Five Point Holdings, LLC (NYSE:FPH) Q1 2021 Earnings Conference Call May 10, 2021 5:00 PM ET Company Participants Emile Haddad - Chairman & Chief Executive Officer Erik Higgins - Chief Financial Officer, Vice President & Treasurer Conference Call Participants Elad Hillman - JPMorgan Stephen Kim - Evercore ISI Alan Ratner - Zelman and Associates Ken Hansen - Stifel Operator Greetings and welcome to the Five Point Holdings LLC First Quarter 2021 Conference Call. Currently, all participants are in listen-only ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-38088 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of th ...

Financial Data and Key Metrics Changes - The cash position improved by $27.6 million to $298 million, with no borrowings under the $125 million corporate revolving line of credit [19] - Debt to total capitalization remained stable at 24.9%, while net debt to total capitalization was 14.8% [20] - Consolidated revenues for the quarter were $111.7 million, with net income of $2.7 million [20][21] Business Line Data and Key Metrics Changes - The Valencia segment generated total revenues of $106 million, including land sales and marketing fee revenue [22] - The Great Park segment reported revenues of $7.2 million, primarily from management fee revenue [29] - The San Francisco segment incurred a loss of $3 million, mainly due to SG&A expenses [25] Market Data and Key Metrics Changes - Median home prices in LA County increased by 18.2% and by 12.6% in Orange County in 2020 [10] - Home sales at the Great Park increased from 177 to 257 year-over-year, with cancellations dropping from 41 to 10 [11] Company Strategy and Development Direction - The company is positioned to capitalize on the favorable political environment for housing, with a target of building 3.5 million new homes in California by 2025 [15] - Active dialogues with local public partners are ongoing to explore opportunities for intensification within communities [17] - The company aims to provide diversified residential opportunities in primary markets in California [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the housing market's strength and the ability to sell homes without significant cancellations [10][11] - The company anticipates a good environment for housing in the coming years, driven by high demand and limited supply [17] - Management highlighted the importance of maintaining affordability while navigating home price appreciation [64][66] Other Important Information - The company has approximately $180 million in cash on the Great Park Venture's balance sheet, providing flexibility for decision-making [7] - The anticipated proceeds from upcoming homesite sales are expected to cover priority legacy distributions totaling $476 million [12][28] Q&A Session Summary Question: Sales trends at Great Park - Management noted a strengthening trend in sales, with minimal cancellations and a significant increase in net sales [33] Question: Development cadence for remaining lots at Great Park - Management indicated plans for 800 to 900 homesite sales in the next round at Great Park [36] Question: Changes in builder/land acquisition strategies - Management observed increased interest from builders in acquiring more land, with no significant changes in underwriting criteria [38] Question: Estimated distribution from land sales - Management expects distributions between $100 million to $150 million from upcoming land sales [42][45] Question: Engagement with build-to-rent operators - Management is exploring the addition of apartments and single-family rentals as part of their portfolio [44] Question: Political environment and San Francisco developments - Management expressed optimism about the San Francisco market, with potential for increased density and movement on projects [49][52] Question: Impairment impact on cost basis for new homesites - Management clarified that the previous impairment of $30 million would not significantly affect the cost basis for new homesites [56] Question: Opportunities in Concord - Management confirmed no current developments in Concord but acknowledged potential future opportunities [62] Question: Impact of commercial development on company strategy - Management emphasized a focus on healthcare and life sciences in commercial development, aligning with community needs [81]

PART I [Business](index=5&type=section&id=Item%201.%20Business) Five Point Holdings, LLC develops large mixed-use communities in California, focusing on master planning, infrastructure, and land sales across four segments, subject to extensive regulation [Company Structure and Formation](index=5&type=section&id=Structure%20and%20Formation%20of%20Our%20Company) Formed in 2009, the company operates through its subsidiary, Five Point Operating Company, LP (62.5% interest), and is treated as a corporation for U.S. federal income tax purposes - The company conducts all business through its operating company, in which it owned approximately **62.5%** of outstanding Class A units as of December 31, 2020[23](index=23&type=chunk) - The company has elected to be treated as a corporation for U.S. federal income tax purposes, meaning shareholders receive Form 1099 for distributions, not a Schedule K-1[26](index=26&type=chunk) [Business Model and Segments](index=6&type=section&id=Our%20Business%20and%20Segments) The company's business model focuses on planning and developing master-planned communities, generating revenue primarily from land sales, and operates through four distinct segments - The principal source of revenue is the sale of residential and commercial land sites to homebuilders and developers[27](index=27&type=chunk) - Residential land sales typically include participation provisions, allowing the company to share in homebuilders' profits[32](index=32&type=chunk) - The company operates through four reportable segments: Valencia, San Francisco, Great Park, and Commercial[37](index=37&type=chunk) [Our Communities and Commercial Operations](index=8&type=section&id=Our%20Communities%20and%20Commercial%20Operations) The company develops three major California communities: Valencia, San Francisco, and Great Park, with significant planned homesites and commercial space, alongside commercial asset sales Overview of Master-Planned Communities | Community | Location | Planned Homesites | Planned Commercial Space (sq. ft.) | | :--- | :--- | :--- | :--- | | Valencia | Los Angeles County | ~21,500 | ~11.5 million | | Candlestick & The SF Shipyard | San Francisco | ~12,000 | ~6.3 million | | Great Park Neighborhoods | Orange County | ~10,500 | ~4.9 million | - Development at The San Francisco Shipyard is delayed due to allegations against a U.S. Navy contractor (Tetra Tech) and subsequent resampling efforts, which has postponed the transfer of approximately **408 acres** from the Navy[43](index=43&type=chunk) - In 2020, the Gateway Commercial Venture sold three buildings at the Five Point Gateway Campus, including one to City of Hope for a cancer care center, retaining one building and approximately **50 acres** of land[50](index=50&type=chunk) [Regulation](index=11&type=section&id=Regulation) The company's operations are heavily regulated, requiring extensive land use and environmental approvals, incurring significant costs and potential liability for contamination at former U.S. Navy sites - The company must obtain numerous discretionary entitlements and approvals for infrastructure and construction, a process that has incurred significant costs over the last 10-15 years and is subject to third-party challenges[57](index=57&type=chunk)[59](index=59&type=chunk) - The company may be liable for costs related to hazardous substance contamination, particularly at former U.S. Navy sites like The San Francisco Shipyard and Great Park Neighborhoods, which are on the USEPA's National Priorities List for cleanup[61](index=61&type=chunk)[63](index=63&type=chunk) - The transfer of remaining parcels at The San Francisco Shipyard from the U.S. Navy is dependent on the completion of the multi-stage FOST process, which includes remedial investigation, feasibility studies, and final cleanup documentation[69](index=69&type=chunk)[77](index=77&type=chunk) [Human Capital](index=15&type=section&id=Human%20Capital) As of December 31, 2020, the company had approximately 160 employees, with a diverse workforce, and implemented remote work and safety protocols in response to COVID-19 Employee Statistics (as of Dec 31, 2020) | Metric | Value | | :--- | :--- | | Total Employees | ~160 | | Female Workforce | ~46% | | Ethnic & Racial Minorities | ~43% | - In response to COVID-19, the company shifted to remote work for most associates and implemented a new COVID-19 Prevention Program with safety protocols for on-site staff[93](index=93&type=chunk)[94](index=94&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from pandemics, project delays, California-specific economic and natural disaster exposures, regulatory complexities, substantial indebtedness, TRA obligations, and significant shareholder influence - The COVID-19 pandemic has disrupted business and led to a **$26.9 million** impairment charge on the company's investment in the Great Park Venture due to expected delays in land sales and distributions[104](index=104&type=chunk)[106](index=106&type=chunk) - All of the company's communities are located in California, making it susceptible to risks specific to the state, including adverse economic, political, or regulatory changes, as well as natural disasters like earthquakes, droughts, and wildfires[112](index=112&type=chunk)[113](index=113&type=chunk) - The company has substantial indebtedness, with approximately **$625.0 million** in 7.875% senior notes due 2025 as of December 31, 2020[166](index=166&type=chunk) - The company is party to a Tax Receivable Agreement (TRA) which requires it to pay certain investors **85%** of cash savings from specific tax benefits; if terminated on December 31, 2020, the estimated payment would have been approximately **$108.5 million**[152](index=152&type=chunk)[154](index=154&type=chunk) - As of December 31, 2020, major shareholders Lennar and Castlelake controlled approximately **39%** and **17%** of the voting power, respectively, allowing them to exercise significant influence over shareholder matters[148](index=148&type=chunk) [Unresolved Staff Comments](index=32&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[195](index=195&type=chunk) [Properties](index=32&type=section&id=Item%202.%20Properties) The company leases its principal executive office in Irvine, California, with additional offices in Valencia and San Francisco, while its master-planned community properties are held as inventory - The company's three communities are designed to include approximately **40,000 residential homes** and **23 million square feet of commercial space**, with these properties held as inventory[197](index=197&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) In February 2020, the company filed lawsuits against the United States and Tetra Tech, seeking damages for financial harm resulting from delayed land delivery at The San Francisco Shipyard due to alleged fraudulent conduct - The company filed lawsuits against the U.S. government and contractor Tetra Tech in February 2020, alleging damages from delayed land transfers at The San Francisco Shipyard caused by Tetra Tech's allegedly fraudulent conduct[199](index=199&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[201](index=201&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A common shares trade on the NYSE under 'FPH', with no distributions paid or planned, and no share repurchases made in 2020 - Class A common shares are traded on the NYSE under the symbol 'FPH'[203](index=203&type=chunk) - No distributions have been declared or paid on common shares, and there are no current plans for a distribution policy[204](index=204&type=chunk) - There were no repurchases of the company's shares during the year ended December 31, 2020[206](index=206&type=chunk) [Selected Financial Data](index=34&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is reserved, and no data is presented, in line with amendments to SEC disclosure requirements - Reserved[211](index=211&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, total revenues decreased to $153.6 million, resulting in a net loss of $0.4 million, despite increased equity in earnings from asset sales, while the company maintained a solid liquidity position [Operational Highlights and COVID-19 Response](index=35&type=section&id=Operational%20Highlights%20and%20COVID-19%20Response) Key 2020 operational events included Valencia homesite sales, commercial building sales at Five Point Gateway Campus, and the formation of the Valencia Landbank Venture, alongside COVID-19 response measures - In 2020, the company sold **487 homesites** at Valencia for a gross price of **$115.4 million**[215](index=215&type=chunk) - The Gateway Commercial Venture sold three buildings and land for a combined price of **$463.0 million**, resulting in a **$112.2 million** net gain and distributions of **$136.5 million** to the company[217](index=217&type=chunk) - The company formed the Valencia Landbank Venture with a **10% interest** to facilitate land sales to homebuilders[219](index=219&type=chunk) [Consolidated Results of Operations](index=37&type=section&id=Consolidated%20Results%20of%20Operations) For 2020, total revenues decreased to $153.6 million due to lower land sales, leading to a net loss of $0.4 million, despite a significant increase in equity in earnings from unconsolidated entities Consolidated Statement of Operations Summary (in thousands) | Metric | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $153,619 | $184,380 | | Total Costs and Expenses | $194,870 | $234,756 | | Equity in Earnings from Unconsolidated Entities | $42,364 | $2,327 | | Net Income | $1,094 | $22,268 | | Net (Loss) Income Attributable to the Company | $(428) | $9,033 | - The increase in equity in earnings was primarily due to gains from the sale of land and three buildings at the Gateway Commercial Venture, offset by an other-than-temporary impairment of **$26.9 million** on the investment in the Great Park Venture[237](index=237&type=chunk) [Segment Results](index=39&type=section&id=Segment%20Results) In 2020, Valencia's income decreased, San Francisco reported a loss after a prior-year gain, Great Park swung to a loss due to lower sales, while Commercial income surged from asset sales Segment Income (Loss) (in thousands) | Segment | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Valencia | $21,193 | $25,779 | | San Francisco | $(10,355) | $49,890 | | Great Park | $(22,504) | $44,369 | | Commercial | $112,242 | $(4,818) | - The San Francisco segment's 2019 income was significantly impacted by a **$64.9 million** gain from the settlement of a contingent consideration liability related to a terminated retail project[256](index=256&type=chunk) - The Commercial segment's strong performance in 2020 was driven by a **$112.3 million** net gain on the sale of three buildings and land at the Five Point Gateway Campus[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains solid liquidity with $298.1 million in cash and $124.7 million available credit, expecting to meet short-term obligations through cash, land sales, and distributions, with long-term needs funded by various sources Liquidity Overview (as of Dec 31, 2020) | Metric | Amount (in millions) | | :--- | :--- | | Cash and Cash Equivalents | $298.1 | | Available Revolving Credit | $124.7 | | 2021 Senior Note Interest Payments | $49.2 | | 2021 Related Party Reimbursement Payments | $35.5 | Contractual Obligations Summary (as of Dec 31, 2020) | Obligation | Total (in thousands) | Due in < 1 Year (in thousands) | | :--- | :--- | :--- | | Senior notes payable | $625,000 | $0 | | Interest on senior notes | $246,094 | $49,219 | | Operating lease obligations | $29,085 | $5,017 | | Related party reimbursement obligation | $95,144 | $38,543 | | **Total** | **$1,053,007** | **$104,456** | [Critical Accounting Policies and Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant judgment in consolidation, revenue recognition for land sales, cost allocation, impairment assessment of investments, and deferred tax asset valuation - Revenue recognition for land sales is complex, requiring estimates of variable consideration such as profit participation and marketing fees, with capitalized inventory costs allocated using the relative sales value method based on future cost and sales price estimates[313](index=313&type=chunk)[314](index=314&type=chunk) - The company evaluates investments in unconsolidated entities for other-than-temporary impairment using discounted cash flow models, which rely on significant estimates of future distributions and appropriate discount rates[319](index=319&type=chunk)[320](index=320&type=chunk) - Accounting for income taxes requires assessing the need for a valuation allowance against deferred tax assets, considering factors like cumulative losses and forecasts of future taxable income[322](index=322&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, which is mitigated as its $617.6 million consolidated indebtedness bears fixed interest rates, and it does not use derivative financial instruments - The company's primary market risk is from its indebtedness; as of December 31, 2020, its **$617.6 million** of consolidated debt bears interest at fixed rates, mitigating exposure to prevailing market interest rate changes[328](index=328&type=chunk)[329](index=329&type=chunk) [Financial Statements and Supplementary Data](index=56&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2020, including balance sheets, statements of operations, cash flows, and comprehensive notes detailing accounting policies, investments, and debt [Consolidated Financial Statements](index=57&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of $2.96 billion, total liabilities of $1.05 billion, and total capital of $1.89 billion as of December 31, 2020, with total revenues of $153.6 million and a net loss of $0.4 million for the year Consolidated Balance Sheet Highlights (as of Dec 31, 2020, in thousands) | Category | Amount (in thousands) | | :--- | :--- | | Total Assets | $2,961,985 | | Inventories | $1,990,859 | | Investment in Unconsolidated Entities | $442,850 | | Cash and Cash Equivalents | $298,144 | | Total Liabilities | $1,051,887 | | Notes payable, net | $617,581 | | Total Capital | $1,885,098 | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2020, in thousands) | Category | Amount (in thousands) | | :--- | :--- | | Total Revenues | $153,619 | | Total Costs and Expenses | $194,870 | | Equity in Earnings from Unconsolidated Entities | $42,364 | | Net (Loss) Income Attributable to the Company | $(428) | [Notes to Consolidated Financial Statements](index=62&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail revenue recognition, equity method investments (including a $26.9 million impairment), $625 million in senior notes, Tax Receivable Agreement obligations, and various commitments and contingencies - The company recognized a **$26.9 million** other-than-temporary impairment charge on its investment in the Great Park Venture in March 2020, primarily due to expected delays in land sales and distributions resulting from the COVID-19 pandemic[378](index=378&type=chunk)[411](index=411&type=chunk) - As of December 31, 2020, the company had **$625.0 million** in aggregate principal of 7.875% senior notes due 2025[465](index=465&type=chunk)[466](index=466&type=chunk) - The liability for payments under the Tax Receivable Agreement (TRA) was recorded at **$173.2 million** as of December 31, 2020[474](index=474&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=99&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[554](index=554&type=chunk) [Controls and Procedures](index=99&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, a conclusion affirmed by the independent registered public accounting firm - Based on an evaluation as of December 31, 2020, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[555](index=555&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO 2013 framework, with an unqualified opinion issued by Deloitte & Touche LLP[556](index=556&type=chunk)[559](index=559&type=chunk) [Other Information](index=101&type=section&id=Item%209B.%20Other%20Information) This item is not applicable to the company - Not applicable[566](index=566&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=101&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement for the 2021 Annual Meeting of Shareholders[568](index=568&type=chunk) [Executive Compensation](index=101&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the company's 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement[569](index=569&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=101&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference from the 2021 Proxy Statement, with 4,689,214 securities remaining available for future issuance under approved equity compensation plans Equity Compensation Plan Information (as of Dec 31, 2020) | Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by shareholders | — | — | 4,689,214 | [Certain Relationships and Related Transactions, and Director Independence](index=101&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the company's 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement[572](index=572&type=chunk) [Principal Accounting Fees and Services](index=101&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information concerning principal accounting fees and services is incorporated by reference from the company's 2021 Proxy Statement - Information is incorporated by reference from the Proxy Statement[573](index=573&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=102&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, the Schedule III for Real Estate and Accumulated Depreciation, and all exhibits filed with the report or incorporated by reference - This section lists all financial statements, the Schedule III for Real Estate and Accumulated Depreciation, and all exhibits filed with the report[576](index=576&type=chunk)[578](index=578&type=chunk) [Form 10-K Summary](index=107&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that there is no Form 10-K summary - None[589](index=589&type=chunk)

Financial Data and Key Metrics Changes - The company's consolidated revenues for Q3 2020 totaled $8.4 million, primarily from related party management services [11] - Net income for the quarter was $36.4 million, with approximately $17 million attributable to the company after allocating $19.5 million to non-controlling interests [12] - Total liquidity as of September 30, 2020, was approximately $395.2 million, consisting of a cash balance of $270.6 million and borrowing availability of $124.7 million [22] Business Segment Data and Key Metrics Changes - The Valencia segment reported a loss of $3.2 million, primarily due to selling, general, and administrative expenses, but collected $13.9 million against a land sale note [13] - The San Francisco segment had a net loss of $1.8 million, mainly from SG&A expenses [13] - The Great Park segment generated revenues of $8.1 million but incurred a net loss of $10.2 million, with a loss of $4.2 million recognized on the investment in the Great Park Venture [16] - The commercial segment income was $75.6 million, primarily from the sale of two office buildings for $355 million, resulting in a recognized income of approximately $56.6 million from the Gateway Commercial Venture [18] Market Data and Key Metrics Changes - Home price appreciation in Los Angeles and Orange County was reported at 8.2% and 4.7% over the last 12 months, respectively, with projections of 8.1% and 7.4% for the next 12 months [7] Company Strategy and Development Direction - The company aims to maintain a strong balance sheet while investing in community infrastructure and amenities to drive value [5] - There is a focus on the unique positioning of communities, emphasizing open space and amenities to attract buyers [25] - The company plans to be cautious about increasing the supply of homesites to ensure builders can succeed without oversaturating the market [28] Management's Comments on Operating Environment and Future Outlook - Management noted a significant shift in consumer preferences towards communities with open spaces and amenities due to COVID-19, which has positively impacted demand [25] - The company expects continued strong demand for housing, with no signs of increased supply on the horizon [26] - Management remains optimistic about 2021, anticipating deeper production and sales in Valencia as conditions improve [64] Other Important Information - The company has received $136.6 million in cash distributions from the sale of three buildings and continues to monitor the market for additional opportunities [20] - The company is planning a virtual investor meeting to address the perceived disconnect between the company's real value and share price [9] Q&A Session Summary Question: Trends in home price appreciation and cash flow outlook - Management highlighted a consistent view on the uniqueness of their communities and the pent-up demand for housing, which has been exacerbated by consumer migration towards their type of communities [24][25] Question: Changes in long-term home price appreciation assumptions - Management stated that they have not changed their long-term assumptions for home price appreciation, maintaining a focus on healthy margins [29] Question: Builder engagement and market trends - Management reported increased engagement from builders and higher demand for homesites, with expectations for continued interest in the market [38][39] Question: Update on Valencia and Great Park lot sales - Management confirmed ongoing discussions with builders regarding the sale of lots in Valencia and anticipates a successful year in terms of lot sales [43][55] Question: Political landscape impact on business - Management expressed confidence that local election results would not negatively impact their operations, maintaining strong partnerships with local governments [49]

