Emile Haddad - Chief Executive Officer Erik Higgins - Chief Financial Officer Mike Alvarado - Chief Legal Officer Kofi Bonner - Co-Chief Operating Officer Lynn Jochim - Co-Chief Operating Officer Bob Wetenhall - EVP of Capital Markets

Greetings! And welcome to the Five Point Holdings, Fourth Quarter and Full Year 2018 Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. Today’s conference call may include forward-looking statements regarding Five Point’s business, financial conditions, operations, cash flow, strategies 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 actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to the risks and uncertainties. Many factors could affect the future results and may cause Five Point’s actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. 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 filed with the SEC. Please note that Five Point assumes no obligation to update any forward-looking statements. With that, I’d like to turn it over to Bob Wetenhall, EVP of Capital Markets.

Welcome and good afternoon. For investors new to this story, I want to highlight that Five Point is an owner and developer of large mixed use communities in California. Our communities are planned for more than 40,000 residential homes and 23 million square feet of commercial space in Los Angeles, San Francisco and Orange County. I'm joined this afternoon by CEO, Emile Haddad; CFO, Erik Higgins; Chief Legal Officer, Mike Alvarado; and our Co-COOs, Kofi Bonner and Lynn Jochim. I’m now going to hand it off to Emile who will provide an overview of recent developments in our communities, as well as expectations for 2019. Eric will then review our liquidity position and leverage, as well as our fourth quarter and full year 2018 financial performance.

Thank you, Bob. Good afternoon and thanks for joining us. 2018 was the foundational year in the execution of our long term strategy of developing large scale mixed use communities in major metropolitan areas in California. Our vision of building places where people can live, work, play, learn and connect is now a reality. Let me illustrate by giving you an update on where we are in each of our communities. At the Great Park we continue to see consistent home buying activity as reported by our guest builds. In the first quarter of this year we sold 41 acres for approximately $218 million, which is planned for seven products ranging from 1,500 to 4,200 square feet. This range of products provides a wide range of opportunities for buyers with a mix of incomes, generations and cultures. Some of these land sales will have phased takedowns which maximizes the value per acre. To-date we have approximately 3,200 families living at the Great Park, 775,000 square feet of occupied office and tax base at Five Point gateway, a high school, two schools, kindergarten through eighth grade, a completed sports complex which is twice the size of Disney Land, 75 acres a passive park and the 12,000 seat FivePoint Amphitheater. Last week our partnership with the Anaheim Ducks celebrated a grand opening of a 280,000 square foot ice facility. This state-of-the-art venue is comprised of four ice rinks which will be home to U.S. figure skating, where the Five Point arena will host national and international competitions. The Great Park is living up to its name. It's an amenity for our residents and provides economic benefits to our commercial uses and to the rest of the region. At Newhall in Los Angeles, land development is ongoing and despite an unusually wet year,…

Thanks Emile. A summary of our financial results was included in the earnings release issued earlier this afternoon. Our financial performance in the fourth quarter, as well as our 2018 annual results reflects our continued investment in our communities. As a reminder, our Newhall and San Francisco communities are wholly owned and thus consolidate on our financial statements, while the Great Park Venture and the Gateway Commercial Venture are unconsolidated entities that are accounted for using the equity method of accounting. I’ll first discuss our consolidated results for the quarter before providing a summary of our annual consolidated results, as well as annual results for each of the operating segments. Starting with year-end liquidity. As of December 31, 2018 total liquidity of $619.7 million was comprised of cash and cash equivalents totaling $495.7 million and borrowing availability of $124 million under our $125 million unsecured revolving credit facility. Most importantly, we are well positioned to continue investing in our communities and have enough capital to implement our plan of being able to have our first land sales at Newhall later this year. Total capital was $1.8 billion, reflecting $2.9 billion in assets and $1.1 billion in liabilities. Finally debt to total capitalization of 24.6% was essentially unchanged from the end of the prior quarter. Consolidated revenues for the first quarter totaled $7.9 million and primarily reflect recognition of revenue generated from management services. Our adoption of new revenue accounting guidance on January 1, 2018 has resulted in accelerated recognition of revenue from valuable incentive compensation in our development management agreement with the Great Park Venture. Equity and loss from our unconsolidated entities was $3.5 million for the quarter. $2.3 million of the loss was due to our proportionate share of the Great Park Ventures net loss during the quarter of…

[Operator Instructions]. Our first question comes from a line of Alan Ratner with Zelman & Associates. Please proceed with your question.

