEIVABLE%20AGREEMENT) This section describes the company's Tax Receivable Agreement (TRA) and related payment obligations - The company has a Tax Receivable Agreement (TRA) with certain unit holders, providing for payments equal to **85%** of cash savings in income tax realized from specific tax attributes[85](index=85&type=chunk)[192](index=192&type=chunk) Payable pursuant to Tax Receivable Agreement (in thousands) | Date | Amount | | :---------------- | :------- | | June 30, 2023 | $173,208 | | December 31, 2022 | $173,068 | - No TRA payments were made during the six months ended June 30, 2023 or 2022, and none are expected for the next several years based on current projections[85](index=85&type=chunk)[192](index=192&type=chunk) [11. COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=11.%20COMMITMENTS%20AND%20CONTINGENCIES) This section outlines the company's significant commitments and contingencies, including leases, bonds, and legal proceedings Operating Lease Assets and Liabilities (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $16,156 | $19,067 | | Operating lease liabilities | $12,597 | $15,705 | - Outstanding performance bonds totaled **$307.3 million** as of June 30, 2023, predominantly related to the Valencia community[87](index=87&type=chunk)[189](index=189&type=chunk) - The San Francisco Venture had outstanding guarantees of **$198.3 million** benefiting the San Francisco Agency for infrastructure and construction obligations as of June 30, 2023[89](index=89&type=chunk)[190](index=190&type=chunk) - The company is a defendant in the Bayview Action lawsuit, alleging fraudulent misrepresentation of test results and remediation efforts at The San Francisco Shipyard[91](index=91&type=chunk) [12. SUPPLEMENTAL CASH FLOW INFORMATION](index=23&type=section&id=12.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) This section provides supplemental cash flow details, including cash paid for interest and cash reconciliation Supplemental Cash Flow Information (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------------ | :------- | :------- | | Cash paid for interest (capitalized to inventories) | $25,998 | $26,146 | | Noncash lease expense | $2,094 | $2,452 | Reconciliation of Cash, Cash Equivalents, and Restricted Cash (June 30, in thousands) | Metric | 2023 | 2022 | | :------------------------------------------------------------------------------------------------ | :------- | :------- | | Cash and cash equivalents | $193,203 | $127,820 | | Restricted cash and certificates of deposit | $992 | $1,330 | | **Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows** | **$194,195** | **$129,150** | [13. SEGMENT REPORTING](index=23&type=section&id=13.%20SEGMENT%20REPORTING) This section presents financial information by the company's reportable segments - The company's reportable segments include Valencia, San Francisco, Great Park, and Commercial, each representing distinct mixed-use planned communities or commercial operations[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) Segment Profit (Loss) Before Income Tax Provision (Three Months Ended June 30, 2023, in thousands) | Segment | Profit (Loss) | | :-------------- | :------------ | | Valencia | $(4,538) | | San Francisco | $(885) | | Great Park | $179,145 | | Commercial | $(502) | Segment Profit (Loss) Before Income Tax Provision (Six Months Ended June 30, 2023, in thousands) | Segment | Profit (Loss) | | :-------------- | :------------ | | Valencia | $(6,977) | | San Francisco | $(1,915) | | Great Park | $183,651 | | Commercial | $(678) | [14. SHARE-BASED COMPENSATION](index=25&type=section&id=14.%20SHARE-BASED%20COMPENSATION) This section details the company's share-based compensation plans, activity, and related expenses - The Five Point Holdings, LLC 2023 Incentive Award Plan was approved, increasing the aggregate number of Class A common shares available for issuance by **7,500,000**[104](index=104&type=chunk) Share-Based Compensation Activity (Six Months Ended June 30, 2023) | Metric | Share-Based Awards (in thousands) | Weighted-Average Grant Date Fair Value | | :-------------------------- | :-------------------------------- | :----------------------------------- | | Nonvested at January 1, 2023 | 2,166 | $3.77 | | Granted | 3,947 | $1.92 | | Cancelled | (906) | $2.16 | | Vested | (690) | $6.01 | | Nonvested at June 30, 2023 | 4,517 | $2.13 | - Share-based compensation expense was **$1.7 million** for the six months ended June 30, 2023, compared to **$4.8 million** for the same period in 2022[105](index=105&type=chunk) [15. EMPLOYEE BENEFIT PLANS](index=25&type=section&id=15.%20EMPLOYEE%20BENEFIT%20PLANS) This section describes the company's employee benefit plans, including the frozen defined benefit pension plan - The Newhall Land and Farming Company Retirement Plan is a frozen defined benefit plan[107](index=107&type=chunk) Net Periodic Pension Cost (Benefit) (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | | :-------------------------- | :--- | :----- | | Interest cost | $404 | $272 | | Expected return on plan assets | $(444) | $(522) | | Amortization of net actuarial loss | $81 | $26 | | **Net periodic cost (benefit)** | **$41** | **$(224)** | [16. INCOME TAXES](index=25&type=section&id=16.%20INCOME%20TAXES) This section explains the company's income tax treatment, provision, and valuation allowance - The Holding Company is treated as a corporation for tax purposes, while most of its subsidiaries are pass-through entities[108](index=108&type=chunk) - For the six months ended June 30, 2023, the company recorded no provision or benefit for income taxes on pre-tax income of **$40.8 million**, due to the application of a decrease in its valuation allowance[109](index=109&type=chunk) - The company continues to record a valuation allowance against its federal and state net deferred tax assets, largely due to a history of book losses[110](index=110&type=chunk) [17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS AND DISCLOSURES](index=26&type=section&id=17.%20FINANCIAL%20INSTRUMENTS%20AND%20FAIR%20VALUE%20MEASUREMENTS%20AND%20DISCLOSURES) This section provides disclosures on the fair value measurements of the company's financial instruments - The carrying amount of most of the company's financial instruments, including cash, restricted cash, and certain related party assets and liabilities, approximated their fair value at June 30, 2023, and December 31, 2022[111](index=111&type=chunk) - The estimated fair value of notes payable, net, was **$566.0 million** at June 30, 2023, compared to a carrying value of **$621.4 million**[112](index=112&type=chunk) [18. EARNINGS PER SHARE](index=26&type=section&id=18.%20EARNINGS%20PER%20SHARE) This section details the calculation of basic and diluted earnings per share for Class A common shares - The company uses the two-class method for earnings per share calculation, allocating net income between Class A and Class B common shares and participating securities[113](index=113&type=chunk) - No distributions on common shares were declared for the three and six months ended June 30, 2023 or 2022[114](index=114&type=chunk) Basic and Diluted Earnings (Loss) Per Class A Share | Period | Basic EPS | Diluted EPS | | :-------------------------- | :-------- | :---------- | | Three Months Ended June 30, 2023 | $0.34 | $0.34 | | Three Months Ended June 30, 2022 | $(0.07) | $(0.07) | | Six Months Ended June 30, 2023 | $0.28 | $0.27 | | Six Months Ended June 30, 2022 | $(0.32) | $(0.33) | [19. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=29&type=section&id=19.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) This section describes the components of accumulated other comprehensive loss attributable to the Company - Accumulated other comprehensive loss attributable to the Company totaled **$2.9 million** at June 30, 2023, primarily consisting of unamortized defined benefit pension plan net actuarial losses[117](index=117&type=chunk) - Reclassifications from accumulated other comprehensive loss to net income (loss) related to amortization of net actuarial losses were approximately **$51 thousand** for the six months ended June 30, 2023[117](index=117&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition, operational results, liquidity, and capital resources [Forward-Looking Statements](index=30&type=section&id=Forward-Looking%20Statements) This section highlights forward-looking statements subject to risks and uncertainties - The discussion contains forward-looking statements subject to risks and uncertainties, which are detailed in the 'Risk Factors' section of the Annual Report on Form 10-K[119](index=119&type=chunk) [Overview](index=30&type=section&id=Overview) This section provides an overview of the company's business structure and ownership interests - The company conducts all business through Five Point Operating Company, LP, in which it owned approximately **62.6%** as of June 30, 2023[120](index=120&type=chunk) - The operating company holds equity interests in various entities, including Valencia, San Francisco Venture, Great Park Venture, Gateway Commercial Venture, and the management company[121](index=121&type=chunk) - The operating company consolidates and controls the management of all entities except for the Great Park Venture and the Gateway Commercial Venture, which are accounted for using the equity method[120](index=120&type=chunk) [Operational Highlights](index=31&type=section&id=Operational%20Highlights) This section summarizes key operational and financial achievements for the reporting period - Consolidated net income for Q2 2023 was **$50.6 million**, a significant improvement from a net loss of **$9.7 million** in Q1 2023[122](index=122&type=chunk) - Selling, general, and administrative (SG&A) expenses decreased to **$12.7 million** in Q2 2023 from **$13.8 million** in Q1 2023[122](index=122&type=chunk) - The Great Park Venture closed the sale of **798 homesites** for **$357.8 million** in Q2 2023, including **$143.1 million** in estimated variable price participation[124](index=124&type=chunk) - Total liquidity at June 30, 2023, was **$318.2 million**, comprising **$193.2 million** in cash and **$125.0 million** available under the revolving credit facility[125](index=125&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenues, expenses, and equity in earnings - Total revenues increased by **$16.0 million (295.9%)** to **$21.3 million** for the three months ended June 30, 2023, primarily due to increased management services revenue at the Great Park segment[129](index=129&type=chunk) - Equity in earnings from unconsolidated entities significantly increased to **$52.1 million** for the three months ended June 30, 2023, from **$0.6 million** in the prior year, driven by land sales at the Great Park Venture[132](index=132&type=chunk) - Selling, general, and administrative expenses decreased by **$3.0 million (10.1%)** to **$26.5 million** for the six months ended June 30, 2023, mainly due to lower employee-related and selling and marketing expenses[137](index=137&type=chunk) - Restructuring costs of **$19.4 million** were incurred during the six months ended June 30, 2022, related to executive management changes and layoffs[138](index=138&type=chunk)[139](index=139&type=chunk) [Segment Results and Financial Information](index=34&type=section&id=Segment%20Results%20and%20Financial%20Information) This section provides detailed financial results and information for each operating segment [Valencia Segment](index=37&type=section&id=Valencia%20Segment) This section details the financial performance and key developments of the Valencia segment - Selling, general, and administrative expenses for the Valencia segment decreased by **$2.0 million (24.7%)** to **$6.0 million** for the six months ended June 30, 2023, primarily due to reduced community-related selling and marketing expenses and employee-related costs[153](index=153&type=chunk) [San Francisco Segment](index=38&type=section&id=San%20Francisco%20Segment) This section details the financial performance and key developments of the San Francisco segment - Development at Candlestick and The San Francisco Shipyard is not subject to San Francisco's Proposition M growth control measure, allowing flexibility in commercial space construction[156](index=156&type=chunk) - Land transfers from the U.S. Navy for The San Francisco Shipyard are delayed due to allegations of misrepresented sampling results by contractors and subsequent resampling efforts, which could further impede future development[157](index=157&type=chunk) [Great Park Segment](index=38&type=section&id=Great%20Park%20Segment) This section details the financial performance and key developments of the Great Park segment - Land sales and related party land sales revenues for the Great Park segment increased to **$369.2 million** for the six months ended June 30, 2023, from **$3.8 million** in the prior year, driven by the sale of **798 homesites**[170](index=170&type=chunk) - Management fee revenues increased to **$24.8 million** for the six months ended June 30, 2023, from **$6.0 million** in the prior year, mainly due to variable incentive compensation recognized[174](index=174&type=chunk) - Selling, general, and administrative expenses decreased by **$6.8 million (57.1%)** to **$5.1 million** for the six months ended June 30, 2023, due to lower marketing expenses and the