PART I. FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=ITEM%201.%20Financial%20Statements) Presents Five Point Holdings, LLC's unaudited condensed consolidated financial statements for Q3 and YTD **2020** and **2019** [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of September **30**, **2020**, total assets were **$2.96 billion** and liabilities **$1.06 billion**, both slightly down from year-end **2019** Condensed Consolidated Balance Sheets (as of Sep 30, 2020 and Dec 31, 2019) (in thousands) | | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **ASSETS** | | | | INVENTORIES | $ 2,021,155 | $ 1,889,761 | | INVESTMENT IN UNCONSOLIDATED ENTITIES | 441,737 | 533,239 | | CASH AND CASH EQUIVALENTS | 270,580 | 346,833 | | OTHER ASSETS | 228,452 | 235,407 | | **TOTAL ASSETS** | **$ 2,962,924** | **$ 3,004,700** | | **LIABILITIES AND CAPITAL** | | | | Notes payable, net | $ 617,198 | $ 616,046 | | Accounts payable and other liabilities | 138,066 | 167,711 | | Payable pursuant to tax receivable agreement | 173,248 | 172,633 | | Other Liabilities | 130,525 | 139,510 | | **Total liabilities** | **1,059,037** | **1,095,900** | | **Total capital** | **1,878,887** | **1,883,800** | | **TOTAL LIABILITIES AND CAPITAL** | **$ 2,962,924** | **$ 3,004,700** | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Q3 **2020** net income reached **$36.4 million** from a prior-year loss, driven by equity earnings, contrasting with a nine-month **net loss of $2.6 million** Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $ 8,377 | $ 12,014 | $ 41,904 | $ 37,474 | | **Total costs and expenses** | 24,540 | 34,950 | 91,450 | 104,911 | | **Equity in earnings (loss) from unconsolidated entities** | 52,423 | (1,750) | 45,417 | 4,463 | | **Gain on settlement of contingent consideration—related party** | — | — | — | 64,870 | | **Net income (loss)** | 36,422 | (22,955) | (2,559) | 7,150 | | **Net income (loss) attributable to the Company** | $ 16,964 | $ (10,663) | $ (1,210) | $ 2,633 | | **Diluted EPS (Class A)** | $ 0.25 | $ (0.16) | $ (0.02) | $ 0.04 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Nine-month net cash used in operating activities improved to **$115.7 million**, with **$57.1 million** from investing and **$18.1 million** used in financing Summary of Cash Flows (Nine Months Ended Sep 30, in thousands) | Category | 2020 | 2019 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $ (115,713) | $ (251,193) | | **Net cash provided by investing activities** | 57,129 | 517 | | **Net cash (used in) provided by financing activities** | (18,080) | 85,731 | | **Net decrease in cash, cash equivalents, and restricted cash** | (76,664) | (164,945) | | **Cash, cash equivalents, and restricted cash—End of period** | $ 271,910 | $ 332,152 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover accounting policies, revenue recognition, unconsolidated entity investments, related party transactions, debt, and segment reporting - In March **2020**, the company recognized a **$26.9 million** other-than-temporary impairment charge on its investment in the Great Park Venture. This was due to a delay in projected distributions resulting from the impacts of the COVID-19 pandemic[47](index=47&type=chunk) - The Gateway Commercial Venture sold two buildings in August **2020** for **$355.0 million**, resulting in a gain of approximately **$74.8 million**. It also sold a building and land to City of Hope in May **2020** for **$108.0 million**, resulting in a gain of approximately **$37.4 million**[55](index=55&type=chunk)[56](index=56&type=chunk) - In early **2019**, the company terminated a retail project at Candlestick, resulting in the recognition of a **$64.9 million** gain from the settlement of contingent consideration and release from development obligations[81](index=81&type=chunk) - As of September **30**, **2020**, the company had outstanding performance bonds of **$229.3 million** and guarantees for infrastructure and park obligations of **$198.3 million** related to its development projects[93](index=93&type=chunk)[95](index=95&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, operational highlights, segment results, liquidity, and capital resources, including asset sales and COVID-19 impacts [Overview and Operational Highlights](index=34&type=section&id=Overview%20and%20Operational%20Highlights) The company operates four segments, with a key highlight being the Gateway Commercial Venture's **$355.0 million** asset sale and **$80.3 million** distribution - The Gateway Commercial Venture sold two buildings for **$355.0 million** in August **2020**, generating a gain of **$74.8 million** and a distribution of approximately **$80.3 million** to the company[135](index=135&type=chunk) - The company has resumed regular development activities, citing favorable market conditions for homebuilders, and expects the first home sales at its Valencia community to close in the first half of **2021**[136](index=136&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Q3 **2020** revenues decreased, but **equity earnings surged to $52.4 million**, driving **net income to $17.0 million**, contrasting with a nine-month **$1.2 million net loss** Consolidated Results of Operations Summary (in thousands) | | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $ 8,377 | $ 12,014 | $ 41,904 | $ 37,474 | | **Selling, general, and administrative** | 17,656 | 25,863 | 58,594 | 77,629 | | **Equity in earnings (loss) from unconsolidated entities** | 52,423 | (1,750) | 45,417 | 4,463 | | **Net income (loss) attributable to the company** | $ 16,964 | $ (10,663) | $ (1,210) | $ 2,633 | - The increase in equity in earnings for the nine months ended Sep **30**, **2020** was primarily due to gains from the sale of land and three buildings at the Gateway Commercial Venture, offset by an other-than-temporary impairment of **$26.9 million** on the investment in the Great Park Venture[148](index=148&type=chunk) [Segment Results](index=38&type=section&id=Segment%20Results) Valencia revenue increased from land sales, San Francisco impacted by prior-year gain absence, Great Park revenue declined, and Commercial segment reported **$112.4 million income** Valencia Segment Results (in thousands) | | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | **Total revenues** | $ 18,897 | $ 2,586 | | **Cost of land sales** | 11,861 | — | | **Segment loss** | $ (6,348) | $ (13,237) | San Francisco Segment Results (in thousands) | | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | **Total revenues** | $ 1,285 | $ 3,015 | | **Gain on settlement of contingent consideration** | — | 64,870 | | **Segment (loss) income** | $ (7,387) | $ 52,947 | Great Park Segment Results (in thousands) | | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | **Total revenues** | $ 44,478 | $ 262,863 | | **Segment (loss) income** | $ (22,920) | $ 38,913 | Commercial Segment Results (in thousands) | | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | **Total revenues** | $ 22,439 | $ 25,934 | | **Gain on asset sales, net** | 112,260 | — | | **Segment income (loss)** | $ 112,383 | $ (3,500) | [Financial Condition, Liquidity and Capital Resources](index=49&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) As of September **30**, **2020**, the company held **$270.6 million** in cash and **$124.7 million** in credit, with sufficient liquidity for **12** months, funding long-term development - Cash and cash equivalents stood at **$270.6 million** as of September **30**, **2020**, down from **$346.8 million** at December **31**, **2019**[207](index=207&type=chunk) - Net cash used in operating activities for the first nine months of **2020** decreased to **$115.7 million** from **$251.2 million** in the prior year, largely due to a **$79.0 million** return on investment distribution from the Gateway Commercial Venture[212](index=212&type=chunk)[213](index=213&type=chunk) - The company has deferred a portion of its related party reimbursement obligations, with expected principal payments of **$22.8 million** in the remainder of **2020**, **$20.5 million** in **2021**, **$38.5 million** in **2022**, and **$12.6 million** in **2025**[223](index=223&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's **$617.2 million** fixed-rate net indebtedness minimizes exposure to interest rate fluctuations, with no derivative financial instruments in place - As of September **30**, **2020**, the company had **$617.2 million** in outstanding consolidated net indebtedness, all of which is fixed-rate debt, minimizing exposure to interest rate fluctuations[233](index=233&type=chunk) [Controls and Procedures](index=55&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were **effective** as of September **30**, **2020**, with **no material changes** in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were **effective** as of September **30**, **2020**[235](index=235&type=chunk) - **No changes** were identified in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[236](index=236&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=56&type=section&id=ITEM%201.%20Legal%20Proceedings) Updates on legal proceedings include a final judgment favoring the company for Valencia projects and ongoing environmental litigation at Hunters Point - In July **2020**, the California Supreme Court denied a petition to review a lower court's decision, making the judgment in favor of the company and Los Angeles County regarding the Valencia project approvals final[97](index=97&type=chunk) - The company is a defendant in several lawsuits related to alleged environmental contamination and disclosure issues at The San Francisco Shipyard (Hunters Point), but believes it has meritorious defenses[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) [Risk Factors](index=56&type=section&id=ITEM%201A.%20Risk%20Factors) A new risk factor addresses the ongoing and potential material adverse effects of the COVID-19 pandemic on operations, capital access, and asset values - A new risk factor was added to address the ongoing disruption and potential material adverse effects from the COVID-19 pandemic[240](index=240&type=chunk)[241](index=241&type=chunk) - Potential long-term impacts of COVID-19 include lower demand for homesites, impaired access to capital markets, and the risk of further asset impairments, similar to the **$26.9 million** charge already taken on the Great Park Venture investment[242](index=242&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - None [Exhibits](index=57&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form **10-Q**, including CEO and CFO certifications and Inline XBRL data files - Exhibits filed include CEO and CFO certifications (**31.1**, **31.2**, **32.1**, **32.2**) and Inline XBRL documents (**101** series)[244](index=244&type=chunk)

