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Edited Transcript of FPH.N earnings conference call or presentation 10-Nov-20 10:00pm GMT

·32 min read

Q3 2020 Five Point Holdings LLC Earnings Call ALISO VIEJO Nov 15, 2020 (Thomson StreetEvents) -- Edited Transcript of Five Point Holdings LLC earnings conference call or presentation Tuesday, November 10, 2020 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Emile K. Haddad Five Point Holdings, LLC - Chairman, President & CEO * Erik R. Higgins Five Point Holdings, LLC - CFO, Treasurer & VP ================================================================================ Conference Call Participants ================================================================================ * Alan S. Ratner Zelman & Associates LLC - MD * Elad Elie Hillman JPMorgan Chase & Co, Research Division - Analyst * Stephen Kim Evercore ISI Institutional Equities, Research Division - Senior MD & Head of Housing Research Team * Truman Andrew Patterson Wells Fargo Securities, LLC, Research Division - VP & Senior Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, everyone. Welcome to today's Five Point Holdings Third Quarter 2020 Conference Call. (Operator Instructions) As a reminder, today's program is being recorded. Today's conference may include forward-looking statements regarding Five Point's business, financial conditions, operations, cash flow, strategy, and prospects. Forward-looking statements represent only Five Point's estimates on the date of this conference call and are not intended to give any assurance as to the actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risk and uncertainties. Many factors could affect future results and may cause Five Point's actual results or activities to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described in today's press release and Five Point's SEC filings, including those in the Risk Factors section of the most recent annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC. Please note that Five Point assumes no obligation to update any forward-looking statements. Now, I'd like to turn the call over to Mr. Emile Haddad, Chairman and CEO of Five Point. Please go ahead, sir. -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [2] -------------------------------------------------------------------------------- Thank you, Greg, and welcome, everyone. I hope that you and your loved ones are all healthy. The results of our third quarter speak to the main talents of our strategy of maintaining a strong balance sheet and continuing to invest in our communities. This investment in the infrastructure and amenities that characterize a Five Point community is driving value by creating great places for people of all walks of life to live, work connect with each other and with nature. We have highlighted often the premiums that our homebuyers are paying to live close to state-of-the-art sports and entertainment facilities and to have their children enrolled in our excellent publicly school systems. The price achieved with the sale of 2 of our buildings of our Gateway Campus in Irvine is a clear example of the premium put on our commercial real estate as a result of our investment in the overall community. Today the Great Park in Irvine is being recognized as one of the premier communities in the country. Soon our proof of concept will be seen in Valencia as families are expected to move into their new homes in 2021. The housing market is doing very well. Thanks to historically low interest rates and higher demand for homes in our part of communities. Our markets in Los Angeles and Orange County have seen home price appreciation of 8.2% and 4.7% over the last 12 months respectively according to Zillow and are projected to see another 8.1% and 7.4% over the next 12 months according to the same source. Finally, before I hand it over to Erik to go over our financial results, let me give you an update on our thinking about an investors event that will address our view of the disconnect between the real value of the company and our share prices. At the end of 2019 you'll recall that we were planning for the 2-day investors meeting and tour of our communities. Unfortunately COVID-19 disrupted those plans. Our hope is that we will be able to hold a tour and an in-person meeting next year so we can show you the communities. However, if the conditions don't allow for that, we plan for a virtual meeting early next year that we hope will help you understand the value of the company the way we see it every day. Now let me turn it over to Erik who will report on our Q3 financial results and then we'll take questions after that. -------------------------------------------------------------------------------- Erik R. Higgins, Five Point Holdings, LLC - CFO, Treasurer & VP [3] -------------------------------------------------------------------------------- Thanks, Emile. Our 10-Q was filed on November 6 and a summary of our financial results is included in the earnings release issued earlier today. I'll start with our consolidated results then I will address each of our 4 segments and conclude with comments about our balance sheet and our liquidity position. The company's consolidated revenues for the third quarter totaled $8.4 million, primarily related to the recognition of revenue generated from the related party management services. We recognized $52.4 million in earnings from our 2 unconsolidated joint ventures, including earnings of $56.6 million from our 75% interest in the Gateway Commercial Venture as a result of the sale of 2 buildings occupied by Broadcom at the Five Point Gateway Campus. Total consolidated costs and expenses were approximately $24.5 