elimination of a variable cost reimbursement component[176](index=176&type=chunk) [Commercial Segment](index=43&type=section&id=Commercial%20Segment) This section details the financial performance and key developments of the Commercial segment - The Gateway Commercial Venture owns one commercial office building and approximately **50 acres** of commercial land with additional development rights at the Five Point Gateway Campus[181](index=181&type=chunk) - The company's corporate headquarters are located in the building owned by the Gateway Commercial Venture[181](index=181&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity, cash flow, and available capital resources - Consolidated cash and cash equivalents were **$193.2 million** at June 30, 2023, up from **$131.8 million** at December 31, 2022[184](index=184&type=chunk) - The company has a **$125.0 million** unsecured revolving credit facility available, with no funds drawn or letters of credit outstanding as of June 30, 2023[184](index=184&type=chunk) - Short-term cash needs include general and administrative expenses, development expenditures, interest payments, and related party reimbursement obligations, some of which have been deferred to 2024[185](index=185&type=chunk) - The company expects to meet its cash requirements for the next **12 months** through available cash, distributions from unconsolidated entities, management fees, land sales, public financing reimbursements, and access to financing sources[186](index=186&type=chunk) - No Tax Receivable Agreement (TRA) payments are expected for the next several years based on current projections[192](index=192&type=chunk) [Summary of Cash Flows](index=45&type=section&id=Summary%20of%20Cash%20Flows) This section provides a summary and analysis of the company's cash flows Summary of Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | | :-------------------------- | :------- | :-------- | | Operating activities | $37,925 | $(133,531) | | Investing activities | $29,676 | $1,387 | | Financing activities | $(6,169) | $(5,498) | - Net cash provided by operating activities significantly improved to **$37.9 million** for the six months ended June 30, 2023, from **$133.5 million** net cash used in the prior year, aided by public financing reimbursements and a third-party recovery in Valencia[193](index=193&type=chunk) - The company received **$22.0 million** in incentive compensation payments and **$81.8 million** in total distributions from the Great Park Venture during the six months ended June 30, 2023[194](index=194&type=chunk) [Changes in Capital Structure](index=46&type=section&id=Changes%20in%20Capital%20Structure) This section outlines changes in the company's capital structure, including ownership percentages - The company's ownership percentage in the operating company increased to **62.6%** during the six months ended June 30, 2023, primarily due to the issuance and reacquisition of share-based compensation[199](index=199&type=chunk) Outstanding Class A Units (June 30, 2023) | Entity | Held by Us | Held by Noncontrolling Interest Members | | :-------------------------------- | :--------- | :------------------------------------ | | Class A units of the operating company | 69,199,938 | 41,363,271 | | Class A units of the San Francisco Venture | N/A | 37,870,273 | - There were **79,233,544 Class B common shares** outstanding at June 30, 2023, held by noncontrolling interest members, convertible to Class A common shares at a **0.0003:1 ratio**[201](index=201&type=chunk) [Critical Accounting Estimates](index=46&type=section&id=Critical%20Accounting%20Estimates) This section confirms no significant changes to the company's critical accounting estimates - There have been no significant changes to the company's critical accounting estimates during the six months ended June 30, 2023, compared to those disclosed in its Annual Report on Form 10-K for 2022[202](index=202&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines market risk exposure, primarily from fixed-rate indebtedness, and management strategies - The company's primary market risk stems from its indebtedness, which bears interest at fixed rates[203](index=203&type=chunk) - As of June 30, 2023, the company had outstanding consolidated net indebtedness of **$621.4 million**, none of which bears interest based on floating rates[204](index=204&type=chunk) - The company may consider using swap arrangements in the future to fix rates on floating rate debt, if applicable, to reduce cash flow variability and mitigate interest rate increases, not for speculative purposes[203](index=203&type=chunk) [ITEM 4. Controls and Procedures](index=46&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls and changes in internal financial reporting [Evaluation of Disclosure Controls and Procedures](index=46&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on management's conclusion regarding the effectiveness of disclosure controls - Management, with the supervision of the CEO and Interim CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[205](index=205&type=chunk) [Changes in Internal Control Over Financial Reporting](index=47&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any changes in internal control over financial reporting - There were no changes in internal control over financial reporting identified during the period covered by this report that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[206](index=206&type=chunk) PART II. OTHER INFORMATION This section covers other required disclosures, including legal proceedings, risk factors, and exhibits [ITEM 1. Legal Proceedings](index=48&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to Note 11 of the condensed consolidated financial statements for legal proceedings - Disclosures regarding legal proceedings are incorporated by reference from Note 11 to the condensed consolidated financial statements[208](index=208&type=chunk) [ITEM 1A. Risk Factors](index=48&type=section&id=ITEM%201A.%20Risk%20Factors) This section states no material changes to risk factors from the Annual Report on Form 10-K - There have been no material changes in the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022[209](index=209&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities and use of proceeds to report[210](index=210&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=48&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities - No defaults upon senior securities to report[210](index=210&type=chunk) [ITEM 4. Mine Safety Disclosures](index=48&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[210](index=210&type=chunk) [ITEM 5. Other Information](index=48&type=section&id=ITEM%205.%20Other%20Information) This section states that there is no other information to disclose - No other information to report[210](index=210&type=chunk) [ITEM 6. Exhibits](index=49&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including credit agreements and certifications - Exhibit **10.1** includes the Fourth Amendment to Credit Agreement, dated June 30, 2023[211](index=211&type=chunk) - Includes Certifications of Principal Executive Officer (**31.1, 32.1**) and Principal Financial Officer (**31.2, 32.2**) pursuant to Sarbanes-Oxley Act[211](index=211&type=chunk) - Includes Inline XBRL Instance Document and Taxonomy Extension Documents (**101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104**)[211](index=211&type=chunk) [Signatures](index=50&type=section&id=Signatures) This section contains the required signatures of the company's principal executive and financial officers - The report is signed by Daniel Hedigan, Chief Executive Officer, and Leo Kij, Interim Chief Financial Officer[214](index=214&type=chunk)

```markdown PART I. FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements for Q1 2023 and 2022, including balance sheets, statements of operations, comprehensive loss, capital, and cash flows, with detailed notes [Unaudited Condensed Consolidated Balance Sheets](index=4&type=page&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Balance sheets show slight asset and capital decrease, marginal liability increase, with inventories and notes payable as key items | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | **ASSETS** | | | | INVENTORIES | $2,260,595 | $2,239,125 | | CASH AND CASH EQUIVALENTS | $106,577 | $131,771 | | TOTAL ASSETS | $2,878,482 | $2,885,784 | | **LIABILITIES** | | | | Notes payable, net | $621,035 | $620,651 | | Total liabilities | $996,681 | $992,737 | | **CAPITAL** | | | | Total capital | $1,856,801 | $1,868,047 | [Unaudited Condensed Consolidated Statements of Operations](index=5&type=page&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Net loss significantly reduced in Q1 2023 due to lower costs, reduced restructuring, and improved equity earnings | Metric (in thousands, except per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Total revenues | $5,701 | $4,886 | | Total costs and expenses | $17,290 | $40,751 |\ | Equity in earnings (loss) from unconsolidated entities | $1,048 | $(1,032) | | Net loss | $(9,734) | $(36,769) | | Net loss attributable to the Company | $(4,536) | $(17,130) | | Basic Net Loss per Class A Share | $(0.07) | $(0.25) | [Unaudited Condensed Consolidated Statements of Comprehensive Loss](index=6&type=page&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss significantly decreased in Q1 2023, primarily reflecting the reduction in net loss from the prior year | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(9,734) | $(36,769) | | Other comprehensive income | $41 | $13 |\ | Comprehensive loss | $(9,693) | $(36,756) | | Comprehensive loss attributable to the Company | $(4,510) | $(17,122) | [Unaudited Condensed Consolidated Statements of Capital](index=7&type=page&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Capital) Total capital decreased from December 2022 to March 2023, mainly due to net loss, partially offset by share-based compensation | Metric (in thousands) | December 31, 2022 | March 31, 2023 | | :-------------------- | :---------------- | :------------- | | Total Members' Capital | $618,131 | $614,590 | | Noncontrolling Interests | $1,249,916 | $1,242,211 | | Total Capital | $1,868,047 | $1,856,801 | - Net loss attributable to the Company for the three months ended March 31, 2023, was **$(4,536) thousand**, contributing to the decrease in retained earnings[23](index=23&type=chunk) - Share-based compensation expense of **$763 thousand** increased contributed capital during the period[23](index=23&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=page&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly reduced in Q1 2023, driven by lower net loss and favorable changes | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(21,638) | $(57,969) | | Net cash provided by investing activities | $68 | $484 | | Net cash used in financing activities | $(3,624) | $(4,330) | | Net decrease in cash, cash equivalents, and restricted cash | $(25,194) | $(61,815) | | Cash, cash equivalents, and restricted cash—End of period | $107,569 | $204,977 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=page&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes provide detailed explanations of business, accounting policies, segment performance, related party transactions, debt, and commitments [1. BUSINESS AND ORGANIZATION](index=9&type=page&id=1.%20BUSINESS%20AND%20ORGANIZATION) Five Point Holdings develops mixed-use communities in California via Five Point Operating Company, LP, with Class A/B shares and noncontrolling interests - The Company owns and develops mixed-use planned communities in California through Five Point Operating Company, LP[28](index=28&type=chunk) - As of March 31, 2023, the Company owned approximately **62.6%** of the outstanding Class A Common Units of the Operating Company[32](index=32&type=chunk) - Noncontrolling interests represent equity interests in consolidated subsidiaries held by partners in the Operating Company and members in The San Francisco Venture[30](index=30&type=chunk) [2. BASIS OF PRESENTATION](index=10&type=page&id=2.%20BASIS%20OF%20PRESENTATION) Unaudited financial statements prepared under U.S. GAAP consolidate controlled entities and VIEs, relying on management estimates - Condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information[35](index=35&type=chunk) - The Company consolidates entities where it has a controlling interest or is the primary beneficiary of a Variable Interest Entity (VIE)[34](index=34&type=chunk) [3. REVENUES](index=11&type=page&id=3.%20REVENUES) Total revenues increased by **16.7%** to **$5.7 million** in Q1 2023, primarily from higher management services revenue in the Great Park segment | Revenue Source (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Land sales | $(25) | $557 | | Land sales—related party | $624 | $1 | | Management services—related party | $4,236 | $3,547 | | Operating properties | $866 | $781 | | **Total revenues** | **$5,701** | **$4,886** | - The increase in total revenues was primarily due to a **$689 thousand** increase in management services—related party revenue[38](index=38&type=chunk) [4. INVESTMENT IN UNCONSOLIDATED ENTITIES](index=12&type=page&id=4.