Financial Data and Key Metrics Changes - The company's consolidated revenues for Q2 2020 totaled $24.3 million, primarily from a land sale at Valencia generating $17 million and management services revenue [13] - Total consolidated costs and expenses were approximately $34.3 million, resulting in a net income of approximately $14.2 million, with $6.6 million attributable to the company [14] - Total liquidity as of June 30, 2020, was approximately $339.7 million, comprised of $215 million in cash and cash equivalents and $124.7 million in borrowing capacity [23] Business Line Data and Key Metrics Changes - The Valencia segment reported revenues of $17.9 million, primarily from the sale of 70 homesites, generating a 30% gross margin [15] - The San Francisco segment incurred a net loss of $2.5 million, mainly due to SG&A expenses [16] - The Great Park segment generated revenues of $6.8 million, with a net loss of $10.2 million, including a loss of $4.1 million on the investment in the Great Park Venture [18] - The commercial segment income was $37.4 million, primarily from the sale of 11 acres and a building to City of Hope, with a cash distribution of $56.3 million from the Gateway Commercial Venture [21][22] Market Data and Key Metrics Changes - Home sales in the Great Park have shown a consistent base, with a median of 10 sales per week in Q1, 8 sales per week in Q2, and 12 sales per week so far in Q3 [6] - There is a noted shift in homebuyer preferences towards lower density communities with extensive open space due to COVID-19 [7] Company Strategy and Development Direction - The company aims to build fully integrated multi-generational communities with world-class amenities, which has attracted both home buyers and investors [9] - The company is focusing on healthcare-related developments, pivoting towards this sector even before COVID-19 [38] - Future plans include developing medical facilities and enhancing the Gateway project with outpatient services [49] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the market, noting that while demand has been steady, external factors such as the pandemic and upcoming elections could impact buyer sentiment [56] - The company is monitoring market conditions closely and is prepared to adjust development plans based on demand [30] Other Important Information - The company has retained the right to repurchase buildings sold at the Five Point Gateway Campus, which sold for a record price per square foot [8] - The company has a solid balance sheet with a debt to total capital ratio of 25.4% [23] Q&A Session Summary Question: Update on Valencia land development and sales - Management confirmed that development activity is resuming in Valencia, with interest from builders for more than 400 homesites, exceeding current inventory [27] Question: Cash flow perspective and market conditions - Management indicated that while cash flow is being monitored, it is difficult to predict future conditions due to market uncertainties [29] Question: Great Park sales and fee building relationships - Management stated that they are observing sales velocity and are prepared to bring homesites online quickly if demand accelerates [30] Question: Remaining lots at Great Park - Management estimated approximately 4,000 lots remaining at the Great Park [36] Question: Expected gain from Gateway sale - Management anticipates recognizing a gain of $70 million to $75 million from the recent sale, with 75% of that amount going to Five Point [37] Question: Future commercial projects and healthcare demand - Management noted a shift towards healthcare-related developments and emphasized the importance of community amenities in attracting tenants [60] Question: Development rights and future acreage - Management confirmed the ability to develop an additional 1 million square feet at Gateway, depending on market demand [61]

[Form 10-Q Cover Page](index=1&type=section&id=Form%2010-Q%20Cover%20Page) This section identifies the document as a Quarterly Report (Form 10-Q) for Five Point Holdings, LLC, detailing key filing information and share counts as of June 30, 2020 - The document is a Quarterly Report (Form 10-Q) for Five Point Holdings, LLC, filed for the quarterly period ended June 30, 2020[1](index=1&type=chunk)[2](index=2&type=chunk) - The registrant is an accelerated filer, a smaller reporting company, and an emerging growth company, and has elected not to use the extended transition period for new accounting standards[3](index=3&type=chunk) - As of July 31, 2020, there were **69,056,591 Class A common shares** and **79,233,544 Class B common shares** outstanding[3](index=3&type=chunk) Class A Common Shares Listing Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Class A common shares | FPH | New York Stock Exchange | [Cautionary Statement Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements subject to various risks and uncertainties, including public health issues and real estate market fluctuations - The report contains forward-looking statements subject to risks and uncertainties, identified by words such as 'anticipate,' 'believe,' 'expect,' and 'intend'[8](index=8&type=chunk) - Key risks include public health issues (e.g., COVID-19), real estate industry risks, economic downturns, zoning and land use uncertainties, development and construction risks, and fluctuations in interest rates and real estate values[9](index=9&type=chunk)[12](index=12&type=chunk) - Actual results may vary materially from projections if underlying assumptions prove incorrect, and the company undertakes no obligation to update these statements except as required by law[10](index=10&type=chunk)[11](index=11&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. Financial Statements](index=5&type=section&id=ITEM%201.%20Financial%20Statements) This section presents Five Point Holdings, LLC's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, capital, and cash flows, with detailed notes for the periods ended June 30, 2020, and December 31, 2019 [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and capital as of June 30, 2020, and December 31, 2019 Condensed Consolidated Balance Sheets (in thousands) | ASSETS | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | INVENTORIES | $1,978,879 | $1,889,761 | | INVESTMENT IN UNCONSOLIDATED ENTITIES | 469,564 | 533,239 | | CASH AND CASH EQUIVALENTS | 215,085 | 346,833 | | TOTAL ASSETS | $2,908,303 | $3,004,700 | | **LIABILITIES AND CAPITAL** | | | | Notes payable, net | $616,814 | $616,046 | | Total liabilities | 1,043,711 | 1,095,900 | | Total capital | 1,839,592 | 1,883,800 | | TOTAL LIABILITIES AND CAPITAL | $2,908,303 | $3,004,700 | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, costs, and net income (loss) for the three and six months ended June 30, 2020 and 2019 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $24,307 | $12,387 | $33,527 | $25,460 | | Total costs and expenses | $34,288 | $34,671 | $66,910 | $69,961 | | Equity in earnings (loss) from unconsolidated entities | $23,905 | $(2,669) | $(7,006) | $6,213 | | Net income (loss) attributable to the Company | $6,632 | $(10,512) | $(18,174) | $13,296 | | Basic EPS (Class A) | $0.10 | $(0.16) | $(0.27) | $0.19 | | Diluted EPS (Class A) | $0.10 | $(0.16) | $(0.27) | $0.18 | [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents the company's net income (loss) and other comprehensive income (loss) for the three and six months ended June 30, 2020 and 2019 Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | NET INCOME (LOSS) | $14,238 | $(22,628) | $(38,981) | $30,105 | | OTHER COMPREHENSIVE INCOME—Net of tax | 24 | 35 | 48 | 70 | | COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY | $6,647 | $(10,490) | $(18,144) | $13,340 | [Unaudited Condensed Consolidated Statements of Capital](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Capital) This statement outlines changes in the company's total capital, including members' capital and noncontrolling interests, as of June 30, 2020, and December 31, 2019 Condensed Consolidated Statements of Capital (in thousands, except share amounts) | Metric | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Total Members' Capital | $594,406 | $611,694 | | Noncontrolling Interests | 1,245,186 | 1,272,106 | | Total Capital | $1,839,592 | $1,883,800 | | Class A Common Shares Outstanding | 69,056,591 | 68,788,257 | | Class B Common Shares Outstanding | 79,233,544 | 79,233,544 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2020 and 2019 Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(148,383) | $(164,725) | | Net cash provided by investing activities | $34,136 | $710 | | Net cash used in financing activities | $(17,500) | $(38,682) | | NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | $(131,747) | $(202,697) | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period | $216,827 | $294,400 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context and detailed disclosures for the condensed consolidated financial statements, covering business, accounting policies, equity investments, debt, leases, and segment reporting [1. Business and Organization](index=11&type=section&id=1.%20Business%20and%20Organization) This note describes Five Point Holdings, LLC's structure as an owner and developer of mixed-use communities in California, operating through its primary operating company - Five Point Holdings, LLC (the 'Holding Company') is an owner and developer of mixed-use, master-planned communities in California, operating through Five Point Operating Company, LP (the 'Operating Company')[28](index=28&type=chunk) - The Holding Company owned approximately **62.5%** of the outstanding Class A Common Units of the Operating Company as of June 30, 2020[30](index=30&type=chunk) - The company has Class A and Class B common shares; Class B shares receive **0.0003 times** the distribution amount per Class A share[29](index=29&type=chunk) [2. Basis of Presentation](index=12&type=section&id=2.%20Basis%20of%20Presentation) This note outlines the preparation of unaudited financial statements in accordance with U.S. GAAP, including consolidation principles and the impact of the COVID-19 pandemic - The financial statements are unaudited, prepared in accordance with U.S. GAAP for interim financial information, and include consolidated accounts of subsidiaries and variable interest entities (VIEs) where the Holding Company is the primary beneficiary[32](index=32&type=chunk)[33](index=33&type=chunk) - The COVID-19 pandemic has severely impacted daily activities and economies, leading the Company to limit development activities and monitor government guidelines, with potential material changes to future results[35](index=35&type=chunk) - The Company adopted ASU No. 2016-13 (CECL model) on January 1, 2020, with no material impact on consolidated financial statements, and had no material allowance for credit loss at June 30, 2020[36](index=36&type=chunk)[37](index=37&type=chunk) [3. Revenues](index=14&type=section&id=3.%20Revenues) This note details the company's consolidated revenues by source and segment, highlighting land sales, management services, and operating properties Consolidated Revenues by Source and Segment (in thousands) | Revenue Source | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :------------------------ | :------------------------------- | :----------------------------- | | Land sales | $17,030 | $17,046 | | Management services | $6,314 | $14,558 | | Operating properties | $963 | $1,923 | | Total revenues | $24,307 | $33,527 | - Contract assets increased by **$5.9 million** for the six months ended June 30, 2020, primarily due to timing differences in revenue recognition for management services[38](index=38&type=chunk) - The estimated transaction price allocated to unsatisfied performance obligations for the A&R DMA with Great Park Venture was **$21.8 million** as of June 30, 2020, to be recognized ratably over the remaining contract term[40](index=40&type=chunk) [4. Investment in Unconsolidated Entities](index=15&type=section&id=4.