Hey guys, good afternoon. Thanks for taking my questions. First question, just a quick housekeeping one; SG&A dropped quite a bit this quarter, $15 million had been running 25 to 30. Is there anything unusual for this quarter or is this a good run rate to think about going forward?

Hey Alan, how are you, this is Emile. I’ll let Erik give you a little bit more color, but I think that you can look at it as a run rate, because some of it was due to the fact that some of the incentive program for management didn't hit its maximum target, because we incentivize people based on goals and targets and some of these targets did not get to hit them. Therefore we didn’t end up with the maximum value result, right.

So Alan, so on SG&A you know Emile is right. It’s hard to – you know we are not going to have a consistent run rate just because our communities are in a different stage of development, and our SG&A is not just people and associates, it also includes a lot of other expenses. Basically anything that we don't capitalize to inventory it’s this line. So it includes marketing expenses, professional fees, consulting services and so forth. So the decrease year-over-year was primarily related as Emile mentioned to long term stock compensation expense being reduced because of the awards that were granted in 2017, as well as a decrease in the amount of legal expenses that we capitalized as we get through to litigation at Newhall. So that's the primary difference for the reduction.

Okay, great, that was helpful. I figured that was the case, but helpful to hear it. Second question, you know I was hoping maybe you could just give a little bit more color on the process of the land sale at Great Park. I believe you had mentioned you know previously you were expecting that to occur in the fourth quarter. It looks like that got pushed a little bit and you know you're providing some terms to the builders. So I was curious, is that just a function of the tighter environment. You know a lot of builders have mentioned you have to be more cautious on underwriting and maybe just talk about the bidding process in general. Thank you.

Yeah, I mean I think those are two separate questions. One is the timing of when the sales happened and the other one is the terms that we ended up with. And in terms of the timing, it's not a surprise to you Alan that a lot of the builders wanted to have the closing happen not by year end and the good news for us is we have the luxury to accommodate the builders and make sure that you know nobody feels pressure to close before they can close. So the pushing of the timing of the closing was really an accommodation to the builders who wanted to see the closing happen after year end. In terms of the terms, look right now our focus is on maximizing the value we receive per acre and when we look at the value we got from at least one builder who wanted to have a two takedown versus one take, we felt that the return on the investment for us in terms of allowing that to happen was a very attractive one and if it works for our builder and work for us, we review that as a win-win. Let me just give you a feel, because I think it's an important point to make because we keep on talking about absolute dollars. Our range of value in the last sale we did was $4.4 million to $6.6 million per acre based on the different product lines and that's what average buy. Today we are at $4.2 million to $7.5 million an acre. So some of what you are seeing in terms of the increase in value per acre is obviously derived from terms, but a lot of it comes from the fact that we are starting to see premium for people to live in this community because of all the amenities that have been built, as well as market movement as well.

Thank you for that Emile and if I could sneak one last one in, how many builders were in this round of a lot sales at Great Park.

The closing occurs right now. I had two builders, but you know we expect to have other builders as we go through a complete round of sales.

Okay, thanks guys.

Our next question comes from the line of Stephen East with Wells Fargo. Please proceed with your question.

Thank you. This is actually Paul Przybylski on for Stephen. Staying on the topic of you know The Great Park take on, how should we think about you know impacting the income statement in ‘19 on a quarterly basis and then does that you know stretch out any future expected sales that you were anticipating in ‘19 or push those into ‘20.

Look, I think that in terms of sales we are going to time the sales based on the velocity of the absorption and making sure that we maintain the right balance of supply versus demand. So far everything seems to be working according to previous projections, but at the same time if we find ourselves with the sales that might not be optimum for builders and we would like to push it a week or two or even a quarter, we're going to do that to make sure that we don't compromise the overall integrity of the master plan. So you know we don’t spend to look at these things in terms of fixed days of deliveries. We will look at them as to when we can optimize value and making sure that all builders are building – are buying in ways that are going to allow them to also not just on own financial. So that's in terms of the timing of delivery. So we really are not in a good, basically looking at this as full numbers for that I mean.

Okay. Okay and then for the, you know the lot sale at Newhall later this year, any color you can provide on you know maybe expected revenue, number of lots, margin, ASP, what’s your plans right now?

No, I think it’s really premature to talk about margins and drive-in’s and all that. I think you know what so far I can tell you we have now engaged the builders for a second time and we are talking to our – some of our guest builders at the Great Park who have been great performers and there's a great amount of interest from the building community, and being in Newhall, as you know LA doesn't have a lot of supply. Actually it doesn't have any supply and it has a huge amount of demand. So it's been building up that pent up demand as a result of the imbalance. In terms of number of home sites delivered, look, we still are in the rainy season and as much as we have been able to maintain our schedule, I don't want to go ahead and jinx things, but I think that – my expectation is that we will deliver probably somewhere north of 500 homes, home sites I mean.