%20INVESTMENT%20IN%20UNCONSOLIDATED%20ENTITIES) Investments in Great Park, Gateway Commercial, and Valencia Landbank Ventures are equity method accounted, with Great Park improving net income [Great Park Venture](index=12&type=page&id=Great%20Park%20Venture) Great Park Venture, **37.5%** owned, recognized significant land sale revenues in Q1 2023, shifting to net income and improving equity earnings | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Land sale and related party land sale revenues | $8,600 | $1,819 | | Net income (loss) of Great Park Venture | $2,743 | $(2,831) | | Equity in earnings (loss) from Great Park Venture | $1,162 | $(1,301) | - The Great Park Venture recognized **$5.5 million** in land sale revenues to related parties and **$3.1 million** to third parties in Q1 2023[42](index=42&type=chunk) [Gateway Commercial Venture](index=13&type=page&id=Gateway%20Commercial%20Venture) Gateway Commercial Venture, **75%** owned, reported a net loss in Q1 2023, a decline from prior year's net income despite increased rental revenues | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Rental revenues | $2,154 | $1,938 | | Net (loss) income of Gateway Commercial Venture | $(283) | $112 | | Equity in (loss) earnings from Gateway Commercial Venture | $(212) | $84 | [Valencia Landbank Venture](index=13&type=page&id=Valencia%20Landbank%20Venture) Valencia Landbank Venture, a **10%** equity method investee, generated **$0.1 million** in equity earnings for Q1 2023 - The Company's investment in the Valencia Landbank Venture was **$1.9 million** at March 31, 2023, and it recognized **$0.1 million** in equity in earnings for the three months ended March 31, 2023[47](index=47&type=chunk) [5. NONCONTROLLING INTERESTS](index=14&type=page&id=5.%20NONCONTROLLING%20INTERESTS) Noncontrolling interests relate to Operating Company and San Francisco Venture, with Holding Company ownership increasing to **62.6%** due to share-based compensation - The Holding Company owned approximately **62.6%** of the outstanding Class A Common Units of the Operating Company as of March 31, 2023[48](index=48&type=chunk) - Tax distributions to partners of the Operating Company totaled **$1.974 million** for the three months ended March 31, 2023, up from **$435 thousand** in the prior year[53](index=53&type=chunk) - A redeemable noncontrolling interest of **$25.0 million** in Class C units of The San Francisco Venture was outstanding at March 31, 2023[57](index=57&type=chunk) [6. CONSOLIDATED VARIABLE INTEREST ENTITY](index=15&type=page&id=6.%20CONSOLIDATED%20VARIABLE%20INTEREST%20ENTITY) Operating Company, San Francisco Venture, FP LP, and FPL are consolidated VIEs, with significant inventories and non-recourse liabilities - The Operating Company, The San Francisco Venture, FP LP, and FPL are consolidated VIEs[58](index=58&type=chunk)[64](index=64&type=chunk) | San Francisco Venture (in thousands) | March 31, 2023 | December 31, 2022 | | :----------------------------------- | :------------- | :---------------- | | Total combined assets | $1,330,000 | $1,310,000 | | Inventories | $1,320,000 | $1,310,000 | | Total combined liabilities | $68,300 | $67,300 | | FP LP and FPL (in thousands) | March 31, 2023 | December 31, 2022 | | :--------------------------- | :------------- | :---------------- | | Total combined assets | $1,100,000 | $1,100,000 | | Inventories | $936,700 | $927,900 | | Total combined liabilities | $76,100 | $77,200 | [7. INTANGIBLE ASSET, NET—RELATED PARTY](index=16&type=page&id=7.%20INTANGIBLE%20ASSET,%20NET%E2%80%94RELATED%20PARTY) Intangible asset, representing Great Park Venture incentive compensation, slightly decreased due to amortization expense recognized in Q1 2023 | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | Gross carrying amount | $129,705 | $129,705 | | Accumulated amortization | $(90,095) | $(89,448) | | Net book value | $39,610 | $40,257 | - Intangible asset amortization expense was **$0.6 million** for the three months ended March 31, 2023, included in the cost of management services[68](index=68&type=chunk) [8. RELATED PARTY TRANSACTIONS](index=17&type=page&id=8.%20RELATED%20PARTY%20TRANSACTIONS) Related party assets and liabilities remained stable, with contract assets and management fee revenues from Great Park Venture increasing | Related Party (in thousands) | March 31, 2023 | December 31, 2022 | | :--------------------------- | :------------- | :---------------- | | **Assets:** | | | | Contract assets | $80,414 | $79,863 | | Total Related Party Assets | $97,114 | $97,126 | | **Liabilities:** | | | | Reimbursement obligation | $61,542 | $62,990 | | Accrued advisory fees | $9,075 | $10,525 | | Total Related Party Liabilities | $90,628 | $93,086 | - Management fee revenues under the A&R DMA with the Great Park Venture were **$4.1 million** for Q1 2023, up from **$3.4 million** in Q1 2022[71](index=71&type=chunk) [9. NOTES PAYABLE, NET](index=17&type=page&id=9.%20NOTES%20PAYABLE,%20NET) Notes payable, net, primarily comprise **7.875% Senior Notes due 2025**, with no borrowings on the **$125.0 million** revolving credit facility | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | 7.875% Senior Notes due 2025 | $625,000 | $625,000 | | Unamortized debt issuance costs and discount | $(3,965) | $(4,349) | | Notes payable, net | $621,035 | $620,651 | - No borrowings or letters of credit were outstanding on the Operating Company's **$125.0 million** unsecured revolving credit facility as of March 31, 2023[73](index=73&type=chunk) [10. TAX RECEIVABLE AGREEMENT](index=18&type=page&id=10.%20TAX%20RECEIVABLE%20AGREEMENT) A Tax Receivable Agreement (TRA) liability of **$173.2 million** exists, with no payments made or expected for several years | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | Payable pursuant to tax receivable agreement | $173,208 | $173,068 | - No TRA payments were made during the three months ended March 31, 2023 or 2022[74](index=74&type=chunk) - The company does not expect to make any TRA payments for the next several years based on current projections[163](index=163&type=chunk) [11. COMMITMENTS AND CONTINGENCIES](index=18&type=page&id=11.%20COMMITMENTS%20AND%20CONTINGENCIES) Commitments and contingencies include performance bonds, San Francisco Venture guarantees, and ongoing legal proceedings like Hunters Point Litigation [Performance and Completion Bonding Agreements](index=18&type=page&id=Performance%20and%20Completion%20Bonding%20Agreements) Outstanding performance bonds totaled **$320.0 million** as of March 31, 2023, primarily for Valencia community development obligations | Metric (in millions) | March 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :---------------- | | Outstanding performance bonds | $320.0 | $315.0 | [Candlestick and The San Francisco Shipyard Disposition and Development Agreement](index=18&type=page&id=Candlestick%20and%20The%20San%20Francisco%20Shipyard%20Disposition%20and%20Development%20Agreement) San Francisco Venture has **$198.3 million** in outstanding guarantees for infrastructure and park obligations at Candlestick and The San Francisco Shipyard - The San Francisco Venture had outstanding guarantees of **$198.3 million** for infrastructure and park obligations as of March 31, 2023[78](index=78&type=chunk) [Letters of Credit](index=18&type=page&id=Letters%20of%20Credit) Outstanding letters of credit and restricted cash pledged as collateral each totaled **$1.0 million** as of March 31, 2023 | Metric (in millions) | March 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :---------------- | | Outstanding letters of credit | $1.0 | $1.0 | | Restricted cash and certificates of deposit | $1.0 | $1.0 | [Legal Proceedings](index=18&type=page&id=Legal%20Proceedings) The company is a defendant in the Bayview Action lawsuit regarding alleged contamination at The San Francisco Shipyard, asserting strong defenses - The Bayview Action lawsuit alleges fraudulent misrepresentation of test results and remediation efforts by Tetra Tech at The San Francisco Shipyard, naming the Company as a defendant[80](index=80&type=chunk)[82](index=82&type=chunk) - Management believes it has meritorious defenses and potential insurance/indemnification rights regarding the Bayview Action[82](index=82&type=chunk) [Environmental Contamination](index=20&type=page&id=Environmental%20Contamination) Environmental contamination may require corrective action, but the company does not anticipate a material adverse effect on financial statements - The Company believes that any potential corrective actions for environmental contamination would not have a material adverse effect on its condensed consolidated financial statements[84](index=84&type=chunk) [12. SUPPLEMENTAL CASH FLOW INFORMATION](index=20&type=page&id=12.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Supplemental cash flow includes capitalized interest and noncash lease expense, with a reconciliation showing decreased total cash balances | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Cash paid for interest (capitalized) | $706 | $776 | | Noncash lease expense | $1,116 | $1,301 | | Cash Reconciliation (in thousands) | March 31, 2023 | March 31, 2022 | | :--------------------------------- | :------------- | :------------- | | Cash and cash equivalents | $106,577 | $203,647 | | Restricted cash and certificates of deposit | $992 | $1,330 | | Total cash, cash equivalents, and restricted cash | $107,569 | $204,977 | [13. SEGMENT REPORTING](index=20&type=page&id=13.%20SEGMENT%20REPORTING) The company operates four segments: Valencia, San Francisco, Great Park, and Commercial, focusing on mixed-use developments and showing Great Park profit improvement - The company's reportable segments are Valencia, San Francisco, Great Park, and Commercial[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk)[91](index=91&type=chunk) | Segment Operating Results (in thousands) | Revenues (Q1 2023) | Revenues (Q1 2022) | Profit (Loss) (Q1 2023) | Profit (Loss) (Q1 2022) | | :--------------------------------------- | :----------------- | :----------------- | :---------------------- | :---------------------- | | Valencia | $1,303 | $1,159 | $(2,439) | $(4,827) | | San Francisco | $162 | $180 | $(1,030) | $(669) | | Great Park | $12,729 | $22,424 | $4,506 | $(2,071) | | Commercial | $2,261 | $2,041 | $(176) | $215 | | Total reportable segments | $16,455 | $25,804 | $861 | $(7,352) | [14. SHARE-BASED COMPENSATION](index=22&type=page&id=14.%20SHARE-BASED%20COMPENSATION) Share-based compensation expense significantly decreased in Q1 2023 due to prior year's restructuring expense, while nonvested awards increased | Share-Based Compensation (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Share-based compensation expense | $763 | $4,103 | | Share-Based Awards Activity (in thousands) | Nonvested at Jan 1, 2023 | Granted | Vested | Nonvested at Mar 31, 2023 | | :----------------------------------------- | :----------------------- | :------ | :----- | :------------------------ | | Share-Based Awards | 2,166 | 3,040 | (636) | 4,570 | - In Q1 2022, **$3.0 million** of share-based compensation expense was included in restructuring expense due to a modification of awards for two former officers[97](index=97&type=chunk) [15. EMPLOYEE BENEFIT PLANS](index=22&type=page&id=15.%20EMPLOYEE%20BENEFIT%20PLANS) The frozen defined benefit Retirement Plan generated a net periodic cost in Q1 2023, shifting from a net benefit due to higher interest cost | Net Periodic Cost (Benefit) (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Interest cost | $202 | $136 | | Expected return on plan assets | $(222) | $(261) | | Amortization of net actuarial loss | $41 | $13 | | Net periodic cost (benefit) | $21 | $(112) | [16. INCOME TAXES](index=23&type=page&id=16.%20INCOME%20TAXES) Despite pre-tax losses, a minimal income tax provision was recorded due to a valuation allowance against deferred tax assets and pass-through entity structure | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Loss before income tax provision | $(9,726) | $(36,764) | | Income tax provision | $(8) | $(5) | - The Company continues to record a valuation allowance against its federal and state net deferred tax assets due to a history of book losses[103](index=103&type=chunk) [17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS AND DISCLOSURES](index=23&type=page&id=17.%20FINANCIAL%20INSTRUMENTS%20AND%20FAIR%20VALUE%20MEASUREMENTS%20AND%20DISCLOSURES) Most financial instruments' carrying amounts approximated fair value, but notes payable, net, had a significantly lower fair value than carrying value - The carrying amount of most financial instruments (cash, restricted cash, certain related party assets/liabilities, accounts payable) approximated fair value[104](index=104&type=chunk) | Notes Payable, Net (in millions) | March 31, 2023 | December 31, 2022 | | :------------------------------- | :------------- | :---------------- | | Estimated fair value | $563.8 | $525.5 | | Carrying value | $621.0 | $620.7 | [18. EARNINGS PER SHARE](index=24&type=page&id=18.%20EARNINGS%20PER%20SHARE) Using the two-class method, basic and diluted loss per Class A share significantly decreased in Q1 2023 compared to Q1 2022 | Metric (per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------- | :-------------------------------- | :-------------------------------- | | Basic loss per Class A common share | $(0.07) | $(0.25) | | Diluted loss per Class A common share | $(0.07) | $(0.25) | - No distributions on common shares were declared for the three months ended March 31, 2023 or 2022[107](index=107&type=chunk) [19. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=25&type=page&id=19.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Accumulated other comprehensive loss attributable to the Company remained stable at **$3.0 million**, primarily from unamortized pension plan actuarial losses | Metric (in millions) | March 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :---------------- | | Accumulated other comprehensive loss attributable to the Company | $3.0 | $3.0 | - Reclassifications from accumulated other comprehensive loss to net loss related to amortization of net actuarial losses were approximately **$25,000** for Q1 2023[110](index=110&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial performance, focusing on revenue, capital, and cost control, leading to improved results and reduced net loss [Forward-Looking Statements](index=26&type=page&id=Forward-Looking%20Statements) This section reiterates the cautionary statement on forward-looking statements, noting actual results may differ due to risks and uncertainties - The discussion contains forward-looking statements subject to risks and uncertainties, and actual results could differ materially[112](index=112&type=chunk) [Overview](index=26&type=page&id=Overview) The company operates through Five Point Operating Company, LP (**62.6%** owned), consolidating most entities but equity accounting for Great Park and Gateway Commercial Ventures - The company operates through Five Point Operating Company, LP, owning approximately **62.6%** as of March 31, 2023[113](index=113&type=chunk) - The operating company consolidates Five Point Land, LLC and The Shipyard Communities, LLC, but accounts for Great Park Venture and Gateway Commercial Venture using the equity method[113](index=113&type=chunk) [Operational Highlights](index=26&type=page&id=Operational%20Highlights) Q1 2023 focus on revenue, capital, and cost control led to an **18%** SG&A reduction, increased homebuyer activity, and **$231.6 million** in total liquidity - The company's three main priorities are generating revenue and positive cash flow, managing capital spend, and managing selling, general and administrative costs[114](index=114&type=chunk) - Selling, general and administrative costs decreased by **18%** in Q1 2023 compared to Q1 2022[114](index=114&type=chunk) - Home sales at Valencia increased to **75 homes** in Q1 2023 from **49** in Q4 2022, and at Great Park Neighborhoods to **255 homes** from **113**[115](index=115&type=chunk) - Total liquidity as of March 31, 2023, was **$231.6 million**, comprising **$106.6 million** in cash and **$125.0 million** available under the revolving credit facility[116](index=116&type=chunk) [Results of Operations](index=27&type=page&id=Results%20of%20Operations) Q1 2023 financial results significantly improved with reduced net loss, driven by increased revenues, decreased restructuring costs, and positive equity earnings | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total revenues | $5,701 | $4,886 | | Total costs and expenses | $17,290 | $40,751 | | Net loss attributable to the company | $(4,536) | $(17,130) | [Revenues](index=28&type=page&id=Revenues) Total revenues increased by **$0.8 million (16.7%)** in Q1 2023, primarily due to higher management services revenue from the Great Park segment - Revenues increased by **$0.8 million (16.7%)** to **$5.7 million** in Q1 2023, mainly due to increased management services revenue at the Great Park segment[120](index=120&type=chunk) [Selling, general, and administrative](index=28&type=page&id=Selling,%20general,%20and%20administrative) SG&A expenses decreased by **$3.0 million (18.1%)** in Q1 2023, driven by reduced employee and marketing costs following a **38%** headcount reduction - Selling, general, and administrative expenses decreased by **$3.0 million (18.1%)** to **$13.8 million** in Q1 2023[121](index=121&type=chunk) - The decrease was mainly due to reductions in employee-related and selling and marketing expenses, following an approximately **38%** headcount reduction since the end of 2021[121](index=121&type=chunk) [Restructuring](index=28&type=page&id=Restructuring) No restructuring costs in Q1 2023, a significant reduction from **$19.4 million** in Q1 2022, which included advisory payments and share-based compensation - Restructuring costs were **$0** in Q1 2023, down from **$19.437 million** in Q1 2022[18](index=18&type=chunk) - Q1 2022 restructuring costs included a **$15.6 million** related party liability for advisory agreement payments and **$3.0 million** in share-based compensation expense due to executive management changes[122](index=122&type=chunk) - An additional **$0.9 million** in severance benefits from layoffs was incurred in Q1 2022[123](index=123&type=chunk) [Equity in earnings (loss) from unconsolidated entities](index=28&type=page&id=Equity%20in%20earnings%20(loss)%20from%20unconsolidated%20entities) Equity in earnings from unconsolidated entities shifted from a **$1.0 million** loss in Q1 2022 to a **$1.0 million** gain in Q1 2023, driven by Great Park Venture's net income - Equity in earnings from unconsolidated entities increased to **$1.0 million** in Q1 2023 from a loss of **$1.0 million** in Q1 2022[125](index=125&type=chunk) - This increase was primarily driven by the Great Park Venture recognizing net income in Q1 2023 compared to a net loss in Q1 2022[125](index=125&type=chunk) [Income taxes](index=28&type=page&id=Income%20taxes) Minimal income tax provision recorded in Q1 2023 and Q1 2022 despite pre-tax losses, due to valuation allowance against deferred tax assets - Pre-tax losses of **$9.7 million** (Q1 2023) and **$36.8 million** (Q1 2022) resulted in no tax benefit due to the application of a valuation allowance[126](index=126&type=chunk) - The effective tax rate, before changes in valuation allowance, was substantially similar for both periods[126](index=126&type=chunk) [Net loss attributable to noncontrolling interests](index=28&type=page&id=Net%20loss%20attributable%20to%20noncontrolling%20interests) Net loss attributable to noncontrolling interests significantly decreased in Q1 2023, reflecting the overall reduction in the company's net loss | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net loss attributable to noncontrolling interests | $(5,198) | $(19,639) | - Noncontrolling interests represent interests held by other partners in the operating company and members of The San Francisco Venture[127](index=127&type=chunk) [Segment Results and Financial Information](index=29&type=page&id=Segment%20Results%20and%20Financial%20Information) Four segments (Valencia, San Francisco, Great Park, Commercial) show varied performance, with Great Park improving profit and Commercial shifting to loss - The Great Park segment reported a profit of **$4.5 million** in Q1 2023, a significant improvement from a **$2.1 million** loss in Q1 2022[92](index=92&type=chunk) - The Valencia segment's loss decreased to **$2.4 million** in Q1 2023 from **$4.8 million** in Q1 2022[92](index=92&type=chunk) - The Commercial segment shifted from a **$215 thousand** profit in Q1 2022 to a **$176 thousand** loss in Q1 2023[92](index=92&type=chunk) [Valencia Segment](index=30&type=page&id=Valencia%20Segment) Valencia segment's SG&A expenses decreased by **40.4%** in Q1 2023 due to lower marketing and employee-related costs for its mixed-use community - The Valencia property is designed to include approximately **21,500 homesites** and **11.5 million square feet** of commercial space[133](index=133&type=chunk) - Selling, general, and administrative expenses for the Valencia segment decreased by **$1.8 million (40.4%)** to **$2.6 million** in Q1 2023[134](index=134&type=chunk) [San Francisco Segment](index=31&type=page&id=San%20Francisco%20Segment) San Francisco segment's Candlestick and Shipyard development is exempt from Proposition M, but land transfers are delayed by environmental retesting and litigation - Candlestick and The San Francisco Shipyard are designed to include approximately **12,000 homesites** and **6.3 million square feet** of commercial space[135](index=135&type=chunk)[137](index=137&type=chunk) - Development at Candlestick and The San Francisco Shipyard is not subject to San Francisco's Proposition M growth control measure[137](index=137&type=chunk) - Land transfers from the U.S. Navy are delayed due to allegations of misrepresented sampling results by contractors and subsequent retesting efforts[138](index=138&type=chunk) [Great Park Segment](index=31&type=page&id=Great%20Park%20Segment) Great Park segment saw significant increases in land sales and management fees in Q1 2023, alongside decreased SG&A expenses - The Great Park Neighborhoods is designed to include approximately **10,500 homesites** and **4.9 million square feet** of commercial space[141](index=141&type=chunk) - Land sales and related party land sales revenues increased to **$8.6 million** in Q1 2023 from **$1.8 million** in Q1 2022, primarily due to an increase in profit participation[143](index=143&type=chunk) - Management fees—related party increased by **$3.0 million (196.7%)** to **$4.5 million** in Q1 2023, mainly due to a higher annual base fee of **$12.0 million**[148](index=148&type=chunk) - Selling, general, and administrative expenses decreased by **$4.2 million (56.0%)** to **$3.3 million** in Q1 2023, due to lower marketing expenses and the elimination of a variable cost reimbursement component[147](index=147&type=chunk) [Commercial Segment](index=33&type=page&id=Commercial%20Segment) Commercial segment, including Gateway Commercial Venture (**75%** owned), reported a loss in Q1 2023, with limited control due to unanimous approval requirements - The Gateway Commercial Venture owns one commercial office building and approximately **50 acres** of commercial land with additional development rights at the Five Point Gateway Campus[152](index=152&type=chunk) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Segment (loss) profit from operations | $(176) | $215 | | Equity in (loss) earnings from the Gateway Commercial Venture | $(212) | $84 | [Liquidity and Capital Resources](index=33&type=page&id=Liquidity%20and%20Capital%20Resources) The company had **$106.6 million** cash and **$125.0 million** credit facility available, with short-term needs for development and long-term needs for horizontal development - As of March 31, 2023, the company had **$106.6 million** in consolidated cash and cash equivalents and **$125.0 million** available under its revolving credit facility[155](index=155&type=chunk) - Short-term cash needs include general and administrative expenses, development expenditures at Valencia and San Francisco, interest payments, and related party reimbursement obligations[156](index=156&type=chunk) - Approximately **$9.0 million** in related party reimbursement obligations were deferred from Q1 2023 to Q1 2024[156](index=156&type=chunk) - Long-term cash needs primarily relate to future horizontal development expenditures and investments in income-producing properties[158](index=158&type=chunk) [Summary of Cash Flows](index=34&type=page&id=Summary%20of%20Cash%20Flows) Net cash used in operating activities significantly decreased in Q1 2023, partially offset by public financing reimbursements | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $(21,638) | $(57,969) | | Investing activities | $68 | $484 | | Financing activities | $(3,624) | $(4,330) | - Net cash used in operating activities decreased by **$36.3 million** in Q1 2023, partially offset by **$17.7 million** in public financing reimbursements in Valencia[164](index=164&type=chunk) - Financing activities included **$0.2 million** for share-based compensation tax withholding and **$2.0 million** for noncontrolling interest tax distributions in Q1 2023[167](index=167&type=chunk) [Changes in Capital Structure](index=36&type=page&id=Changes%20in%20Capital%20Structure) Company ownership in the operating company increased to **62.6%** in Q1 2023 due to share-based compensation, with details on outstanding Class A and B units - The company's ownership percentage in the operating company increased to **62.6%** during Q1 2023[168](index=168&type=chunk) | Class A Units (in shares) | March 31, 2023 | December 31, 2022 | | :------------------------ | :------------- | :---------------- | | Held by us | 69,199,938 | 69,068,354 | | Held by noncontrolling interest members (Operating Company) | 41,363,271 | 41,363,271 | | Class A units of The San Francisco Venture held by noncontrolling interest members | 37,870,273 | 37,870,273 | - As of March 31, 2023, **79,233,544 Class B common shares** were outstanding, held by noncontrolling interest members, convertible to Class A common shares at a **0.0003 ratio**[170](index=170&type=chunk) [Critical Accounting Estimates](index=36&type=page&id=Critical%20Accounting%20Estimates) No significant changes to critical accounting estimates occurred in Q1 2023 compared to those disclosed in the Annual Report on Form 10-K - No significant changes to critical accounting estimates occurred during the three months ended March 31, 2023[171](index=171&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk stems from **$621.0 million** fixed-rate indebtedness; no derivative financial instruments are currently used, but swaps may be considered - The company's primary market risk results from its indebtedness, which bears interest at fixed rates[172](index=172&type=chunk) - As of March 31, 2023, outstanding consolidated net indebtedness was **$621.0 million**, none of which bears interest based on floating rates[173](index=173&type=chunk) - The company has not entered into any transactions using derivative financial instruments[173](index=173&type=chunk) [ITEM 4. Controls and Procedures](index=36&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=36&type=page&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Certifying Officers concluded disclosure controls and procedures were effective as of March 31, 2023, ensuring timely and accurate reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2023[175](index=175&type=chunk) [Changes in Internal Control Over Financial Reporting](index=37&type=page&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting were identified during the period - No material changes in internal control over financial reporting were identified during the period[176](index=176&type=chunk) PART II. OTHER INFORMATION [ITEM 1. Legal Proceedings](index=38&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to Note 11 for disclosures on legal proceedings, including the ongoing Hunters Point Litigation - Disclosures of legal proceedings are incorporated by reference from Note 11 to the condensed consolidated financial statements[179](index=179&type=chunk) [ITEM 1A. Risk Factors](index=38&type=page&id=ITEM%201A.