%20Investment%20in%20Unconsolidated%20Entities) This note details the company's equity method investments in unconsolidated entities, including Great Park Venture and Gateway Commercial Venture, and their financial performance [Great Park Venture](index=15&type=section&id=Great%20Park%20Venture) This section details the company's 37.5% interest in Great Park Venture, including its financial performance and an impairment charge due to COVID-19 - The Operating Company owns a **37.5% Percentage Interest** in the Great Park Venture, which develops Great Park Neighborhoods[41](index=41&type=chunk)[42](index=42&type=chunk) - An other-than-temporary impairment charge of **$26.9 million** was recognized during the six months ended June 30, 2020, due to delays in projected distributions from Great Park Venture caused by the COVID-19 pandemic[44](index=44&type=chunk) Great Park Venture Statements of Operations (in thousands) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Land sale revenues | $22,826 | $192,579 | | Net (loss) income of Great Park Venture | $(16,277) | $31,575 | | Equity in (loss) earnings from Great Park Venture | $(34,452) | $7,948 | Great Park Venture Balance Sheet Data (in thousands) | Asset/Liability | June 30, 2020 | December 31, 2019 | | :------------------------------------------ | :------------ | :---------------- | | Inventories | $895,536 | $870,861 | | Total assets | $1,092,295 | $1,196,258 | | Total liabilities and capital | $1,092,295 | $1,196,258 | | The Company's investment in the Great Park Venture | $396,964 | $431,835 | [Gateway Commercial Venture](index=17&type=section&id=Gateway%20Commercial%20Venture) This section details the company's 75% interest in Gateway Commercial Venture, highlighting significant asset sales and related financial gains and distributions - The Company owns a **75% interest** in the Gateway Commercial Venture and accounts for it using the equity method[50](index=50&type=chunk) - In May 2020, Gateway Commercial Venture sold **11 acres** and a **189,000 sq ft building** to City of Hope for **$108.0 million**, resulting in a **$37.4 million gain** and a **$56.3 million distribution** to the Company[52](index=52&type=chunk) - In June 2020, Gateway Commercial Venture entered an agreement to sell two buildings leased by Broadcom Inc. for **$355.0 million**, expected to close in August 2020[53](index=53&type=chunk) Gateway Commercial Venture Statements of Operations (in thousands) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Rental revenues | $16,982 | $17,134 | | Gain on asset sale, net | $37,413 | $— | | Net income (loss) of Gateway Commercial Venture | $36,594 | $(2,314) | | Equity in earnings (loss) from Gateway Commercial Venture | $27,446 | $(1,735) | Gateway Commercial Venture Balance Sheet Data (in thousands) | Asset/Liability | June 30, 2020 | December 31, 2019 | | :------------------------------------------ | :------------ | :---------------- | | Real estate and related intangible assets, net | $377,951 | $451,988 | | Total assets | $405,259 | $473,398 | | Notes payable, net | $273,845 | $302,344 | | The Company's investment in the Gateway Commercial Venture | $72,600 | $101,404 | [5. Noncontrolling Interests](index=18&type=section&id=5.%20Noncontrolling%20Interests) This note explains the company's accounting for noncontrolling interests in its operating company and other ventures, including exchange rights and tax distributions - The Holding Company owned approximately **62.5%** of the Operating Company's Class A Common Units as of June 30, 2020, consolidating its financial results and recording a noncontrolling interest for the remaining **37.5%**[56](index=56&type=chunk) - Holders of Operating Company Class A Common Units and San Francisco Venture Class A units have exchange rights for Class A common shares or cash, impacting the Holding Company's ownership[57](index=57&type=chunk)[60](index=60&type=chunk) - In 2019, the San Francisco Venture issued **25.0 million Class C units** to an affiliate of Lennar for **$25.0 million**, which are redeemable under specific conditions and included in redeemable noncontrolling interest[61](index=61&type=chunk) - A tax distribution payment of **$4.6 million** was made to the management partner in January 2020, treated as an advance distribution[58](index=58&type=chunk) [6. Consolidated Variable Interest Entity](index=20&type=section&id=6.%20Consolidated%20Variable%20Interest%20Entity) This note identifies the Operating Company, San Francisco Venture, FP LP, and FPL as consolidated Variable Interest Entities, with the Holding Company as the primary beneficiary - The Operating Company is a consolidated Variable Interest Entity (VIE), and the Holding Company conducts all operations through it[65](index=65&type=chunk) - The San Francisco Venture, FP LP, and FPL are also determined to be VIEs, with the Operating Company or its subsidiary identified as the primary beneficiary due to unilateral power over significant activities and economic benefits[66](index=66&type=chunk)[71](index=71&type=chunk) San Francisco Venture Combined Assets and Liabilities (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Total combined assets | $1,213,200 | $1,197,100 | | Total combined liabilities | $104,600 | $119,200 | FP LP and FPL Combined Assets and Liabilities (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Total combined assets | $980,800 | $900,000 | | Total combined liabilities | $106,700 | $126,800 | [7. Intangible Asset, Net—Related Party](index=21&type=section&id=7.%20Intangible%20Asset,%20Net%E2%80%94Related%20Party) This note describes the intangible asset representing incentive compensation from the Great Park Venture A&R DMA, including its gross carrying amount and amortization - The intangible asset represents the contract value of incentive compensation from the A&R DMA with the Great Park Venture, amortized over the contract period[75](index=75&type=chunk) Intangible Asset, Net (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :---------------------- | :------------ | :---------------- | | Gross carrying amount | $129,705 | $129,705 | | Accumulated amortization | $(54,076) | $(49,355) | | Net book value | $75,629 | $80,350 | Intangible Asset Amortization Expense (in thousands) | Period | 2020 | 2019 | | :-------------------------------- | :--- | :--- | | Three months ended June 30, | $2,300 | $4,500 | | Six months ended June 30, | $4,700 | $8,800 | [8. Related Party Transactions](index=21&type=section&id=8.%20Related%20Party%20Transactions) This note details the company's related party assets and liabilities, including a gain from a project settlement and deferred reimbursement obligations Related Party Assets and Liabilities (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :------------------------------------------ | :------------ | :---------------- | | Related Party Assets | $97,373 | $97,561 | | Related Party Liabilities | $119,759 | $127,882 | - In early 2019, the San Francisco Venture recognized a **$64.9 million gain** from the settlement of contingent consideration related to the termination of a retail outlet shopping district project[77](index=77&type=chunk) - A related party affiliate agreed to defer **$12.6 million** of reimbursement obligations until April 2025, accruing interest at **6% per year**[81](index=81&type=chunk) [9. Notes Payable, Net](index=23&type=section&id=9.%20Notes%20Payable,%20Net) This note details the company's notes payable, including senior notes and the available capacity on its revolving credit facility Notes Payable, Net (in thousands) | Debt Instrument | June 30, 2020 | December 31, 2019 | | :-------------------------- | :------------ | :---------------- | | 7.875% Senior Notes due 2025 | $625,000 | $625,000 | | Unamortized debt issuance costs and discount | $(8,186) | $(8,954) | | Total | $616,814 | $616,046 | - The Operating Company's **$125.0 million** revolving credit facility had **$124.7 million** available capacity as of June 30, 2020, after accounting for **$0.3 million** in outstanding letters of credit[82](index=82&type=chunk) [10. Tax Receivable Agreement](index=23&type=section&id=10.%20Tax%20Receivable%20Agreement) This note describes the company's Tax Receivable Agreement (TRA) with Class A unit holders, detailing the liability and payment status - The Company has a Tax Receivable Agreement (TRA) with certain Class A unit holders, with a liability of **$173.2 million** at June 30, 2020, and **$172.6 million** at December 31, 2019[83](index=83&type=chunk) - The TRA term continues until tax benefits are utilized or expire, or if the Company exercises its right to terminate[84](index=84&type=chunk) - No TRA payments were made during the six months ended June 30, 2020 and 2019[84](index=84&type=chunk) [11. Leases](index=24&type=section&id=11.%20Leases) This note details the company's operating lease arrangements for office facilities and equipment, including lease costs and related balance sheet information - All of the Company's leasing arrangements, primarily for office facilities and equipment, are classified as operating leases as of June 30, 2020[85](index=85&type=chunk) Lease Costs (in thousands) | Lease Type | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $552 | $666 | $1,106 | $1,327 | | Related party operating lease cost | $788 | $783 | $1,577 | $1,567 | | Short-term lease cost | $182 | $119 | $308 | $251 | Supplemental Balance Sheet Information Related to Leases (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :------------------------------------------ | :------------ | :---------------- | | Operating lease right-of-use assets | $30,449 | $32,579 | | Operating lease liabilities | $25,640 | $27,206 | | Weighted average remaining lease term (operating lease) | 6.6 years | 7.1 years | | Weighted average discount rate (operating lease) | 5.9 % | 5.9 % | [12. Commitments and Contingencies](index=25&type=section&id=12.%20Commitments%20and%20Contingencies) This note outlines the company's various commitments and contingencies, including settlement payments, bonding agreements, guarantees, letters of credit, and ongoing legal proceedings [Valencia Project Approval Settlement](index=25&type=section&id=Valencia%20Project%20Approval%20Settlement) This section details the remaining estimated monetary payment of **$23.8 million** due by 2026 related to the Valencia project approval settlement - The Company reached a settlement in September 2017 regarding legal challenges to Valencia's regulatory approvals, with a remaining estimated maximum potential monetary payment of **$23.8 million** due by 2026[89](index=89&type=chunk) [Performance and Completion Bonding Agreements](index=25&type=section&id=Performance%20and%20Completion%20Bonding%20Agreements) This section reports outstanding performance bonds totaling **$243.7 million** as of June 30, 2020, ensuring completion of development obligations - Outstanding performance bonds totaled **$243.7 million** as of June 30, 2020, and **$230.0 million** as of December 31, 2019, to ensure completion of development obligations[90](index=90&type=chunk) [Candlestick and The San Francisco Shipyard Disposition and Development Agreement](index=25&type=section&id=Candlestick%20and%20The%20San%20Francisco%20Shipyard%20Disposition%20and%20Development%20Agreement) This section notes outstanding guarantees of **$198.3 million** as of June 30, 2020, benefiting the San Francisco Agency for infrastructure and park obligations - The Company had outstanding guarantees of **$198.3 million** as of June 30, 2020, benefiting the San Francisco Agency for infrastructure and park/open space obligations[92](index=92&type=chunk) [Letters of Credit](index=25&type=section&id=Letters%20of%20Credit) This section reports outstanding letters of credit totaling **$1.8 million** at June 30, 2020, secured by **$1.4 million** in restricted cash - Outstanding letters of credit totaled **$1.8 million** at June 30, 2020, secured by **$1.4 million** in restricted cash and certificates of deposit[93](index=93&type=chunk) [Legal Proceedings](index=26&type=section&id=Legal%20Proceedings) This section discusses ongoing legal challenges, including final judgment on Valencia project approvals and lawsuits concerning environmental contamination at The San Francisco Shipyard - The California Supreme Court denied a petition to review the Landmark Village/Mission Village project approvals, making the judgment in favor of Los Angeles County and the Company final[94](index=94&type=chunk) - Multiple lawsuits have been filed regarding alleged environmental contamination and misrepresentation of testing results by Tetra Tech at The San Francisco Shipyard, naming the Company and others as defendants[95](index=95&type=chunk)[96](index=96&type=chunk) - The Company believes it has meritorious defenses and potential insurance/indemnification rights for the Hunters Point litigation, but cannot predict the outcome[97](index=97&type=chunk) [13. Supplemental Cash Flow Information](index=27&type=section&id=13.