Okay, thank you. I appreciate it.

Our next question comes from the line of the Mike Eisen with RBC Capital Markets. Please proceed with your question.

Good afternoon. Thanks you guys for talking the questions. Just wanted to start off following up on that prior comment of the 500 homicides potentially from Newhall. Can you talk to with all the development activity that's going on, what the acreage of land that you think can realistically be ready to be passed over to builders either in the next 12 to probably 24 months?

I can give you that number if you give me a second, somebody here will help me with that. I can – I don’t have it in front of me, but just bear with me and we’ll get you that acreage that we are expected to develop. Although it is flux because as I said it all depends on how quickly we get to it, but I can tell you how many acres we are developing in total right now if you are interested in that. Okay just, if you have another question, go to it. I’ll get back to give you the acreage after we look it up.

Sure, and then you made the comment that in Great Park you know the pace of land sales for ‘19 is going to be dependent on the takedowns and absorptions for your builder partners and just touring some other communities in the region, there’s definitely been a slow down over the last six months or so. So can you talk to kind of what are the trend you are seeing from buyers in the taste of your home builder partners in the Great Park area and how that’s trended year-to-date.

Sure. First of all, let me make sure I clarify what I said. The takedowns are – we have one builder that’s requested two takes. So this is not a rolling option takedown where they have the ability to meet the takedown based their absorption. What I meant is absorption, is I meant we monitor the rate of sales of the building and make sure that when we bring and new community online, it dovetails well in terms of one committee setting out and another one coming on line, so we don't have a lot of overlap. So this is not – the builder is having an ability to be there when they take down. In terms of activity, yes, we have seen really a very consistent performance in terms of home buying. We're very cognizant of a lot of the you know what we are hearing about the market in general in the United States and so the other markets in California, but honestly we haven't seen it. We had one of our best sales months at our active community to their cadence at the Great Park in February; it was one of our best months. So we haven't seen it. We see the numbers every week in terms of sales; we know what the builders profitability looks like and so far it looks like the Great Park is performing in a very consistent way to previous sales. You have that number? We got that. So the total number of acreage that we could be delivering to builders, let’s call it somewhere around 40 to 45 acres. That's what I am shooting for and obviously I'm hoping that if we can keep on doing what we've been doing, we can actually deliver more acreage than that.

Got it. Those are both very helpful comments, and then one more if can sneak it in, maybe it's for Eric. Eric when you think of the liquidity position, when you talk to that you guys would be self-sufficient through the first sale in 2019 from Newhall. If that sale were to be pushed out, how long do you think you guys can develop with your current liquidity before needing to find extra funds before land sale?

Yes, so we’ll have plenty of liquidity. I mean we obviously plan for those types of things. The bulk of our expenditures are discretionary and so if we feel as if those land sales are going to be pushed out, we can manage our spend accordingly. But at this point we don't see any, have any really issues with liquidity to get to those land sales, whether they you know at the end of the year or delayed.

Let me let me add to that, because that's a very important question and it’s probably a critical to do business we’re in. We monitor the market constantly; you know we are talking to builders constantly. We will know very quickly what the appetite of the builders is and where their mind is in terms of year end closing. Two-thirds of our expenditures, that's valuable costs. We have an ability to shut down that cost with a 30 day notice. At Newhall the grading, most of the grading is done, the mass grading is done. So now we are into the infrastructure phase and let's assume that we figure out that maybe the appetite is not there for 500, maybe it’s 300. We will know way ahead of time of committing to that expenditure, and we will make sure that the dollars that go in will be exactly the amount of dollars we need to put in that give us comfort that we are going to generate the revenues out of it. So this is not an auto pilot business by any stretch of imagination. We are monitoring all of that and we will not commit to spec infrastructure, you know hoping that would be able to get the revenues and that's key to how we run the business.

Understood. Thanks for all the information.

Our next question comes from the line of Scott Schrier with Citi. Please proceed with your question.

Hi, good afternoon and thanks for taking my question. I wanted to ask a little more about Newhall in San Francisco and I know in Newhall you said it's too early to start talking about margins for those land sales. But I’m curious what you are seeing from, in terms of appetite and demand, whether you might see some pressure on land prices versus you know where you thought things were shaping up a year ago and if there’s any changes, you know obviously a lot of builders are searching to put more affordable product in the ground. Is there any pressure or willingness from builders that are kind of change up plans a little bit to potentially reduce the ASP of the homes that they're going to build in the communities.