%20Risk%20Factors) Readers are referred to the Annual Report on Form 10-K for risk factors, with no material changes reported - Readers should consider risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2022[180](index=180&type=chunk) - There have been no material changes in risk factors from those disclosed in the Annual Report on Form 10-K[180](index=180&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **83,660 Class A common shares** in January 2023 at **$2.41** per share to settle employee tax withholding obligations | Period | Total number of shares purchased | Average price paid per share | | :---------------------- | :------------------------------- | :--------------------------- | | January 1, 2023 to January 31, 2023 | 83,660 | $2.41 | | Total | 83,660 | $2.41 | - Shares were repurchased to settle tax withholding obligations of employees upon vesting of restricted shares[181](index=181&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=38&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - No defaults upon senior securities occurred[182](index=182&type=chunk) [ITEM 4. Mine Safety Disclosures](index=38&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable - This item is not applicable[182](index=182&type=chunk) [ITEM 5. Other Information](index=38&type=section&id=ITEM%205.%20Other%20Information) No other information was reported for this item - No other information was reported[182](index=182&type=chunk) [ITEM 6. Exhibits](index=39&type=section&id=ITEM%206.%20Exhibits) Exhibits filed with Form 10-Q include certifications from CEO and CFO, and Inline XBRL documents - Exhibits include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[183](index=183&type=chunk) - Inline XBRL documents for the instance, schema, calculation, definition, label, and presentation linkbases are also filed[183](index=183&type=chunk) [Signatures](index=40&type=section&id=Signatures) The report was signed by Daniel Hedigan, CEO, and Leo Kij, Interim CFO, on April 21, 2023 - The report was signed by Daniel Hedigan, Chief Executive Officer, and Leo Kij, Interim Chief Financial Officer, on April 21, 2023[186](index=186&type=chunk) ```

Financial Data and Key Metrics Changes - The company reported a consolidated net loss of $9.7 million for the quarter, with revenue of $5.7 million primarily from management services [2][11] - Selling, general and administrative (SG&A) expenses were $13.8 million, an 18% decrease or $3 million compared to the same quarter last year [3][11] - Total liquidity at quarter end was $231.6 million, consisting of $106.6 million in cash and cash equivalents and $125 million in available borrowing capacity [7][13] - The debt to total capitalization ratio was stable at 25.2%, with a net debt to capitalization ratio of 21.8% after accounting for cash [8][13] Business Line Data and Key Metrics Changes - The Great Park segment reported net income of $4.5 million, with $4.1 million in management fee revenues [40][41] - The Valencia segment recognized a loss of $2.4 million, primarily due to SG&A expenses related to employee compensation and marketing [51] - The Commercial segment had a net loss of approximately $200,000 for the quarter [45] Market Data and Key Metrics Changes - Home sales in the Great Park community increased significantly, with builders selling 255 homes in Q1, up from 113 in Q4 [26] - In Valencia, new home sales totaled 75 homes during the first quarter, an increase from 49 homes in the previous quarter [30] - The overall land market remained complicated, but there are signs of stabilization and increased interest in land acquisition as the banking crisis subsides [15][16] Company Strategy and Development Direction - The company aims to focus on generating revenue, managing capital expenditures, and reducing SG&A while adapting to market conditions [1][20] - There is a strategic emphasis on cash generation from various sources, including land sales and joint venture distributions [21][22] - The company plans to continue working with builders to sell land at prices that reflect current market conditions and the scarcity of entitled land [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future opportunities despite ongoing challenges such as interest rate increases and inflation [1] - The company anticipates substantial cash flow in the second quarter from land sales and expects to increase cash flow and bottom line throughout the year [12][34] - Management noted that builders are returning to the market, with competitive bidding for land, indicating a recovery in demand [65] Other Important Information - The company has deferred approximately $9 million of a reimbursement obligation to the first quarter of 2024, with expectations of further deferrals [6] - The Great Park Venture is a self-funding operation with no debt and a cash balance of $144 million at the end of the quarter [44] Q&A Session Summary Question: What kind of pressure are you seeing in your communities on pricing? - Management noted that builders are pricing homes to meet the market, with little concessions being given, especially in the Great Park [50] Question: Can you talk about what you're seeing on the cost on the development side? - Management indicated that land development costs are decreasing, with a recent rebid saving $0.5 million [59] Question: How do you plan to position your balance sheet ahead of the bond maturity in 2025? - Management emphasized a focus on maximizing cash position but did not specify a target for the balance sheet [70][76]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Class A common shares | FPH | New York Stock Exchange | Securi ...

Financial Data and Key Metrics Changes - Consolidated net income for Q4 2022 was $22.5 million, with SG&A expenses reduced to $13.1 million, a decrease of $4.5 million compared to Q4 2021 [7][27] - Consolidated SG&A for the year was $54.6 million, reflecting a 29% reduction from 2021 [7] - Cash and cash equivalents at year-end stood at $131.8 million, with total liquidity of $256.8 million [14][38] Business Line Data and Key Metrics Changes - The Great Park segment reported net income of $93.7 million for the quarter, primarily from a commercial land sale of approximately 42 acres for $240 million [42][45] - The Valencia segment recognized a loss of $509,000 for the quarter, with no land sale closings but reported revenue of $3.8 million [40] - The San Francisco segment incurred a loss of $1.2 million, focusing on reassessing development plans [41] Market Data and Key Metrics Changes - Builders in the Great Park community sold 113 homes in Q4, up from 82 in Q3, totaling 326 homes sold for the year [16] - In Valencia, builders sold 49 homes in Q4, down from 166 in Q3, with a total of 594 homes sold for the year [19] - The company anticipates a transition year in residential markets, with ongoing demand for well-located homes despite current market pressures [11][12] Company Strategy and Development Direction - The company will focus on generating revenue, managing capital expenditures, and controlling SG&A to achieve net positive cash flow in 2023 [10][24] - The management team aims to capitalize on opportunities in commercial land sales and residential developments as the market stabilizes [11][12] - The renewal of the development management agreement with Great Park Venture through 2024 reflects the value added by the management team [9][37] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about 2023, acknowledging the challenges posed by rising interest rates and inflation on housing demand [31][32] - The company is focused on maintaining liquidity and is prepared to adjust plans proactively based on market conditions [32][77] - Management highlighted the importance of patience and strategic planning in navigating the current real estate market down cycle [10][11] Other Important Information - The company has no principal debt repayment obligations on senior notes in 2023 or 2024, with a stable debt-to-capitalization ratio of 25.1% [14][39] - The Great Park Venture is a self-funding operation with a cash balance of $149 million at the end of the quarter [46] Q&A Session Summary Question: Builder appetite for land and recent conversations - Management indicated that builders are re-engaging and showing interest in land purchases, with positive early signs for 2023 [51][54] Question: Cash balance in Great Park and distribution cadence - The cash balance in the Great Park partnership is $149 million, with distributions expected to align with land sales in the second half of the year [55][57] Question: Development expenses for Candlestick project - Management does not expect development expenses for the Candlestick project in 2023, with clarity on costs to come as plans progress [65] Question: Management agreement changes - The management agreement was extended without changes to the economic terms, focusing on continuity and key personnel [73][76] Question: Related party tax liability and liquidity - Management clarified that the Tax Receivable Agreement (TRA) is a projected obligation and does not currently affect bond payments [87]

PART I. FINANCIAL INFORMATION Presents unaudited condensed consolidated financial statements and management's discussion and analysis for Five Point Holdings, LLC [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, capital, and cash flows, with detailed notes [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Details the company's financial position, showing a decrease in total assets and capital, primarily due to reduced cash and cash equivalents | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Change (vs. Dec 31, 2021) | | :----------------------------- | :-------------------------- | :-------------------------- | :------------------------ | | Total Assets | $2,885,093 | $2,942,910 | $(57,817) | | Inventories | $2,229,525 | $2,096,824 | $132,701 | | Cash and Cash Equivalents | $86,379 | $265,462 | $(179,083) | | Total Liabilities | $1,013,610 | $1,017,532 | $(3,922) | | Total Capital | $1,846,483 | $1,900,378 | $(53,895) | [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, costs, and net loss for the three and nine months ended September 30, 2022 and 2021, showing a significant increase in net loss attributable to the company | Metric (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Total Revenues | $15,416 | $20,695 | $(5,279) | $25,695 | $42,179 | $(16,484) | | Total Costs & Expenses| $21,098 | $30,927 | $(9,829) | $79,078 | $89,311 | $(10,233) | | Net Loss | $(9,531) | $(8,210) | $(1,321) | $(57,272) | $(34,182) | $(23,090) | | Net Loss Attributable to the Company | $(4,439) | $(3,848) | $(591) | $(26,680) | $(15,916) | $(10,764) | | Basic EPS (Class A) | $(0.06) | $(0.06) | $0.00 | $(0.39) | $(0.23) | $(0.16) | [Unaudited Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Reports the comprehensive loss for the three and nine months ended September 30, 2022 and 2021, including net loss and other comprehensive income components | Metric (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Net Loss | $(9,531) | $(8,210) | $(1,321) | $(57,272) | $(34,182) | $(23,090) | | Other Comprehensive Income | $13 | $27 | $(14) | $39 | $83 | $(44) |\n| Comprehensive Loss | $(9,518) | $(8,183) | $(1,335) | $(57,233) | $(34,099) | $(23,134) | | Comprehensive Loss Attributable to the Company | $(4,431) | $(3,831) | $(600) | $(26,656) | $(15,864) | $(10,792) | [Unaudited Condensed Consolidated Statements of Capital](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Capital) Details changes in the company's capital structure, including common shares, contributed capital, retained earnings, and noncontrolling interests | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :-------------------- | :----------- | :----------- | :----- | | Contributed Capital | $586,954 | $587,587 | $(633) | | Retained Earnings | $22,109 | $48,789 | $(26,680)| | Total Members' Capital| $607,146 | $634,424 | $(27,278)| | Noncontrolling Interests | $1,239,337 | $1,265,954 | $(26,617)| | Total Capital | $1,846,483 | $1,900,378 | $(53,895)| - The company's ownership interest in the Operating Company decreased to **62.5%** during the nine months ended September 30, 2022, due to reacquisition of restricted Class A common shares for tax withholding and forfeiture of unvested shares, partially offset by new share-based compensation issuances[64](index=64&type=chunk)[67](index=67&type=chunk)[216](index=216&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Provides a summary of cash flows from operating, investing, and financing activities, indicating a net decrease in cash, cash equivalents, and restricted cash | Metric (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | | Net Cash Used in Operating Activities | $(175,023) | $(162,301) | $(12,722) | | Net Cash Provided by Investing Activities | $2,307 | $78,313 | $(76,006) | | Net Cash Used in Financing Activities | $(6,367) | $(23,022) | $16,655 | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(179,083) | $(107,010) | $(72,073) | | Cash, Cash Equivalents, and Restricted Cash—End of period | $87,709 | $192,464 | $(104,755) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the condensed consolidated financial statements, covering business, accounting policies, and financial information [Note 1. BUSINESS AND ORGANIZATION](index=10&type=section&id=1.