%20Supplemental%20Cash%20Flow%20Information) This note provides additional details on cash flow items, including cash paid for interest, noncash recognition of TRA liability, and reconciliation of cash and restricted cash Supplemental Cash Flow Information (in thousands) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Cash paid for interest (capitalized to inventories) | $26,697 | $32,882 | | Recognition of TRA liability (noncash) | $615 | $3,124 | | Purchase of properties and equipment in accounts payable (noncash) | $530 | $— | Reconciliation of Cash, Cash Equivalents, and Restricted Cash (in thousands) | Metric | 2020 | 2019 | | :------------------------------------------ | :----- | :----- | | Cash and cash equivalents | $215,085 | $292,661 | | Restricted cash and certificates of deposit | $1,742 | $1,739 | | Total | $216,827 | $294,400 | [14. Segment Reporting](index=27&type=section&id=14.%20Segment%20Reporting) This note presents financial information for the company's four reportable segments: Valencia, San Francisco, Great Park, and Commercial, detailing revenues, profit, and assets - The Company operates through four reportable segments: Valencia, San Francisco, Great Park, and Commercial[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) Segment Revenues (in thousands) | Segment | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Valencia | $17,861 | $820 | $18,657 | $2,435 | | San Francisco | $172 | $972 | $1,147 | $2,065 | | Great Park | $6,827 | $43,854 | $36,355 | $213,413 | | Commercial | $8,603 | $8,912 | $17,176 | $17,261 | | Total reportable segments | $33,463 | $54,558 | $73,335 | $235,174 | Segment Profit (Loss) (in thousands) | Segment | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Valencia | $1,677 | $(4,261) | $(3,117) | $(8,345) | | San Francisco | $(2,466) | $(4,465) | $(5,558) | $56,609 | | Great Park | $(10,185) | $(2,325) | $(12,727) | $37,943 | | Commercial | $37,426 | $(1,406) | $36,788 | $(2,187) | | Total reportable segments | $26,452 | $(12,457) | $15,386 | $84,020 | Segment Assets (in thousands) | Segment | June 30, 2020 | December 31, 2019 | | :---------------- | :------------ | :---------------- | | Valencia | $833,134 | $748,082 | | San Francisco | $1,213,156 | $1,197,081 | | Great Park | $1,253,477 | $1,356,417 | | Commercial | $405,291 | $473,409 | | Total reportable segments | $3,705,058 | $3,774,989 | [15. Share-Based Compensation](index=29&type=section&id=15.%20Share-Based%20Compensation) This note details the company's incentive award plan, including RSU and restricted share activity, compensation expense, and unrecognized compensation cost - The Company has an incentive award plan granting RSUs and restricted share awards, with **4,683,907 Class A common shares** available for future issuance as of June 30, 2020[111](index=111&type=chunk) Share-Based Equity Compensation Activity (Six Months Ended June 30, 2020) | Metric | Share-Based Awards (in thousands) | Weighted Average Grant Date Fair Value | | :-------------------------- | :------------------------------- | :------------------------------------- | | Nonvested at January 1, 2020 | 3,011 | $9.02 | | Granted | 677 | $8.09 | | Forfeited | (307) | $6.88 | | Vested | (1,071) | $12.64 | | Nonvested at June 30, 2020 | 2,310 | $7.36 | Share-Based Compensation Expense (in thousands) | Period | 2020 | 2019 | | :-------------------------------- | :--- | :--- | | Three months ended June 30, | $2,800 | $3,400 | | Six months ended June 30, | $5,800 | $6,800 | - Approximately **$11.7 million** of total unrecognized compensation cost is expected to be recognized over a weighted-average period of **1.6 years** from June 30, 2020[114](index=114&type=chunk) [16. Employee Benefit Plans](index=30&type=section&id=16.%20Employee%20Benefit%20Plans) This note describes the Newhall Land and Farming Company Retirement Plan, a frozen defined benefit plan, and its net periodic benefit costs - The Newhall Land and Farming Company Retirement Plan is a frozen defined benefit plan, with the Company expecting to contribute **$0.6 million** in 2020[115](index=115&type=chunk) Net Periodic Benefit (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest cost | $164 | $208 | $328 | $416 | | Expected return on plan assets | $(276) | $(252) | $(552) | $(505) | | Amortization of net actuarial loss | $24 | $35 | $48 | $70 | | Net periodic benefit | $(88) | $(9) | $(176) | $(19) | [17. Income Taxes](index=30&type=section&id=17.%20Income%20Taxes) This note explains the company's income tax treatment, the absence of a tax provision due to valuation allowance, and the analysis of the CARES Act impact - The Holding Company is treated as a corporation for tax purposes, while most subsidiaries are pass-through entities[118](index=118&type=chunk) - No income tax provision or benefit was recorded for the three and six months ended June 30, 2020, due to the application of a valuation allowance against deferred tax assets[119](index=119&type=chunk)[120](index=120&type=chunk) - The CARES Act was signed into law in March 2020, and the Company is analyzing its financial impact but does not believe any aspects are material to the tax provision for the reported periods[121](index=121&type=chunk) [18. Financial Instruments and Fair Value Measurements and Disclosures](index=31&type=section&id=18.%20Financial%20Instruments%20and%20Fair%20Value%20Measurements%20and%20Disclosures) This note discusses the fair value of the company's financial instruments, primarily notes payable, and the absence of nonrecurring fair value measurements - The carrying amount of most financial instruments approximated fair value at June 30, 2020, and December 31, 2019[123](index=123&type=chunk) Fair Value of Notes Payable, Net (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :---------------------- | :------------ | :---------------- | | Estimated fair value | $600,000 | $631,100 | | Carrying value | $616,800 | $616,000 | - The Company had no assets measured at fair value on a nonrecurring basis during the periods, other than the investment in Great Park Venture[123](index=123&type=chunk) [19. Earnings Per Share](index=32&type=section&id=19.%20Earnings%20Per%20Share) This note details the company's earnings per share calculation using the two-class method, including basic and diluted EPS for Class A common shares - The Company uses the two-class method for EPS calculation, allocating net income/loss between Class A and Class B common shares based on distribution rates[124](index=124&type=chunk)[125](index=125&type=chunk) Basic and Diluted Earnings Per Share (Class A common shares) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.10 | $(0.16) | $(0.27) | $0.19 | | Diluted EPS | $0.10 | $(0.16) | $(0.27) | $0.18 | Weighted Average Class A Shares Outstanding | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | 66,731,233 | 66,256,961 | 66,690,550 | 66,234,066 | | Diluted | 142,851,412 | 66,256,961 | 68,854,356 | 145,403,189 | [20. Accumulated Other Comprehensive Loss](index=34&type=section&id=20.%20Accumulated%20Other%20Comprehensive%20Loss) This note details the company's accumulated other comprehensive loss, primarily consisting of unamortized defined benefit pension plan net actuarial losses - Accumulated other comprehensive loss (AOCI) attributable to the Company totaled **$2.7 million** at both June 30, 2020, and December 31, 2019, primarily consisting of unamortized defined benefit pension plan net actuarial losses[129](index=129&type=chunk) - Reclassifications from AOCI to net loss related to amortization of net actuarial losses were approximately **$30,000** and **$44,000** (net of taxes) for the six months ended June 30, 2020 and 2019, respectively[129](index=129&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Five Point Holdings, LLC's financial condition and operational results, covering key highlights, consolidated and segment-specific performance, liquidity, and the COVID-19 impact [Overview](index=35&type=section&id=Overview) This section outlines Five Point Holdings, LLC's operational structure, conducting business through its operating company and various equity interests in development ventures - Five Point Holdings, LLC conducts all business through its operating company, Five Point Operating Company, LP, in which it owned approximately **62.5%** as of June 30, 2020[131](index=131&type=chunk) - The operating company directly or indirectly owns equity interests in FPL (Valencia), The San Francisco Venture (Candlestick and The San Francisco Shipyard), Great Park Venture, Gateway Commercial Venture, and the management company[131](index=131&type=chunk) - The Great Park Venture and Gateway Commercial Venture are accounted for using the equity method, while other entities are consolidated[131](index=131&type=chunk) [Operational Highlights](index=35&type=section&id=Operational%20Highlights) This section highlights key operational achievements, including significant asset sales by Gateway Commercial Venture, land sales at Valencia, and the company's response to COVID-19 - In May 2020, the Gateway Commercial Venture sold land and a building to City of Hope for **$108.0 million**, generating a **$37.4 million gain** and distributing **$56.3 million** to the Company[132](index=132&type=chunk) - In June 2020, the Gateway Commercial Venture agreed to sell two additional buildings for **$355.0 million**, with closing anticipated in August 2020[133](index=133&type=chunk) - The Company closed on **70 previously sold homesites** at Valencia in May 2020 for **$16.6 million**[134](index=134&type=chunk) - In response to COVID-19, the Company limited development activities, shifted to remote work, and observed a rebound in sales rates at Great Park Neighborhoods since late April[135](index=135&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section analyzes the company's consolidated results, highlighting revenue changes from land sales and management services, and the impact of an unconsolidated entity gain and an impairment charge [Three Months Ended June 30, 2020 and 2019](index=37&type=section&id=Three%20Months%20Ended%20June%2030,%202020%20and%202019) This section analyzes the company's financial performance for the three months ended June 30, 2020 and 2019, focusing on revenue, cost, and equity earnings changes - Total revenues increased by **$11.9 million (96.2%)** to **$24.3 million**, primarily due to land sales at the Valencia segment, partially offset by decreased management services revenue at Great Park[139](index=139&type=chunk) - Cost of management services decreased by **$3.1 million (41.0%)** to **$4.4 million**, mainly due to lower intangible asset amortization expense[141](index=141&type=chunk) - Selling, general, and administrative expenses decreased by **$9.7 million (37.2%)** to **$16.3 million**, mainly due to reduced employee-related expenses[142](index=142&type=chunk) - Equity in earnings from unconsolidated entities increased to **$23.9 million** from a **$2.7 million loss**, driven by the sale of a building and land at the Commercial segment[143](index=143&type=chunk) [Six Months Ended June 30, 2020 and 2019](index=38&type=section&id=Six%20Months%20Ended%20June%2030,%202020%20and%202019) This section analyzes the company's financial performance for the six months ended June 30, 2020 and 2019, focusing on revenue, cost, and equity earnings changes - Total revenues increased by **$8.1 million (31.7%)** to **$33.5 million**, primarily due to land sales at the Valencia segment, offset by decreased management services revenue at Great Park[145](index=145&type=chunk) - Cost of management services decreased by **$4.6 million (30.7%)** to **$10.5 million**, mainly due to lower intangible asset amortization expense[146](index=146&type=chunk) - Selling, general, and administrative expenses decreased by **$10.8 million (20.9%)** to **$40.9 million**, mainly due to reduced employee-related expenses[147](index=147&type=chunk) - Equity in unconsolidated entities shifted from **$6.2 million** in earnings to a **$7.0 million loss**, primarily due to a **$26.9 million** other-than-temporary impairment charge on the Great Park Venture investment, partially offset by increased earnings from Gateway Commercial Venture[148](index=148&type=chunk) [Segment Results and Financial Information](index=39&type=section&id=Segment%20Results%20and%20Financial%20Information) This section details the performance of the Valencia, San Francisco, Great Park, and Commercial segments, highlighting revenue drivers, cost changes, and significant events like land sales and asset dispositions [Valencia Segment (formerly Newhall)](index=39&type=section&id=Valencia%20Segment%20(formerly%20Newhall)) This section details the Valencia segment's land holdings, homesite and commercial space development, and revenue growth from land sales - The Valencia segment includes approximately **15,000 acres** designed