million, including selling, general and administrative expenses of $17.7 million for the quarter. Net income for the quarter was $36.4 million of which $19.5 million was allocated to the non-controlling interests leaving approximately $17 million attributable to the company. Moving to the segment results. The Valencia segment is consolidated for accounting purposes. The segment loss for the quarter was $3.2 million, which was primarily selling, general and administrative expenses. We collected $13.9 million against the landfill loan related to a landslide that occurred earlier in the year. The San Francisco segment is also consolidated for accounting purposes. The San Francisco segment's net loss for the quarter was $1.8 million, which was primarily SG&A expenses. The Great Park segment includes operations at the Great Park Venture, the owner of the Great Park Neighborhoods as well as management services provided by the management company to the Great Park Venture. As a reminder, we own 37.5% of the non-legacy percentage interest of the Great Park Venture and 100% of the management company. The Great Park Venture is an unconsolidated entity with our investment in the venture accounted for under the equity method of accounting. For segment reporting, we include the full results of the Great Park Venture at the venture's historical cost basis of accounting. The Great Park Venture is a self-funding operation with no project level debt. The Great Park segment revenues were $8.1 million for the third quarter, consisting primarily of revenue recognized under the management agreement. The third-quarter net loss for the Great Park segment totaled $10.2 million, consisting of $1.8 million of net income related to the management company and a loss of $12 million for the Great Park Venture operations. The company recognized a loss of $4.2 million on its investment in the Great Park Venture, which includes our share of the Great Park Venture's losses. Our Commercial segment includes operations of the Gateway Commercial Venture and management services provided by the management company to the Gateway Commercial Venture. We own 75% of the Gateway Commercial Venture and 100% of the management company. The Gateway Commercial Venture is also an unconsolidated entity with our investment in the venture accounted for under the equity method of accounting. For segment reporting we include the full results of the Gateway Commercial Venture at the venture's historical basis of accounting. Commercial segment income was $75.6 million for the quarter, primarily related to the sale of 2 office buildings occupied by Broadcom at the Five Point Gateway Campus. These buildings were sold for $355 million. The JV paid off $245 million in project level debt in connection with the sale and made a cash distribution of $107 million to its members, of which Five Point received $80.3 million. The company recognized approximately $56.6 million of income on its investment in the Gateway Commercial Venture. For historical purpose perspective on our 75% investment in the Gateway Commercial Venture, the company contributed approximately $107 million to the JV in August of 2017 in connection with the venture's acquisition of the 73-acre campus, which included 4 buildings totaling approximately 1 million square feet of office space. As of today, Five Point has received $136.6 million in cash distributions from the sale of 3 buildings and approximately 11 acres. The venture currently homes 1 of the 4 buildings and approximately 50 acres of commercial land with additional development rights at the campus. I'll wrap it up with a few comments related to our balance sheet and liquidity position. Our cash position increased by $55.5 million for the quarter. The increase was primarily the result of $80.3 million in cash distributions from the Gateway Commercial Venture and collected $13.9 million against the [landfill loan] offset by continued inventory expenditures of Valencia and SG&A expenses. As of September 30th, 2020 total liquidity was approximately $395.2 million, which is comprised of our cash balance of $270.6 million and borrowing availability of $124.7 million under our $125 million unsecured revolving credit facility. Our balance sheet is strong with a debt-to-total capital ratio of 25%. Let me turn it now back to the operator to open it up for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And first we'll hear from Stephen Kim who is with Evercore ISI. -------------------------------------------------------------------------------- Stephen Kim, Evercore ISI Institutional Equities, Research Division - Senior MD & Head of Housing Research Team [2] -------------------------------------------------------------------------------- Obviously a lot has changed over the course of this interesting year. And probably no -- 1 thing has changed more than the attitude of it, the perspective on home price appreciation, particularly near term home price appreciation. Obviously -- I know your business. You don't run it for the quarter or even 1 year. But given your unique advantage point in the industry, I was curious if you could comment on the trends you're seeing and the degree to which what you have seen thus far and the near-term outlook. I think you talk of 7%, 8% price growth in the neighboring markets in your Newhall, for example, which I think is very different from what was conceived of maybe 6, 9 months ago. How those changes are factoring into your thinking as to the stream of cash flows perhaps in the future from Newhall or just in general how you may be approaching the best way? What might be the best way to monetize your long-term investments in those -- in the Great Park, remaining in Great Park as well as in Newhall? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [3] -------------------------------------------------------------------------------- Stephen, nice to hear from you. Look, I think that the answer to your question is very consistent with the view that we have and we've always have on the uniqueness of our communities location wise, size wise and ability to put in amenities that are very unique as we have seen at the Great Park and create value that way. Coupled with the fact that we really are the -- in many ways we're the only game in town in Los Angeles County as well as in Orange County to a great extent. And that gives us a huge advantage in terms of supplying in market that [has starved] for housing and has been with a huge amount of pent-up demand. That hasn't changed. If anything, I think it has been even more aggravated. What has changed though is, as you highlighted, is an attitude of the consumer to migrate more to other type of communities with open space, with trails, with lower density and with amenities. But today people are appreciating much more than they were actually appreciating before COVID-19. So that obviously is a factor that has helped a lot the Great Park. And we are seeing now that through the interest from our builders translate to Valencia as well and we are expecting that there's going to be a lot of interest from the higher density in Los Angeles to be up there. So that we're seeing. In terms of the appreciation and -- whether it's short term or long term, look appreciation is a function of an imbalance of supply-demand and nothing on the horizon shows us that there's going to be an increase in the supply. And if anything, as I said before, we are seeing the demand go higher. And it's translating to some of the numbers I gave you in terms of appreciation that was -- today we are seeing in the rearview mirror that is more than what I think a lot of people are speculating what is going to happen in 2020. So to summarize, we have always believed that we are going to be in this unique position in these markets and now that both of our assets have reached the maturity they have reached and we can now start monetizing. It happens to be at a time when interest rates are low, there is a high level of interest from the consumers, and it's only going to accelerate, I think, our thinking. Now in terms of what the question is are we going to be increasing the amount of supply or not of homesites, we have to be very careful for 2 reasons. One, this is the beginning of a large master-planned community, as you know that's going to be 21,000 homes and it is extremely important for us to allow our first group of builders to make money, to go in and not to have to stretch and to create the right momentum for the community. And 2 the infrastructure timeline sometimes dictates how much can we put on the market in terms of homesites. It's not -- no, this is not flat plan where we can go and do whatever you want. But the simple answer is right now we have demand from the builders higher than we were projecting several months ago and we've been extremely careful about how much of that we want to put on the market and how much we want. And hopefully by the next time we have this call, we will be able to tell you exactly what happened. -------------------------------------------------------------------------------- Stephen Kim, Evercore ISI Institutional Equities, Research Division - Senior MD & Head of Housing Research Team [4] -------------------------------------------------------------------------------- Yes. That will be great. In your -- correct me if I am wrong. I recall that perhaps earlier this year, at the end of last year, when there was a rethinking of HPA, your longer-term HPA assumptions, I think you recalled a number around 3.5% or something. Can you comment on how you're thinking around HPA that you've been embedding in your longer-term models has changed in the last 20 -- last 12 months? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [5] -------------------------------------------------------------------------------- Yes. I mean -- look, I think that we don't regularly do life of a deal cash flow for something that goes as long as this is. We tend to look more in terms of 3 years ahead, 2 to 3 -- between 2 to 4 years, 3 years ahead. And we have not changed our assumptions. There is no reason for us to change our assumption because we already have reported very healthy margins and you change assumptions, [that's what] all you're doing, just moving the needle on the margin. So from my perspective, do I believe it's going to be higher? I think if the dynamic stays the same, if the interest rates stay as low as they are, the answer is yes. But there is no reason for us to change those assumptions. -------------------------------------------------------------------------------- Stephen Kim, Evercore ISI Institutional Equities, Research Division - Senior MD & Head of Housing Research Team [6] -------------------------------------------------------------------------------- I recall asking earlier this year when there seemed to be a big change happening in buyer preferences whether or not you thought that there was a potential that there can be changes, particularly as it related to the attractiveness of food and beverage and entertainment venues and things like that that at the time you felt like it would be a mistake to presume that some of the changing elevated concerns and therefore reduce preference for some of those venues. It would be a mistake to assume that that would be a semi-permanent kind of a situation. More recently I heard you talk about the importance you think of providing opportunities for conversation, relationships. And it seems like you're sort of leaning into this idea that as we go forward here, perhaps in the next year or 2, you will actually see the preference for those kinds of venues to, if anything, increase relative to what they had been before. I'm curious if I'm reading what I heard correctly or if you could give any kind of update on what you think about the longer term of the durability of some of the more recent trends that we've seen in customer behavior and homeownership -- or homeowners behavior? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [7] -------------------------------------------------------------------------------- Yes. I mean look, here's what I've been saying. First, I think I don't want to jump to a quick conclusion that the design of the home is going to have to change because everybody is going to be working out of their home or that the office space is obsolete because nobody is going to want to come to an office. I said and I still say that we are going to be watching the consumers' behavior and how much of the consumers' behavior is going to change as a result of the acceleration of some things that were going to happen anyway in the future with this COVID-19 situation and we are doing that. I can tell you though that I believe -- you asked about the short term and the long term. Obviously, the short term, [the communities] themselves are serving the purpose because of the open space and the type of amenities that the consumer is looking for in this environment. Long term, I can tell you we started thinking about even accelerating and enhancing some of our lifestyle and entertainment venues because I believe that once the virus is behind us, once people are going to forget about the virus, I think you're going to see something very similar to [our '20s] because of the amount of pent-up demand for normality, social life and everything else. And as you remember, before the COVID-19 a lot of what we were focusing on was either healthcare-related under commercial which we are still doing that as well as very unique lifestyle, food, beverage, entertainment that you are going to be building at basically half of our communities. I think that long term I think that's going to be even more focused on. The one area that I think we don't have a lot of and we will have to watch is the office space because there is a very good change that the office space itself is going to start changing in configurations. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Moving on from JPMorgan, we have Michael Rehaut. -------------------------------------------------------------------------------- Elad Elie Hillman, JPMorgan Chase & Co, Research Division - Analyst [9] -------------------------------------------------------------------------------- This is Elad Hillman for Mike. So, first, I was wondering if you could comment on what you saw from homebuilders on the stronger monthly sales trends at Great Park during the quarter? And also whether you saw any seasonal slowing in October? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [10] -------------------------------------------------------------------------------- Elad, I'm sorry, didn't hear the second part. The first part was you're asking about the rate of sales, I think, at the Great Park. And we have seen an increase from the first quarter. The way I look at the year is I look at the first quarter, which was before the COVID-19 lockdown. And at that time, we were running about 10 sales a week. I can tell you in the last quarter -- for the last 90 days we did see more like 12. So we've had an increase and I think that's really what's telling us that there is a higher demand we gear up from our builders as well and it's across the board. So I'm sorry, what was the second part of your question? I didn't catch. -------------------------------------------------------------------------------- Elad Elie Hillman, JPMorgan Chase & Co, Research Division - Analyst [11] -------------------------------------------------------------------------------- I was wondering about October whether that's continued -- that strength has continued into October. -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [12] -------------------------------------------------------------------------------- Yes. Yes, we are seeing is all through last reporting which was last week. -------------------------------------------------------------------------------- Elad Elie Hillman, JPMorgan Chase & Co, Research Division - Analyst [13] -------------------------------------------------------------------------------- And then secondly just following up there, are you seeing builders more engaged in the market in the sense that they are maybe willing to pay more for your homesites at Great Park and Valencia versus last quarter. And then also have you started to re-ramp any development activities for your homesites at Great Park and Valencia? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [14] -------------------------------------------------------------------------------- Yes. The question is we in the Great Park, let me start with that, we don't intend to grow to sale with another round of homesites until late of next year and therefore we haven't priced our land. We still feel based on everything we're seeing in the market, that the price for land is moving up. But I can tell you where we're going to be because we're not going to be in that position until mid of next year sometime. In terms of Valencia, we have not changed our asking prices. As I said before, we would just want to make sure that our builders are comfortable that they're going to be able to start their sales program and have success because the last thing we want is to not have the right momentum with the first group of homesites. However, I can tell you that in the last probably 60 days we've had a lot of more engagements from builders, a lot of more interest from builders in Valencia. And I think that by the end of this year, hopefully we'll be able to share with you all some of these deals that would have been done. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- (Operator Instructions) We'll move on next to Alan Ratner who is with Zelman & Associates. -------------------------------------------------------------------------------- Alan S. Ratner, Zelman & Associates LLC - MD [16] -------------------------------------------------------------------------------- Glad to hear everyone is doing well on your end. Emile, just on that last point on Valencia, I just want to hopefully make sure I'm interpreting that right, because I believe last quarter you updated that you had about 250 standing finished lots still up to sell in Valencia and I think another 100, 150 or so that maybe were partially developed. So, is that what you're referring to that you've been talking to builders about lately and potentially could announce sale there before the end of the year or am I thinking about that wrong? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [17] -------------------------------------------------------------------------------- No, you're not. You're right. We had about 250 standing inventory and those are already in negotiations with builders in discussions. I also mentioned that there is a higher demand and therefore we're doing some land developments for additional homesites. And the expectation is that those will be all hopefully concluded either by the end of the year or shortly after the end of the year. As much as we are focusing on the year-end we also want to make sure that we don't force a closing at the year-end that might not give the right valuation or might create a situation that is not the right business decision. But I would tell you that I think that our goal right now, and every indication shows us that we're going to get there, is that we're going to get to somewhere between the 350 and 400 homesites. -------------------------------------------------------------------------------- Alan S. Ratner, Zelman & Associates LLC - MD [18] -------------------------------------------------------------------------------- Second question a little bit housekeeping. I think you made a comment that your development activity is resuming again. So from a cash flow perspective should we think about kind of the quarterly increase in inventory that you were seeing pre-COVID as a realistic guide going forward? I think it was roughly $70 million, $80 million or so a quarter is the run rate you were running at previously. -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [19] -------------------------------------------------------------------------------- I don't have the numbers in front me. And I hesitate to give it in terms of a burn rate just because, as you know, land development is not as consistent quarter-to-quarter in terms of spending. But I don't think you should expect the same amount that we were incurring as we were gearing up for the first phase of sales. The first 2 years of land development in Valencia was very -- a big heavy lift and was very costly. So I don't think it's going to be that much. But the answer to your question is we are starting to gear up for land development, productivity, additional homesites we're talking about. And as we see how the builders do, we will start thinking about how many more homesites we want to manufacture. But, yes, just on the margin note, yeah, Valencia is not the subdivision where you look at your dollars that you're going in are just simply going to develop homesites. We have a lot of major infrastructure that we are doing because -- to basically building the city and that will probably have less to do with how many homesites are going to be online and how many homesites are not going to be online. [There is] obligations we're going to do. But I don't think you should expect the same amount of burn rate. -------------------------------------------------------------------------------- Alan S. Ratner, Zelman & Associates LLC - MD [20] -------------------------------------------------------------------------------- I have 2 more quick ones, if I could. First on Great Park. Thank you for that timeline as far as the next trend of lot sales. Should we think about that also coinciding with when you guys would expect to receive your first distribution from the joint venture? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [21] -------------------------------------------------------------------------------- Well, I mean I think that the distribution -- there is a distribution that still is needed to satisfy the legacy. And then -- but we are expecting that there'll be enough sales of homesites next year and enough revenue to where we will start seeing distributions come to Five Point pass the point of satisfying the legacy, which put us in perspective. I mean that's a major statement to be able to say that over the last 3 years we've been able to satisfy the legacy distribution, which was about $500 million-plus. But our expectations right now, Alan, is that we will see a distribution from the Great Park next year and we will -- we're monitoring the rate of sales. And if the rate of sales keep on going as well as they are going that will decide -- that will determine when we go to market with the additional homesites because