%20BUSINESS%20AND%20ORGANIZATION) Describes Five Point Holdings, LLC as an owner and developer of mixed-use planned communities in California, operating through its subsidiary, Five Point Operating Company, LP - Five Point Holdings, LLC is a Delaware limited liability company that owns and develops mixed-use planned communities in California, conducting operations through Five Point Operating Company, LP[36](index=36&type=chunk) - The company has two classes of shares, Class A and Class B common shares, with Class B shares receiving **0.0003 times** the distribution amount of Class A shares[37](index=37&type=chunk) - As of September 30, 2022, the Company owned approximately **62.5%** of the outstanding Class A Common Units of the Operating Company, with noncontrolling interests representing equity interests held by partners in the Operating Company and members in The Shipyard Communities, LLC[40](index=40&type=chunk) [Note 2. BASIS OF PRESENTATION](index=11&type=section&id=2.%20BASIS%20OF%20PRESENTATION) Explains that the financial statements are unaudited, prepared in accordance with U.S. GAAP for interim financial information, and include consolidation of subsidiaries and VIEs - The condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information, consolidating subsidiaries and variable interest entities where the Holding Company is the primary beneficiary[42](index=42&type=chunk)[43](index=43&type=chunk) - Restructuring costs of **$19.4 million** were recognized during the nine months ended September 30, 2022, including **$15.6 million** for advisory agreement payments to former executives and **$3.0 million** in share-based compensation expense, plus **$0.9 million** from severance benefits[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) [Note 3. REVENUES](index=14&type=section&id=3.%20REVENUES) Disaggregates the company's consolidated revenues by source and reporting segment, highlighting a decrease in total revenues for both periods | Revenue Source (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :---------------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Land sales | $72 | $10,000 | $(9,928) | $643 | $10,087 | $(9,444) | | Land sales—related party | $2,817 | $17 | $2,800 | $4,529 | $73 | $4,456 | | Management services—related party | $12,108 | $10,156 | $1,952 | $18,358 | $30,242 | $(11,884) | | Operating properties | $419 | $522 | $(103) | $2,165 | $1,777 | $388 | | Total Revenues | $15,416 | $20,695 | $(5,279) | $25,695 | $42,179 | $(16,484) | - The Development Management Agreement (A&R DMA) with Great Park Venture was extended through December 31, 2022, eliminating variable cost reimbursements and increasing the annual fixed base fee to **$12.0 million** for 2022[49](index=49&type=chunk) - Contract assets increased by **$6.3 million** for the nine months ended September 30, 2022, primarily due to additional incentive compensation revenue from changes in estimated transaction price, offset by marketing fees received from prior land sales[50](index=50&type=chunk) [Note 4. INVESTMENT IN UNCONSOLIDATED ENTITIES](index=16&type=section&id=4.%20INVESTMENT%20IN%20UNCONSOLIDATED%20ENTITIES) Details the company's equity method investments in Great Park Venture, Gateway Commercial Venture, and Valencia Landbank Venture, including their financial performance - The Great Park Venture fully satisfied **$476.0 million** in priority distribution rights to Legacy Interest holders, with **$82.7 million** remaining for participating Legacy Interest distribution rights as of September 30, 2022[52](index=52&type=chunk)[175](index=175&type=chunk) | Great Park Venture (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Land sale and related party land sale revenues | $39,020 | $407,311 | $(368,291) | | Net (loss) income of Great Park Venture | $(19,658) | $63,604 | $(83,262) | | Equity in (loss) earnings from Great Park Venture | $(5,634) | $8,319 | $(13,953) | - The Gateway Commercial Venture recognized **$6.2 million** and **$6.4 million** in rental revenues for the nine months ended September 30, 2022 and 2021, respectively, from leasing arrangements with the Company and a Lennar subsidiary[60](index=60&type=chunk) - The Company's investment in Valencia Landbank Venture was **$2.3 million** at September 30, 2022, and it recognized **$0.9 million** in equity in earnings for the nine months ended September 30, 2022[63](index=63&type=chunk) [Note 5. NONCONTROLLING INTERESTS](index=18&type=section&id=5.%20NONCONTROLLING%20INTERESTS) Explains the nature of noncontrolling interests in the Operating Company and San Francisco Venture, including exchange rights and tax distribution provisions - Noncontrolling interests represent equity interests in the Operating Company (**37.5%** of Class A Common Units) and Class A units of the San Francisco Venture, held by affiliates of Lennar, Castlelake, and Emile Haddad[64](index=64&type=chunk)[70](index=70&type=chunk) - Holders of Class A Common Units of the Operating Company and Class A units of the San Francisco Venture have exchange rights for Class A common shares or cash, subject to certain conditions[65](index=65&type=chunk)[71](index=71&type=chunk) | Tax Distributions (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :------------------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Management Partner | $0 | $1,246 | $(1,246) | $435 | $2,932 | $(2,497) | | Other partners | $0 | $0 | $0 | $0 | $1,497 | $(1,497) | | Total Tax Distributions | $0 | $1,246 | $(1,246) | $435 | $4,429 | $(3,994) | - The San Francisco Venture has **$25.0 million** in redeemable noncontrolling interest from Class C units issued to an affiliate of Lennar, redeemable upon certain Mello-Roos reimbursements or at the San Francisco Venture's option[72](index=72&type=chunk) [Note 6. CONSOLIDATED VARIABLE INTEREST ENTITY](index=19&type=section&id=6.%20CONSOLIDATED%20VARIABLE%20INTEREST%20ENTITY) Explains that the Holding Company consolidates the Operating Company and its subsidiaries as Variable Interest Entities (VIEs) due to its primary beneficiary status - The Holding Company consolidates the Operating Company, San Francisco Venture, FP LP, and FPL as VIEs, as it is determined to be the primary beneficiary due to its unilateral power over significant economic activities and more-than-insignificant economic benefit[73](index=73&type=chunk)[74](index=74&type=chunk)[79](index=79&type=chunk) - As of September 30, 2022, the San Francisco Venture had total combined assets of **$1.3 billion** (primarily inventories) and liabilities of **$72.0 million**, with creditors having no recourse to the Company's assets[75](index=75&type=chunk)[77](index=77&type=chunk) - As of September 30, 2022, FP LP and FPL had combined assets of **$1.1 billion** (primarily inventories and intangibles) and liabilities of **$81.1 million**[80](index=80&type=chunk) [Note 7. INTANGIBLE ASSET, NET—RELATED PARTY](index=20&type=section&id=7.%20INTANGIBLE%20ASSET,%20NET%E2%80%94RELATED%20PARTY) Describes the intangible asset related to incentive compensation provisions of the Development Management Agreement with the Great Park Venture, amortized over the expected contract period - The intangible asset represents the contract value of incentive compensation from the A&R DMA with the Great Park Venture, amortized over the expected contract period based on economic benefit patterns[83](index=83&type=chunk) | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :-------------------- | :----------- | :----------- | :----- | | Gross carrying amount | $129,705 | $129,705 | $0 | | Accumulated amortization | $(83,736) | $(78,300) | $(5,436)| | Net book value | $45,969 | $51,405 | $(5,436)| - Intangible asset amortization expense was **$5.4 million** for both the three and nine months ended September 30, 2022, and **$4.9 million** and **$15.5 million** for the three and nine months ended September 30, 2021, respectively, included in the cost of management services[84](index=84&type=chunk) [Note 8. RELATED PARTY TRANSACTIONS](index=21&type=section&id=8.%20RELATED%20PARTY%20TRANSACTIONS) Details various related party assets and liabilities, including contract assets from the Great Park Venture's development management agreement and accrued advisory fees | Related Party Assets (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :---------------------------------- | :----------- | :----------- | :----- | | Contract assets | $87,003 | $79,082 | $7,921 | | Operating lease right-of-use asset | $17,006 | $18,715 | $(1,709)| | Total Related Party Assets | $104,887 | $101,818 | $3,069 | | | | | | | Related Party Liabilities (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :----------------------------------- | :----------- | :----------- | :----- | | Reimbursement obligation | $66,341 | $69,536 | $(3,195)| | Accrued advisory fees | $11,975 | $0 | $11,975|\n| Total Related Party Liabilities | $99,913 | $95,918 | $3,995 | - The Development Management Agreement with Great Park Venture includes "Legacy Incentive Compensation" (max **$9.0 million**) and "Non-Legacy Incentive Compensation" (**9%** of distributions), with a potential clawback to **6.75%** if the agreement is not extended beyond December 31, 2022[86](index=86&type=chunk) - Accrued advisory fees of **$9.6 million** for Emile Haddad and **$2.4 million** for Lynn Jochim were included in related party liabilities as of September 30, 2022, following their transitions to advisory roles[88](index=88&type=chunk)[89](index=89&type=chunk) [Note 9. NOTES PAYABLE, NET](index=22&type=section&id=9.%20NOTES%20PAYABLE,%20NET) Details the company's notes payable, primarily consisting of **7.875%** Senior Notes due 2025, and the status of its unsecured revolving credit facility | Notes Payable (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :--------------------------- | :----------- | :----------- | :----- | | 7.875% Senior Notes due 2025 | $625,000 | $625,000 | $0 | | Unamortized debt issuance costs and discount | $(4,733) | $(5,884) | $1,151 | | Notes payable, net | $620,267 | $619,116 | $1,151 | - The Operating Company has a **$125.0 million** unsecured revolving credit facility maturing in April 2024, with **$0.3 million** issued in letters of credit, leaving **$124.7 million** available as of September 30, 2022[91](index=91&type=chunk) [Note 10. TAX RECEIVABLE AGREEMENT](index=22&type=section&id=10.%20TAX%20RECEIVABLE%20AGREEMENT) States the company is party to a Tax Receivable Agreement (TRA) with certain unit holders, with a liability of **$173.1 million** as of September 30, 2022 - The company has a Tax Receivable Agreement (TRA) with holders of Class A Common Units of the Operating Company and Class A units of the San Francisco Venture[92](index=92&type=chunk) | TRA Liability (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :--------------------------- | :----------- | :----------- | :----- | | Payable pursuant to tax receivable agreement | $173,068 | $174,126 | $(1,058)| - No TRA payments were made during the nine months ended September 30, 2022 or 2021[92](index=92&type=chunk) [Note 11. COMMITMENTS AND CONTINGENCIES](index=22&type=section&id=11.%20COMMITMENTS%20AND%20CONTINGENCIES) Outlines the company's various contractual obligations, including operating leases, performance bonds, guarantees, and ongoing legal proceedings | Commitments (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :------------------------- | :----------- | :----------- | :----- | | Operating lease right-of-use assets | $20,267 | $23,779 | $(3,512)| | Operating lease liabilities | $16,814 | $20,034 | $(3,220)| | Other contractual payment guarantees | $10,500 | N/A | N/A | | Outstanding performance bonds | $326,300 | $279,600 | $46,700| | Guarantees benefiting San Francisco Agency | $198,300 | $198,300 | $0 | | Outstanding letters of credit | $1,300 | $1,300 | $0 | - The company is involved in legal proceedings (Bayview Action, Homeowners Action) concerning alleged environmental contamination and misrepresentation at The San Francisco Shipyard, with a settlement approved for the Homeowners Action in March 2022[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) [Note 12. SUPPLEMENTAL CASH FLOW INFORMATION](index=24&type=section&id=12.