Well, so let me – first of all we control the product and the product segmentation. Right now our first phase of delivery could be anywhere between you know seven to 15 different products segmented very carefully. So, we will have a very wide range of product offerings for builders to look at. If we feel like there's more of an interest in a certain size product, then we will lead with that. The answer to the first part of your question is, no, we haven't seen any push back from the builders. As a matter of fact we’ve seen a very high level of interest from builders just because there's nothing else in LA and a lot of the builders had to shut down their operation in Los Angeles and start operating. If they have one or two communities up in that market they would operate in the market of either Orange County or [inaudible] and there is a great amount of interest from builders to have a presence over there in operation and one of the things that we have an ability to do is talk to them about the strategic relationship, that's a long term relationship where they know they are going to be able to be able to get land for the next you know decade plus, and as a result can make commitments to the market place both in terms of talking to trades as well as having local market experts. Both those issues helped the G&A and the cost structure of the builders and therefore it aligns our interest with them. So your question is a good one, but I want you to thing that we're not selling land one time and therefore going to sit down with the build and builder says, you know this is all I can pay you. We're sitting down with the builder saying, we can provide you with a pipeline of land for a long time and here's how we work together as partners to make sure that you execute on your business and we execute on ours and we have proven that at the Great Park. Today if you look at our value that we sold at the Great Park, its higher than the value we sold more than a year ago, despite all the market you know statements that are being made. So we believe that it is fundamental to our business to have that partnership with the building community and we expect to take it all up to Newhall and expand them.

Got it, thanks for that Emile, that was great color. I just wanted to follow up and ask a little on the commercial side of things. Obviously you spoke about you know your 8K and your decision with respect to the mall with Matrix. More broadly speaking, when you look at your commercial opportunities and you spoke about certain office opportunity, how much flexibility do you have in terms of changing the plans and if you've seen any more noticeable trends over the past six to 12 months that changed the way you think about the commercial space in any way.

Yeah, I mean I think that we said before that the advantage we have is we have a great amount of flexibility to move the uses around. Probably the best example is actually San Francisco where we had a mall that was designed with apartments, with condominiums, with an entertainment center, all in one design and was approved in one configuration. Then as a result of a lot of the discussions we had with Macerich, we went back and revised the plan and we were able to capitalize on that flexibility to get the plan revised and go through the city's approval, and here we are doing it again on a third time. So we have the ability both from an entitlement point of view to move uses around, but more importantly from a relationship point of view. We have the ability to have discussions with our public partners on the city size, to talk about why we want to make sure that the uses are more in line with current demands. As to the second part of your question, the answer is yes, and that's why we have spent a lot of time evaluating an outlet mall versus not and we decided that where we see the trends today is more shifting to office space in San Francisco. But as I said in my remarks, the challenge with office space in San Francisco is that providing housing for employees and schooling, and open space and parks are not available, and that by the way is consistent in every city where people seem to want to relocate office space. What we believe we are doing over here is we are providing in the first phase an ability to deliver to somebody 750,000 square feet in one phase if needed, 1,600 homes, lifestyle entertainment, connectivity to the city both my road, by rail and by water taxi and provide a very unique opportunity for somebody to come and build the campus. That's really what we see as the golden opportunity for us here and that's why we decided to pursue this time.

Great, thanks a lot, that’s great color. Thank you and good luck.

Our next question comes from a line of Stephen Kim with Evercore; please proceed with your question.

Hey, this is actually Trey on for Steve. Thanks for the time. I want to start with talking about the former ratio to plan. So first, is there any financial penalty between you and Macerich that need you to pay them and they need to pay you on this result of moving away from having the mall in a shipyard.

Well no, no, there's no penalty. We disclosed all of that in the 8k, it’s already done. Macerich had the $65 million investment and that was made more than four years ago. We give them back the $65 million plus $6 million, so they got $71 million and that was the amount we gave back to them to unwind and take back 50% interest and that's the end of it. So from our perspective there's nothing else here and everybody’s moving forward.

Got it, and the former plan with the mall and the town homes and condos attached to it, in this new foot print that you are designing and you are taking to San Francisco, is there a change in the number of apartments or home sites in that plan compared to the previously approved plan?

No, there isn't in the total. I mean what I was talking about here in terms of this, the makeup of the users is the first phase that we are moving forward. Obviously Candlestick has you know much more than what I talked about in terms of all these different uses. This is just the first phase which takes basically the footprint of Macerich and expands a little bit to include a couple of other areas and that's what become the first phase. So think about this as the first phase of Candlestick, which is a placement to the outlet mall which is going to have this mixture of users.