for **21,500 homesites** and **11.5 million square feet** of commercial space[150](index=150&type=chunk) - Revenues increased by **$17.0 million** to **$17.9 million** for the three months ended June 30, 2020, primarily from the sale of **70 homesites** for a base purchase price of **$16.6 million**[154](index=154&type=chunk) - Selling, general, and administrative expenses decreased by **$1.2 million (30.3%)** for the three months ended June 30, 2020, mainly due to reduced employee-related expenses[157](index=157&type=chunk) [San Francisco Segment](index=41&type=section&id=San%20Francisco%20Segment) This section covers the San Francisco segment's development projects, including Candlestick and The San Francisco Shipyard, and challenges related to land transfers and legal claims - The San Francisco segment includes Candlestick and The San Francisco Shipyard, designed for **12,000 homesites** and **6.3 million square feet** of commercial space, exempt from Proposition M growth control[161](index=161&type=chunk)[164](index=164&type=chunk) - Land transfers from the U.S. Navy at The San Francisco Shipyard are delayed due to allegations of misrepresented sampling results by a contractor, leading to additional testing and potential legal claims[165](index=165&type=chunk) - Selling, general, and administrative expenses decreased by **$2.6 million (49.4%)** for the three months ended June 30, 2020, and by **$3.5 million (35.9%)** for the six months ended June 30, 2020, mainly due to reduced employee-related expenses[170](index=170&type=chunk)[172](index=172&type=chunk) - In early 2019, the segment recognized a **$64.9 million gain** from the termination of a retail project and related development obligations[173](index=173&type=chunk) [Great Park Segment](index=43&type=section&id=Great%20Park%20Segment) This section details the Great Park segment's neighborhoods and development management services, highlighting revenue decreases due to fewer land sales and reduced management fees - The Great Park segment includes Great Park Neighborhoods (**2,100 acres**, **10,500 homesites**) and development management services provided to the Great Park Venture, in which the Company holds a **37.5% interest**[174](index=174&type=chunk)[175](index=175&type=chunk) - Revenues decreased by **$37.0 million** for the three months and **$177.1 million** for the six months ended June 30, 2020, primarily due to fewer land sales and a reduction in management services revenue, impacted by COVID-19's effect on incentive compensation estimates[179](index=179&type=chunk)[185](index=185&type=chunk) - Management fees incurred by the Great Park Venture decreased by **$4.4 million (51.9%)** for the three months and **$12.4 million (74.8%)** for the six months ended June 30, 2020, due to reduced estimates of incentive compensation probable of being paid[184](index=184&type=chunk)[190](index=190&type=chunk) Equity in (Loss) Earnings from the Great Park Venture (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Segment net (loss) income from operations | $(10,185) | $(2,325) | $(12,727) | $37,943 | | Equity in (loss) earnings from the Great Park Venture | $(4,092) | $(1,496) | $(34,452) | $7,948 | [Commercial Segment](index=48&type=section&id=Commercial%20Segment) This section details the Commercial segment's Five Point Gateway Campus, highlighting significant asset sales by Gateway Commercial Venture and their impact on costs and expenses - The Commercial segment includes the Five Point Gateway Campus, with the Company holding a **75% interest** in the Gateway Commercial Venture[194](index=194&type=chunk)[195](index=195&type=chunk) - In May 2020, the Gateway Commercial Venture sold a building and land to City of Hope for **$108.0 million**, resulting in a **$37.4 million gain**[201](index=201&type=chunk)[204](index=204&type=chunk) - Costs and expenses decreased by **$1.7 million (16.7%)** for the three months and **$1.6 million (8.5%)** for the six months ended June 30, 2020, primarily due to lower interest and depreciation expenses following the asset sale and debt payment[202](index=202&type=chunk)[205](index=205&type=chunk) Equity in Earnings (Loss) from the Gateway Commercial Venture (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Segment net income (loss) from operations | $37,426 | $(1,406) | $36,788 | $(2,187) | | Equity in earnings (loss) from the Gateway Commercial Venture | $27,997 | $(1,173) | $27,446 | $(1,735) | [Financial Condition, Liquidity and Capital Resources](index=50&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) This section assesses the company's financial position, liquidity, and capital resources, including cash balances, credit facility availability, and expected short-term and long-term cash needs - As of June 30, 2020, the Company had **$215.1 million** in consolidated cash and cash equivalents, down from **$346.8 million** at December 31, 2019[208](index=208&type=chunk) - The Operating Company's **$125.0 million** revolving credit facility had **$124.7 million** available capacity as of June 30, 2020[208](index=208&type=chunk) - Short-term cash needs include general and administrative expenses, development expenditures, interest payments, and related party reimbursement obligations[209](index=209&type=chunk) - The Company expects to meet cash requirements for the next 12 months through available cash, land sales, distributions from unconsolidated entities, and management fees, despite potential delays from COVID-19[209](index=209&type=chunk) - Long-term cash needs relate to future horizontal development and investments, with funding expected from cash, community cash flows, and public financing, but additional capital may be sought[210](index=210&type=chunk)[211](index=211&type=chunk) [Summary of Cash Flows](index=51&type=section&id=Summary%20of%20Cash%20Flows) This section summarizes the company's cash flow activities for the six months ended June 30, 2020 and 2019, detailing changes in operating, investing, and financing cash flows Net Cash Provided by (Used in) Activities (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------- | :----------------------------- | :----------------------------- | | Operating activities | $(148,383) | $(164,725) | | Investing activities | $34,136 | $710 | | Financing activities | $(17,500) | $(38,682) | - Net cash used in operating activities decreased by **$16.3 million**, primarily due to a **$22.4 million** return on investment from Gateway Commercial Venture in 2020[213](index=213&type=chunk) - Net cash provided by investing activities increased significantly to **$34.1 million**, driven by a **$33.9 million** return of investment from Gateway Commercial Venture in 2020[214](index=214&type=chunk)[215](index=215&type=chunk) - Net cash used in financing activities decreased to **$17.5 million**, mainly due to the absence of the **$65.1 million** Macerich promissory note repayment made in 2019, partially offset by a **$4.6 million** noncontrolling interest tax distribution and **$7.4 million** related party reimbursement payment in 2020[216](index=216&type=chunk)[217](index=217&type=chunk) [Changes in Capital Structure](index=52&type=section&id=Changes%20in%20Capital%20Structure) This section details changes in the company's ownership in the Operating Company and the outstanding Class A and Class B common shares - The Company's ownership in the Operating Company increased to **62.5%** during the six months ended June 30, 2020, primarily due to equity transactions related to its share-based compensation plan[218](index=218&type=chunk) Outstanding Class A Units (in thousands) | Entity | June 30, 2020 | December 31, 2019 | | :------------------------------------------ | :------------ | :---------------- | | Class A units of the operating company held by us | 69,056,591 | 68,788,257 | | 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 | - As of June 30, 2020, there were **79,233,544 Class B common shares** outstanding, held by noncontrolling interest members, which convert to Class A common shares at a **0.0003 ratio** upon redemption of Class A units[220](index=220&type=chunk) [Contractual Obligations and Commitments](index=52&type=section&id=Contractual%20Obligations%20and%20Commitments) This section outlines the company's contractual obligations, including deferred reimbursement payments, letters of credit, performance bonds, and municipal guarantees - A **$12.6 million** related party reimbursement obligation due April 2020 was deferred until April 2025, accruing **6% interest**[222](index=222&type=chunk) - Expected reimbursement payments are **$49.4 million** in the balance of 2020, **$6.0 million** in 2021, **$26.9 million** in 2022, and **$12.6 million** in 2025[222](index=222&type=chunk) - Outstanding letters of credit totaled **$1.8 million** at June 30, 2020, with **$1.4 million** in restricted cash collateral[223](index=223&type=chunk) - Outstanding performance bonds were **$243.7 million**, and guarantees for municipal infrastructure/park obligations totaled **$198.3 million** as of June 30, 2020[223](index=223&type=chunk)[224](index=224&type=chunk) [Critical Accounting Policies](index=53&type=section&id=Critical%20Accounting%20Policies) This section confirms no significant changes to critical accounting policies during the six months ended June 30, 2020, compared to the prior annual report - No significant changes to critical accounting policies occurred during the six months ended June 30, 2020, compared to the Annual Report on Form 10-K for December 31, 2019[225](index=225&type=chunk) [Recently Issued Accounting Pronouncements and Developments](index=53&type=section&id=Recently%20Issued%20Accounting%20Pronouncements%20and%20Developments) This section directs readers to Note 2 of the condensed consolidated financial statements for details on new accounting pronouncements - Refer to Note 2 of the condensed consolidated financial statements for a discussion of new accounting pronouncements applicable to the Company[226](index=226&type=chunk) [Off-Balance Sheet Arrangements](index=53&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms that the company had no material off-balance sheet arrangements as of June 30, 2020 - The Company had no material off-balance sheet arrangements as of June 30, 2020[227](index=227&type=chunk) [Seasonality](index=53&type=section&id=Seasonality) This section states that the company's business and results of operations are not materially impacted by seasonality - The Company's business and results of operations are not materially impacted by seasonality[228](index=228&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's market risk exposure, primarily from fixed-rate indebtedness, and its approach to managing interest rate risk without current derivative use - The Company's primary market risk stems from its **$616.8 million** consolidated net indebtedness, which bears interest at fixed rates as of June 30, 2020[229](index=229&type=chunk)[230](index=230&type=chunk) - The Company does not currently use derivative financial instruments but may consider swap arrangements for floating-rate debt in the future to reduce interest rate exposure[229](index=229&type=chunk)[230](index=230&type=chunk) [ITEM 4. Controls and Procedures](index=55&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2020[232](index=232&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the period[233](index=233&type=chunk) [PART II. OTHER INFORMATION](index=56&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity security sales, defaults, mine safety, and other information [ITEM 1. Legal Proceedings](index=56&type=section&id=ITEM%201.%20Legal%20Proceedings) This section incorporates by reference disclosures on legal proceedings from Note 12, detailing ongoing litigation related to Valencia project approvals and environmental contamination at The San Francisco Shipyard - Disclosures of legal proceedings are incorporated by reference from Note 12 to the condensed consolidated financial statements[236](index=236&type=chunk) [ITEM 1A. Risk Factors](index=56&type=section&id=ITEM%201A.