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Provides additional details on cash flow activities, including cash paid for interest and noncash lease expense, and reconciles cash, cash equivalents, and restricted cash | Supplemental Cash Flow (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :------------------------------------ | :-------------------------- | :-------------------------- | :----------- | | Cash paid for interest (capitalized to inventories) | $26,902 | $27,177 | $(275) | | Noncash lease expense | $3,453 | $3,296 | $157 | | Adjustment to liability recognized under TRA | $(1,058) | $878 | $(1,936) | | Cash paid for income taxes | $0 | $775 | $(775) | | Cash Reconciliation (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Change | | :--------------------------------- | :----------- | :----------- | :----- | | Cash and cash equivalents | $86,379 | $191,134 | $(104,755)| | Restricted cash and certificates of deposit | $1,330 | $1,330 | $0 | | Total cash, cash equivalents, and restricted cash | $87,709 | $192,464 | $(104,755)| [Note 13. SEGMENT REPORTING](index=24&type=section&id=13.%20SEGMENT%20REPORTING) Defines the company's four reportable segments: Valencia, San Francisco, Great Park, and Commercial, each representing distinct mixed-use planned communities or commercial operations - The company operates through four reportable segments: Valencia (northern Los Angeles County), San Francisco (Candlestick and The San Francisco Shipyard), Great Park (Orange County Great Park Neighborhoods), and Commercial (Five Point Gateway Campus)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) | Segment Revenues (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :------------------------------ | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Valencia | $3,082 | $10,398 | $(7,316) | $6,809 | $11,506 | $(4,697) | | San Francisco | $226 | $141 | $85 | $528 | $431 | $97 | | Great Park | $47,195 | $92,486 | $(45,291) | $97,541 | $450,196 | $(352,655) | | Commercial | $2,297 | $2,210 | $87 | $6,560 | $6,661 | $(101) | | Total Reportable Segments | $52,800 | $105,235 | $(52,435) | $111,438 | $468,794 | $(357,356) | | Segment Assets (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :---------------------------- | :----------- | :----------- | :----- | | Valencia | $977,974 | $878,399 | $99,575| | San Francisco | $1,303,826 | $1,275,510 | $28,316| | Great Park | $1,012,305 | $988,444 | $23,861| | Commercial | $103,746 | $104,400 | $(654) | | Total Reportable Segments | $3,397,851 | $3,246,753 | $151,098| [Note 14. SHARE-BASED COMPENSATION](index=26&type=section&id=14.%20SHARE-BASED%20COMPENSATION) Summarizes share-based equity compensation activity, including grants, forfeitures, and vesting, and details the share-based compensation expense recognized | Share-Based Awards (in thousands) | Nonvested at Jan 1, 2022 | Granted | Forfeited | Vested | Nonvested at Sep 30, 2022 | | :-------------------------------- | :----------------------- | :------ | :-------- | :----- | :------------------------ | | Number of Awards | 2,640 | 1,359 | (834) | (979) | 2,186 | | Weighted-Average Grant Date Fair Value | $6.38 | $1.92 | $2.96 | $7.80 | $3.79 | | Share-Based Compensation Expense (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :---------------------------------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Total Expense | $700 | $1,800 | $(1,100) | $5,500 | $4,200 | $1,300 | - For the nine months ended September 30, 2022, **$3.0 million** of share-based compensation expense was included in restructuring expense and **$2.5 million** in selling, general, and administrative expenses due to modification of awards for former officers[112](index=112&type=chunk) [Note 15. EMPLOYEE BENEFIT PLANS](index=26&type=section&id=15.%20EMPLOYEE%20BENEFIT%20PLANS) Provides details on the company's frozen defined benefit Retirement Plan, including the components of net periodic benefit - The Newhall Land and Farming Company Retirement Plan is a frozen defined benefit plan, with no service cost component[114](index=114&type=chunk) | Net Periodic Benefit (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :---------------------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Interest cost | $136 | $128 | $8 | $408 | $384 | $24 | | Expected return on plan assets | $(261) | $(289) | $28 | $(783) | $(870) | $87 | | Amortization of net actuarial loss | $13 | $27 | $(14) | $39 | $83 | $(44) | | Total Net Periodic Benefit | $(112) | $(134) | $22 | $(336) | $(403) | $67 | [Note 16. INCOME TAXES](index=26&type=section&id=16.%20INCOME%20TAXES) Explains the company's income tax treatment and notes that no significant income tax provision or benefit was recorded due to a valuation allowance against deferred tax assets - The Holding Company is treated as a corporation for tax purposes, while most subsidiaries are pass-through entities[115](index=115&type=chunk) - No significant income tax provision or benefit was recorded for the three and nine months ended September 30, 2022 and 2021, due to the application of an increase in the company's valuation allowance against its net deferred tax assets, driven by a history of book losses[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) [Note 17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS AND DISCLOSURES](index=27&type=section&id=17.%20FINANCIAL%20INSTRUMENTS%20AND%20FAIR%20VALUE%20MEASUREMENTS%20AND%20DISCLOSURES) Discusses the fair value measurement of financial instruments, noting that most carrying amounts approximate fair value, except for notes payable, net - The company uses a fair value hierarchy (Level 1, 2, 3) for financial instrument measurements[119](index=119&type=chunk) - The carrying amounts of most financial instruments (cash, restricted cash, certain related party assets/liabilities, accounts payable) approximated their fair value[119](index=119&type=chunk) | Notes Payable, Net (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :-------------------------------- | :----------- | :----------- | | Estimated Fair Value | $499,700 | $655,600 | | Carrying Value | $620,300 | $619,100 | [Note 18. EARNINGS PER SHARE](index=27&type=section&id=18.%20EARNINGS%20PER%20SHARE) Explains the company's use of the two-class method for EPS calculation, allocating net income/loss between Class A and Class B common shares and considering dilutive potential securities - The company uses the two-class method for EPS, allocating net income/loss between Class A and Class B common shares, with Class B shares receiving **0.03%** of Class A distributions[121](index=121&type=chunk) - No distributions on common shares were declared for the three and nine months ended September 30, 2022 or 2021[122](index=122&type=chunk) | EPS (Class A) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic | $(0.06) | $(0.06) | $(0.39) | $(0.23) | | Diluted | $(0.07) | $(0.06) | $(0.39) | $(0.23) | [Note 19. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=28&type=section&id=19.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Details the components of accumulated other comprehensive loss attributable to the company, primarily unamortized defined benefit pension plan net actuarial losses - Accumulated other comprehensive loss attributable to the Company primarily consists of unamortized defined benefit pension plan net actuarial losses, totaling **$1.9 million** at September 30, 2022[125](index=125&type=chunk) - A full valuation allowance is held against the accumulated tax benefits related to these losses[125](index=125&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on the company's financial condition and results of operations, discussing business, operational highlights, financial performance, liquidity, and capital structure [Overview](index=29&type=section&id=Overview) Five Point Holdings, LLC conducts all business through its operating company, Five Point Operating Company, LP, in which it holds approximately **62.5%** ownership - Five Point Holdings, LLC operates through Five Point Operating Company, LP, owning approximately **62.5%** of it as of September 30, 2022[127](index=127&type=chunk) - The operating company consolidates and controls entities developing Valencia, Candlestick, and The San Francisco Shipyard, while holding equity method interests in Great Park Venture and Gateway Commercial Venture[127](index=127&type=chunk)[128](index=128&type=chunk) [Operational Highlights](index=30&type=section&id=Operational%20Highlights) The company experienced softening residential markets due to rising mortgage rates, leading to delays in some residential land sales, but commercial land offerings are progressing with significant cost savings - Residential markets were negatively impacted by rising mortgage rates, causing the company to delay some residential land sales at Valencia and Great Park Neighborhoods to match market pace and prices[129](index=129&type=chunk) - Commercial land offerings are moving forward at Great Park Neighborhoods and Valencia[130](index=130&type=chunk) - Guest builders sold **166 homes** at Valencia in Q3 2022, totaling **891 homes** since sales began in May 2021[130](index=130&type=chunk) - The Great Park Venture sold **61 homesites** for **$23.9 million** in Q3 2022, and guest builders sold **82 homes** at Great Park Neighborhoods[131](index=131&type=chunk) - Selling, general, and administrative costs decreased by **42%** in Q3 2022 compared to Q3 2021, driven by cost rationalization and a **29%** reduction in headcount since the end of 2021[132](index=132&type=chunk)[138](index=138&type=chunk)[145](index=145&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) The company experienced significant variability in its results of operations due to the timing of land sales and market conditions, leading to increased net loss attributable to the company - The timing of land sale revenues, influenced by planning, development, and market conditions, causes variability in results of operations[134](index=134&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Total Revenues | $15,416 | $20,695 | $(5,279) | $25,695 | $42,179 | $(16,484) | | Total Costs & Expenses| $21,098 | $30,927 | $(9,829) | $79,078 | $89,311 | $(10,233) | | Net Loss Attributable to the Company | $(4,439) | $(3,848) | $(591) | $(26,680) | $(15,916) | $(10,764) | [Three Months Ended September 30, 2022 and 2021](index=31&type=section&id=Three%20Months%20Ended%20September%2030,%202022%20and%202021) Revenues decreased by **25.5%** due to lower land sales, while costs of management services and SG&A expenses decreased, and equity in loss from unconsolidated entities increased - Revenues decreased by **$5.3 million** (**25.5%**) to **$15.4 million**, primarily due to lower land sales at Valencia, offset by increased management services revenue at Great Park[136](index=136&type=chunk) - Cost of management services decreased by **$0.6 million** (**7.3%**) to **$7.5 million**, mainly due to reduced reimbursable project team expenses at Great Park[137](index=137&type=chunk) - Selling, general, and administrative expenses decreased by **$8.7 million** (**42.0%**) to **$12.0 million**, primarily due to a **29%** reduction in headcount since the end of 2021[138](index=138&type=chunk) - Equity in loss from unconsolidated entities was **$4.3 million**, a decrease from earnings of **$0.5 million** in the prior year, mainly due to the Great Park Venture's net loss[140](index=140&type=chunk) [Nine Months Ended September 30, 2022 and 2021](index=32&type=section&id=Nine%20Months%20Ended%20September%2030,%202022%20and%202021) Revenues decreased by **39.1%** due to lower management services revenue and land sales, while costs and SG&A expenses decreased, and restructuring costs were incurred - Revenues decreased by **$16.5 million** (**39.1%**) to **$25.7 million**, primarily due to lower management services revenue at Great Park and reduced land sales at Valencia[143](index=143&type=chunk) - Cost of management services decreased by **$12.3 million** (**49.9%**) to **$12.4 million**, mainly due to decreased reimbursable project team expenses and intangible asset amortization at Great Park[144](index=144&type=chunk) - Selling, general, and administrative expenses decreased by **$18.0 million** (**30.3%**) to **$41.5 million**, driven by a **29%** reduction in headcount[145](index=145&type=chunk) - Restructuring costs of **$19.4 million** were incurred, including **$15.6 million** for executive advisory agreements and **$3.0 million** in share-based compensation expense due to award modifications, plus **$0.9 million** for severance benefits[146](index=146&type=chunk)[147](index=147&type=chunk) - Equity in loss from unconsolidated entities was **$4.7 million**, a decrease from earnings of **$9.0 million** in the prior year, mainly due to the Great Park Venture's net loss[148](index=148&type=chunk) [Segment Results and Financial Information](index=34&type=section&id=Segment%20Results%20and%20Financial%20Information) The company's four reportable segments (Valencia, San Francisco, Great Park, and Commercial) showed varied performance, with Valencia and Great Park experiencing significant