that's how we look at these things. We dovetail when a community is burning out to when a replacement comes in. -------------------------------------------------------------------------------- Alan S. Ratner, Zelman & Associates LLC - MD [22] -------------------------------------------------------------------------------- Understood. And finally, obviously you're incredibly connected from a political landscape throughout your markets of operation in California. So now with election day behind us, just curious if you can give us a little bit of an update on if anything has kind of changed locally on the political landscape that would affect your business one way or another across either Orange County, L.A. County or even up in San Francisco. -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [23] -------------------------------------------------------------------------------- Well, look, locally all of the results of the elections make us feel very comfortable that we're not going to see anything here that is going to mean anything different. The good news for us is we used to worry about these things much more a few years ago when we were in the entitlement process. As you know we've crossed that hurdle and we are entitled but we still have to deal with a lot of issues at the local level and we're very, very comfortable that our partnership with the City of Irvine, our partnership with L.A. County and our partnership with San Francisco is very much on solid ground. So at the local level, all the results are good results. None of them are results that are making us rethink anything. Obviously at the state level today California has even a more prominent position at the federal level with the Vice President and with the Speaker of the House, assuming nothing changes there. And we have great relationship with both sides of the aisle. And California becomes even much more of a focus as a result of the latest election we believe. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- Moving on, from Wells Fargo, we have Truman Patterson. -------------------------------------------------------------------------------- Truman Andrew Patterson, Wells Fargo Securities, LLC, Research Division - VP & Senior Analyst [25] -------------------------------------------------------------------------------- Last quarter you all discussed in the Great Park of being a fee builder, I believe, with kind of a partnership with new home to prove the market feasibility or some of the higher price points. Could you just give an update there? I believe it was supposed to start in 1Q, but just give an update there? And do you still see the need given the rebound in the market? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [26] -------------------------------------------------------------------------------- Well, look, I mean the -- first of all the new home company is under construction. They are moving forward. I don't have a report of sales yet, but they're moving forward. And I think even in their own earnings call they referenced that opportunity and how they view that as a very positive relationship. I just want to make sure that I didn't say something that might have been misunderstood. The relationship with the new home company wasn't because we couldn't sell something or because the market was weak. We basically said that there are certain products -- when you develop 15 to 20 different product lines, there might be 1 product that might be unique product and as you know, we design the products that might not be a product that is very comfortable for your big builders to build because it's much more of a mixed builder product. And as such, rather than changing the product and duplicating something that already exist, we will then go down the path of a fee build with somebody like a new home company, a company that actually has done very well in this type of niche building. So this is not because we couldn't sell the products or because the market is weak. It's just because we did not want to compromise the integrity of the product segmentation and mix by taking the product out that might not be as comfortable for a production builder to be embarking on. -------------------------------------------------------------------------------- Truman Andrew Patterson, Wells Fargo Securities, LLC, Research Division - VP & Senior Analyst [27] -------------------------------------------------------------------------------- Okay. Okay, fair enough. And then in Valencia, I believe the homebuilders were supposed to be grand opening in January, but I know a lot of times prior to the hard grand opening, we will have trailers and open up sales a few months ahead of time. Could you give an update there, how the homebuilder sales have trended in Valencia so far, if they've actually been kind of pre-selling out of trailers? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [28] -------------------------------------------------------------------------------- They have not. And the grand opening was scheduled to before March and right now we are on a parallel path of a physical grand opening as we are building right now parks and amenities and things like that to enable the builders and then enable ourselves to have the typical grand opening that we have, knowing that we probably will have still some limitations even in nights. So we're at least planning for something physical. But at the same time we we're running a parallel strategy of virtual grand opening and we are making a big investment to help our builders in terms of any virtual type of selling from our perspective to make sure that the builders have an ability to sell the potential buyers on the amenities and