%20Risk%20Factors) This section supplements existing risk factors with a new discussion on the material adverse effects of the COVID-19 pandemic, highlighting potential business disruptions and asset impairments - A new risk factor has been added to expand the discussion of risks related to public health issues, specifically the COVID-19 pandemic[237](index=237&type=chunk)[238](index=238&type=chunk) - COVID-19 has disrupted the Company's business, leading to limited development activities, remote work, and potential negative impacts on consumer confidence, demand for homesites, and access to capital[238](index=238&type=chunk)[239](index=239&type=chunk) - The extent and duration of COVID-19's impact are highly uncertain and could result in material asset impairments, similar to the **$26.9 million** impairment on the Great Park Venture investment[239](index=239&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms no unregistered sales of equity securities or use of proceeds to report for the period covered by this Form 10-Q - No unregistered sales of equity securities and use of proceeds to report[240](index=240&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=57&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms no defaults upon senior securities to report for the period - No defaults upon senior securities to report[241](index=241&type=chunk) [ITEM 4. Mine Safety Disclosures](index=57&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section indicates that the disclosure requirements for mine safety are not applicable to the Company - Mine Safety Disclosures are not applicable[241](index=241&type=chunk) [ITEM 5. Other Information](index=57&type=section&id=ITEM%205.%20Other%20Information) This section states that there is no other information to report under this item - No other information to report[241](index=241&type=chunk) [ITEM 6. Exhibits](index=57&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various certifications and XBRL instance and taxonomy extension documents - Exhibits include 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)[241](index=241&type=chunk) [Signatures](index=58&type=section&id=SIGNATURES) This section provides the signatures of the Chairman, President, Chief Executive Officer, Chief Financial Officer, and Vice President, certifying the report - The report is signed by Emile Haddad, Chairman, President and Chief Executive Officer, and Erik Higgins, Chief Financial Officer and Vice President, on August 7, 2020[244](index=244&type=chunk)[245](index=245&type=chunk)

Financial Data and Key Metrics Changes - The company's consolidated revenues for Q1 2020 totaled $9.2 million, primarily from management services, with a net loss of $53.2 million, including a $30.9 million equity loss from unconsolidated entities [17][18][25] - Total consolidated costs and expenses were $32.6 million, with $24.6 million attributed to selling, general, and administrative expenses [18][25] - The company reported a $26.9 million impairment against its investment in the Great Park Venture [17][21] Business Line Data and Key Metrics Changes - The Valencia Segment generated revenues of $0.8 million, with a loss of $4.8 million for the quarter [18][19] - The San Francisco Segment reported approximately $1 million in revenues and a loss of $2.1 million [19] - The Great Park Segment had revenues of $29.5 million, with a net loss of $2.5 million [21][22] - The Commercial Segment generated revenues of $8.6 million, resulting in a loss of $0.6 million [24] Market Data and Key Metrics Changes - Home sales at the Great Park showed recovery, with net sales returning to historical averages, reaching 10 net sales last week [12][50] - The company noted a lack of inventory in homes, which is helping to maintain home values [12] Company Strategy and Development Direction - The company is focusing on managing land development operations to support builders while anticipating no land sales in Valencia and the Great Park for the remainder of 2020 [6][10] - A strategic partnership with the City of Hope is being developed, emphasizing healthcare delivery and technology [10][75] - The company is rethinking commercial real estate uses, with a pivot towards healthcare-related developments [73][76] Management's Comments on Operating Environment and Future Outlook - Management expressed caution in extrapolating current consumer behavior due to the pandemic, indicating that changes may be temporary [28][32] - The company is monitoring sales trends closely and is prepared to adjust land development plans based on market demand [64][65] - Management remains confident in liquidity, with total liquidity at approximately $372 million [25][70] Other Important Information - The company has implemented measures to protect employee health and preserve financial strength amid the pandemic [15][16] - The management team has been actively involved in daily operations to ensure the implementation of strategic plans [8][10] Q&A Session Summary Question: Impact of pandemic on home buying attitudes - Management indicated that consumer behavior may change post-pandemic, but it is too early to draw conclusions [28][32] Question: Timing of future land sales in Newhall - Management noted ongoing interest from builders and potential announcements regarding future transactions [34][35] Question: Details on the $27 million impairment - Management explained the impairment was due to accounting methods and assumptions about future cash flows [37][44] Question: Builder orders and incentives - Management provided insights into builder engagement and sales trends, noting a cautious but returning interest from builders [47][56] Question: Future of commercial real estate - Management is considering adjustments to commercial plans, particularly in healthcare, but is awaiting clearer market signals [72][76] Question: Builder appetite for land - Management categorized builders into three groups based on their engagement levels, indicating a cautious return to land acquisition [80][82]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=5&type=section&id=ITEM%201.%20Financial%20Statements) The company reported a net loss of **$53.2 million** in Q1 2020, a reversal from **$52.7 million** net income in Q1 2019, driven by revenue decline and a **$26.9 million** impairment Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $247,754 | $346,833 | | Inventories | $1,958,901 | $1,889,761 | | Investment in unconsolidated entities | $501,909 | $533,239 | | **Total Assets** | **$2,937,423** | **$3,004,700** | | **Liabilities & Capital** | | | | Notes payable, net | $616,430 | $616,046 | | Total liabilities | $1,089,929 | $1,095,900 | | Total capital | $1,822,494 | $1,883,800 | | **Total Liabilities & Capital** | **$2,937,423** | **$3,004,700** | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Total Revenues | $9,220 | $13,073 | | Gain on settlement of contingent consideration—related party | $0 | $64,870 | | Equity in (Loss) Earnings from Unconsolidated Entities | ($30,911) | $8,882 | | **Net (Loss) Income** | **($53,219)** | **$52,733** | | Net (Loss) Income Attributable to the Company | ($24,806) | $23,808 | | **Diluted EPS (Class A)** | **($0.37)** | **$0.35** | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Category | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($89,426) | ($83,652) | | Net cash provided by investing activities | $1,017 | $267 | | Net cash used in financing activities | ($10,669) | ($38,682) | | **Net Decrease in Cash** | **($99,078)** | **($122,067)** | - The company recognized a **$26.9 million** other-than-temporary impairment charge on its investment in the Great Park Venture, attributing it to delays in projected distributions and land sales resulting from the impacts of the COVID-19 pandemic[45](index=45&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2020's financial decline to reduced land sales, a non-recurring 2019 gain, and a **$26.9 million** impairment, while affirming liquidity for the next 12 months - In response to the COVID-19 pandemic, the company implemented remote work, limited development activities, and began analyzing potential revenue delays of three, six, or nine months[130](index=130&type=chunk) - Equity in loss from unconsolidated entities was **$30.9 million**, a sharp decline from earnings of **$8.9 million** in the prior year, primarily due to a **$26.9 million** other-than-temporary impairment on the Great Park Venture investment caused by expected COVID-19 related delays[138](index=138&type=chunk) - The San Francisco segment's Q1 2019 results included a significant one-time gain of **$64.9 million** from the termination of the Retail Project at Candlestick, which was not repeated in Q1 2020[147](index=147&type=chunk)[155](index=155&type=chunk) - As of March 31, 2020, the company had **$247.8 million** in cash and cash equivalents and **$124.7 million** available on its revolving credit facility, expecting to meet cash requirements for at least the next 12 months[175](index=175&type=chunk)[176](index=176&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk from **$616.4 million** fixed-rate indebtedness is mitigated, as it does not use derivative financial instruments for risk management - As of March 31, 2020, the company had **$616.4 million** in outstanding consolidated net indebtedness, all bearing fixed interest rates, minimizing exposure to market interest rate fluctuations[200](index=200&type=chunk) - The company has not entered into any transactions using derivative financial instruments for hedging or speculative purposes[200](index=200&type=chunk) [Controls and Procedures](index=48&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, deemed disclosure controls effective as of March 31, 2020, with no material changes to internal control over financial reporting - Management, including the Certifying Officers, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020[202](index=202&type=chunk) - No material changes occurred in internal control over financial reporting during the first quarter of 2020[203](index=203&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=49&type=section&id=ITEM%201.%20Legal%20Proceedings) The company's legal proceedings, detailed in Note 12, include environmental challenges at Valencia and contamination lawsuits at The San Francisco Shipyard - For details on legal proceedings, the report refers to Note 12 of the financial statements[206](index=206&type=chunk) - Key legal matters include challenges to Valencia project approvals and multiple lawsuits related to alleged environmental contamination and fraudulent remediation testing at The San Francisco Shipyard[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [Risk Factors](index=49&type=section&id=ITEM%201A.%20Risk%20Factors) A new risk factor addresses COVID-19's business disruption, highlighting potential adverse effects like decreased demand and further asset impairments, exemplified by a **$26.9 million** impairment - A new risk factor was added to address the business disruption from the COVID-19 pandemic and government measures to control it[207](index=207&type=chunk)[208](index=208&type=chunk) - Potential negative impacts from the pandemic include decreased consumer confidence, prolonged economic downturn, lower demand for homesites, and increased costs or decreased availability of contractors[209](index=209&type=chunk) - The company notes the risk of future asset impairments, similar to the **$26.9 million** impairment recognized on its Great Park Venture investment due to pandemic-related delays[209](index=209&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2020, the company repurchased **436,675** shares to satisfy employee tax withholding obligations upon restricted share vesting Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2020 | 436,675 | $8.09 | | February 2020 | 0 | N/A | | March 2020 | 0 | N/A | | **Total** | **436,675** | **$8.09** | - The share repurchases were made to cover minimum statutory tax withholding obligations for employees related to the vesting of restricted shares under the company's equity compensation plan[210](index=210&type=chunk) [Defaults Upon Senior Securities](index=50&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults on its senior securities during the period - None[211](index=211&type=chunk) [Mine Safety Disclosures](index=50&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[211](index=211&type=chunk) [Other Information](index=50&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information for this item - None[211](index=211&type=chunk) [Exhibits](index=51&type=section&id=ITEM%206.%20Exhibits) Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, along with Inline XBRL interactive data files - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[212](index=212&type=chunk) - The filing also includes various Inline XBRL documents for interactive data[212](index=212&type=chunk)