revenue declines - The company's reportable segments include Valencia, San Francisco, Great Park, and Commercial, each with distinct operational results[153](index=153&type=chunk) | Segment Revenues (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :------------------------------ | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Valencia | $3,082 | $10,398 | $(7,316) | $6,809 | $11,506 | $(4,697) | | San Francisco | $226 | $141 | $85 | $528 | $431 | $97 | | Great Park | $47,195 | $92,486 | $(45,291) | $97,541 | $450,196 | $(352,655) | | Commercial | $2,297 | $2,210 | $87 | $6,560 | $6,661 | $(101) | [Valencia Segment](index=37&type=section&id=Valencia%20Segment) Revenues for the Valencia segment significantly decreased due to lower variable land sale consideration, while selling, general, and administrative expenses also decreased - Valencia segment revenues decreased to **$3.1 million** (Q3 2022) from **$10.4 million** (Q3 2021) and to **$6.8 million** (9M 2022) from **$11.5 million** (9M 2021), mainly due to lower variable land sale consideration compared to a **$10.0 million** contingent payment received in 2021[163](index=163&type=chunk)[165](index=165&type=chunk) - Selling, general, and administrative expenses decreased by **51.8%** in Q3 2022 and **28.5%** in 9M 2022, driven by reduced community-related selling, marketing, and employee expenses[164](index=164&type=chunk)[166](index=166&type=chunk) [San Francisco Segment](index=38&type=section&id=San%20Francisco%20Segment) The San Francisco segment's development is delayed due to environmental contamination allegations and resampling efforts by the U.S. Navy, with potential for further delays and legal claims - The San Francisco segment includes Candlestick and The San Francisco Shipyard, planned for approximately **12,000 homesites** and **6.3 million square feet** of commercial space[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - Development at The San Francisco Shipyard is delayed due to allegations of misrepresented sampling results by contractors, leading to data reevaluation, government investigations, and additional resampling efforts by the U.S. Navy[170](index=170&type=chunk) - The company has been named in lawsuits regarding alleged contamination at The San Francisco Shipyard, with a settlement approved for the Homeowners Action in March 2022[171](index=171&type=chunk) [Great Park Segment](index=38&type=section&id=Great%20Park%20Segment) The Great Park segment experienced a significant decrease in land sales revenues due to fewer homesites sold, while management fee revenues increased due to revised estimates - The Great Park segment includes Great Park Neighborhoods (**2,100 acres**, **10,500 homesites**, **4.9 million sq ft commercial**) and development management services for the Great Park Venture, in which the company holds a **37.5%** interest[173](index=173&type=chunk)[174](index=174&type=chunk) - Land sales and related party land sales revenues decreased to **$35.2 million** (Q3 2022) from **$69.5 million** (Q3 2021) and to **$39.0 million** (9M 2022) from **$407.3 million** (9M 2021), primarily due to fewer homesites sold (**61** in 2022 vs. **113** in Q3 2021; **61** in 2022 vs. **887** in 9M 2021)[176](index=176&type=chunk)[185](index=185&type=chunk) - Management fee revenues increased due to a revised base fee and increased estimates of variable incentive compensation, while management services costs and selling, general, and administrative expenses decreased due to reduced project team and marketing expenses[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) | Great Park Venture Equity (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Segment (loss) profit from operations | $(13,791) | $8,957 | $(13,984) | $68,842 | | Net (loss) income of the Great Park Venture | $(18,303) | $6,978 | $(19,658) | $63,604 | | Equity in (loss) earnings from the Great Park Venture | $(4,540) | $367 | $(5,634) | $8,319 | [Commercial Segment](index=42&type=section&id=Commercial%20Segment) The Commercial segment includes the Gateway Commercial Venture, which owns a commercial office building and land, managed by the company but accounted for using the equity method due to limited control - The Commercial segment includes the Gateway Commercial Venture, which owns one commercial office building and approximately **50 acres** of commercial land at the Five Point Gateway Campus[197](index=197&type=chunk)[198](index=198&type=chunk) - The company manages the Gateway Commercial Venture but accounts for its **75%** interest using the equity method due to limited control, as major decisions require unanimous executive committee approval[197](index=197&type=chunk) | Gateway Commercial Venture Equity (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :----------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Segment (loss) profit from operations | $(8) | $48 | $441 | $903 | | Net (loss) income of the Gateway Commercial Venture | $(116) | $(54) | $129 | $599 | | Equity in (loss) earnings from the Gateway Commercial Venture | $(87) | $(41) | $97 | $449 | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company's cash and cash equivalents decreased significantly, with short-term needs including operating expenses and development, expected to be met through available cash, distributions, and credit facilities - Consolidated Cash and Cash Equivalents decreased to **$86.4 million** as of September 30, 2022, from **$265.5 million** at December 31, 2021[201](index=201&type=chunk) - The company has a **$125.0 million** unsecured revolving credit facility with **$124.7 million** available as of September 30, 2022[201](index=201&type=chunk) - Approximately **$43.9 million** of related party reimbursement obligations previously due in 2022 have been deferred to 2023[202](index=202&type=chunk) - Short-term cash needs include general and administrative expenses, development expenditures at Valencia and San Francisco, interest payments, and related party reimbursement obligations[202](index=202&type=chunk) - Long-term cash needs are for future horizontal development, investments in income-producing properties, debt service, and general and administrative expenses, expected to be funded by available cash, community cash flows, public financing, and potential capital raises[205](index=205&type=chunk)[206](index=206&type=chunk) | Commitments (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :------------------------- | :----------- | :----------- | :----- | | Outstanding performance bonds | $326,300 | $279,600 | $46,700| | San Francisco Venture guarantees | $198,300 | $198,300 | $0 | | Outstanding LOCs | $1,300 | $1,300 | $0 | [Summary of Cash Flows](index=43&type=section&id=Summary%20of%20Cash%20Flows) Net cash used in operating activities increased, while net cash provided by investing activities decreased significantly, and net cash used in financing activities decreased | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Operating activities | $(175,023) | $(162,301) | $(12,722) | | Investing activities | $2,307 | $78,313 | $(76,006) | | Financing activities | $(6,367) | $(23,022) | $16,655 | - The increase in cash used in operating activities was due to continued investment in horizontal development and SG&A costs, including **$24.6 million** in interest payments on senior notes for both periods[210](index=210&type=chunk) - The decrease in cash provided by investing activities was primarily due to a **$76.6 million** distribution from the Great Park Venture in 2021, which did not recur in 2022, offset by a **$2.5 million** distribution from Valencia Landbank Venture in 2022[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) - The decrease in cash used in financing activities was mainly due to lower related party reimbursement obligations (**$3.2 million** in 2022 vs. **$15.9 million** in 2021) and reduced noncontrolling interest tax distributions (**$0.4 million** in 2022 vs. **$4.4 million** in 2021)[215](index=215&type=chunk) [Changes in Capital Structure](index=44&type=section&id=Changes%20in%20Capital%20Structure) The company's ownership percentage in the operating company decreased to **62.5%** due to reacquisition and forfeiture of restricted Class A common shares, partially offset by new issuances - The company's ownership percentage in the operating company decreased to **62.5%** during the nine months ended September 30, 2022[216](index=216&type=chunk) - This change was primarily driven by the reacquisition of **0.4 million** restricted Class A common shares for tax withholding and the forfeiture of **0.8 million** unvested restricted Class A common shares, partially offset by the issuance of **0.2 million** restricted Class A common shares[216](index=216&type=chunk) | Outstanding Units/Shares | Sep 30, 2022 | Dec 31, 2021 | | :----------------------- | :----------- | :----------- | | Class A units of the operating company (Held by us) | 69,068,354 | 70,107,552 | | Class A units of the operating company (Held by noncontrolling interest members) | 41,363,271 | 41,363,271 | | Class A units of the San Francisco Venture (Held by noncontrolling interest members) | 37,870,273 | 37,870,273 | | Class B common shares outstanding | 79,233,544 | 79,233,544 | [Critical Accounting Estimates](index=44&type=section&id=Critical%20Accounting%20Estimates) No significant changes to the company's critical accounting estimates were reported during the nine months ended September 30, 2022 - No significant changes to critical accounting estimates were reported during the nine months ended September 30, 2022[219](index=219&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk stems from its fixed-rate indebtedness, with no current use of derivative financial instruments, but potential future use for floating-rate debt exposure - The company's primary market risk is from its fixed-rate indebtedness[220](index=220&type=chunk) - As of September 30, 2022, consolidated net indebtedness was **$620.3 million**, all bearing fixed interest rates[221](index=221&type=chunk) - The company has not entered into derivative financial instruments but may use swap arrangements in the future to manage floating-rate debt exposure[220](index=220&type=chunk)[221](index=221&type=chunk) [ITEM 4. Controls and Procedures](index=45&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures as of September 30, 2022, concluding they were effective with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2022[222](index=222&type=chunk) - No material changes in internal control over financial reporting were identified during the period[223](index=223&type=chunk) PART II. OTHER INFORMATION Presents other information including legal proceedings, risk factors, sales of equity securities, defaults, mine safety disclosures, and exhibits [ITEM 1. Legal Proceedings](index=46&type=section&id=ITEM%201.%20Legal%20Proceedings) Refers to Note 11 of the financial statements for disclosures on legal proceedings, primarily involving lawsuits related to alleged environmental contamination at The San Francisco Shipyard - Legal proceedings are detailed in Note 11, primarily concerning alleged environmental contamination at The San Francisco Shipyard[226](index=226&type=chunk) [ITEM 1A. Risk Factors](index=46&type=section&id=ITEM%201A.%20Risk%20Factors) States that there have been no material changes to the risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to risk factors were reported from the Annual Report on Form 10-K for the year ended December 31, 2021[227](index=227&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales of equity securities or use of proceeds during the period - None reported[228](index=228&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=46&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) Reports no defaults upon senior securities during the period - None reported[228](index=228&type=chunk) [ITEM 4. Mine Safety Disclosures](index=46&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) States that this item is not applicable to the company - Not Applicable[228](index=228&type=chunk) [ITEM 5. Other Information](index=46&type=section&id=ITEM%205.%20Other%20Information) Reports no other information for the period - None reported[228](index=228&type=chunk) [ITEM 6. Exhibits](index=46&type=section&id=ITEM%206.%20Exhibits) Lists the exhibits filed with the Form 10-Q, including certifications of the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents - Includes certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[228](index=228&type=chunk) [Signatures](index=47&type=section&id=Signatures) The report is duly signed on behalf of Five Point Holdings, LLC by Daniel Hedigan, Chief Executive Officer, and Leo Kij, Interim Chief Financial Officer, on October 28, 2022 - Report signed by Daniel Hedigan (CEO) and Leo Kij (Interim CFO) on October 28, 2022[231](index=231&type=chunk)

Five Point Holdings, LLC (NYSE:FPH) Q3 2022 Results Conference Call October 27, 2022 5:00 PM ET Company Participants Dan Hedigan - Chief Executive Officer Leo Kij - Interim Chief Financial Officer Mike Alvarado - Chief Legal Officer Kim Tobler - Vice President Treasurer and Tax Stuart Miller - Executive Chairman Conference Call Participants Dominick D'Angelo - O'Keefe Stevens Advisory Alan Ratner - Zelman & Associates Operator Greetings and welcome to the Five Point Holdings LLC Third Quarter 2022 Conferenc ...