all the different things that they're going to get, which typically they see it physically. But the grand opening was always scheduled for March. Builders could start pre-selling and selling softly in January, but nobody has started selling. -------------------------------------------------------------------------------- Truman Andrew Patterson, Wells Fargo Securities, LLC, Research Division - VP & Senior Analyst [29] -------------------------------------------------------------------------------- Okay. Fair enough. And then I believe you put some numbers around Valencia. But I'm just hoping for a little bit of clarity as we look out over the next year or so, '21, what would you consider a successful year regarding lot sales that you can develop and close at both the Great Park and Valencia? -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [30] -------------------------------------------------------------------------------- Well, look, I mean -- I think we said last year when we started, we said if we can go out with the prescribed group of homesites of 500 and then follow with another probably 250 or so, for the first year 750 was going to be a good number for us, because that would have put us in a position to say we have enough product segmentation, enough activity, but not oversupply the market. We went from the 500 to 781 and we're talking about potentially another 300 to 400. So we obviously are exceeding what we thought we're going to do and we are doing it not because we need to or because we wanted to supply the market. It's really more driven by the demand from the builders and the -- and it's diversified builders. So that's what's driving us. So if you're asking me, I've always said in the first year or 2 or 3 even in Valencia, if we could do 1,000 a year, that would be a good start to ramp up to about 1,500. It looks like now that we're going to might be even more than that and that's very exciting for us, but it's not surprising because there is no supply. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- (Operator Instructions) We'll move on to [Scott Field with Bachmann]. -------------------------------------------------------------------------------- Unidentified Analyst, [32] -------------------------------------------------------------------------------- I was wondering if you guys calculate like a book value but market value base like the actual rough price of the building and so on, back of the envelope type of calculation. Or another way of asking, what do you think the share price range is that's fair value? You mentioned earlier in the call that clearly undervalued. -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [33] -------------------------------------------------------------------------------- Well, look we have a book value of about $2 billion and that translates to $14 a share and that's the book value that came about as a result of a combination of different entities that had very sophisticated investors in it in each of the assets. And because at the time that we did the combination before the IPO, we wanted to make sure that we don't trigger property tax free adjustments, because California had that unique situation, Newhall was deemed to be the acquirer in that combination. And Newhall had a very low historic book value because it was -- it came out of a restructuring and a Chapter 11. So we basically -- our view when we went public that although our stated book value is $14 per share, we believe that based on if we were to adjust Valencia up to market like the other assets were adjusted, we believed at that time that we could be more in the range of about $17 and $18. So that's what we said at that time. The book value, obviously hasn't changed and we still stand behind that. And if anything over the last 3 years based on home price appreciation, as well as value creation with all the things that we put in, as I mentioned before, we have our own belief that we are understated by a lot. Again, if you [have anything to] add to it, Erik? -------------------------------------------------------------------------------- Erik R. Higgins, Five Point Holdings, LLC - CFO, Treasurer & VP [34] -------------------------------------------------------------------------------- Just that I agree. Thank you. -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [35] -------------------------------------------------------------------------------- Well, we appreciate that. Thank you. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- It looks like we have no further questions in the queue. I'd like to turn the floor back to the management team just for any additional or closing remarks that they have. -------------------------------------------------------------------------------- Emile K. Haddad, Five Point Holdings, LLC - Chairman, President & CEO [37] -------------------------------------------------------------------------------- Well, just in conclusion thank you very much for dialing in. Hopefully by the time we have this call next time we will be able to report more on the activities in Valencia. And as I said, from where we sit, we look at 2021 as a great year. Hopefully, assuming that the backdrop in terms of the coronavirus is behind us, because we would be in deep in production and selling homes and moving families into Valencia, which is something that we've been waiting for many, many years. And in the meanwhile just stay healthy and thanks for your interest in the company and look forward to talking to you again. Thank you very much. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Folks, that does conclude our conference for today. We appreciate you dialing in. You may now disconnect.