Okay, and then lastly, should we expect there to be any home sites delivered in Candlestick this year or are we looking at 2020 when those will first start to roll through?

No, you should not expect any deliveries this year. I think what you should expect is we finally now have made a commitment to a plan that we are going to be moving forward with. That plan is already in process with the city and we are right now saying that we will have it approved by the end of the year, which then will inform us as to the timing of moving forward to the development in 2020 and beyond.

Okay, thanks very much Emile. I appreciate it.

Sure.

Our next question comes from a line of Nishu Sood with Deutsche Bank. Please proceed with your question.

Hi, this is actually Tim Daley on for Nishu. So I guess my first question, Erik you mentioned that you all had adopted new accounting standards at the beginning of the year and we've heard from various builders that their adoption of ACS 606 has driven some lumpiness in the timing of SG&A and gross profit recognition, particularly those that are doing a lot more heavy development activity or opening a lot of communities in the I guess beginning of the year. So given the long duration and larger side of your size of your development projects, obviously recognizing you are not the one building the real model, but opening to the few communities themselves. But should we be expecting any sort of changes in how costs and expenses are recognized under this new accounting standard compared to pre-adoption I guess.

No, I don't think so. I mean the big impact for our company was recognition of revenue related to management services that we provide to the Great Park Venture and so as part of implementing the new revenue standard, we recognize you know revenue in advance of the actual collections and so you'll see the revenue on our P&L and then you'll see a large contract asset in our related party asset line item. That’s been a real impact of the new revenue standard for us.

Alright, that’s helpful and then I guess kind of more in a high level basis, we've heard that from some builders and developers that they are starting to see a bit more labor inflation creeping into those trades, particularly in grading and earth works, seeing a bit more inflation on the labor side of things. So just curious, are you seeing that in your project across the kind of labor that's doing the development and I guess if you could help us out with a rate of increase if you have that, that will be helpful?

Sure, well the answer is no. and our operation as I said in the past is much more relying on equipment than labor. However, what I was saying in my opening remarks about our scale in our communities and our long standing relationship with contractors really has allowed us to lock in on prices and give contractors a very long term contract and therefore protect ourselves and provide jobs. Today if you go to the Newhall, we have over a 150 pieces of equipment that are moving dirt over there. That’s a totally different position to negotiate from with your contractors than if you’re doing a grading job for 100 or 200 home sites where you have two scrapers working. So that is probably true for some people who are doing smaller sized development, who are – you know it’s on a contact by contact. That’s not our position we are in, because our relationship with our trade is more of a long term partnership relationship and it benefits both.

That’s helpful detail, and then just one more quick one. It seems from your commentary that demand for commercial space in San Francisco continues to be pretty strong. So just curious as to what did you see the market achieve in terms of price per square foot growth in the San Francisco market this year?

You mean on the commercial or residential?

On the commercial side, thanks.

Yeah, we are not yet in the space in terms of activity of leasing or selling. So I don't want to be speculating on that. We are very much focused right now on the first part of your statement, which is the amount of demand that we are seeing and the challenges that people who are looking for that space are facing in terms of as I said the housing for their employees and other things that are essential to making sure that they have a full package for that employee. So our focus has been more on the demand and how do we actually provide the right supply for that demand, and be able to provide it in a way that is much more complete than just simply building office space in downtown San Francisco, but we haven't gotten to the numbers yet.

Alright. Well, thank you. I appreciate the time.

Sure.

[Operator Instructions]. Our next question comes from the line of Michael Rehaut with J.P. Morgan. Please proceed with your question.

Hi, this is Elad Hillman on for Mike. I just wanted to dig in a little more on Candlestick, recognizing that still early. Is there any indication for how we should think about the capital requirements and new plan or would you think they could be higher, lower, roughly similar to the capital requirements compared to the old plan. And in a similar vein, is there potential for you to find a new partner Candlestick. Is this something you're actively looking for or do you feel like the new plan will get executed fully in house.

Well, the only thing that you should think about in terms of capital needs is what is needed this year to get the approvals. Before we pull the trigger and move forward with developments, we would be evaluating the capitalization of these uses and all of the opportunities out on the table. So whether we decide to go with a partner or multiple partners based on the asset classes or whether there could be an interest from somebody who would like to have it built to suit because of the nature of what we are doing. But those are discussions and those are decisions that we will make out of the end of the year once we are much closer to the approval and we have something actually to go and talk to people about that. But all of these are options that are on the table for us to evaluate and make decisions on.

Okay, thank you. And lastly, have you received any update in terms of the retesting plans, shipping over the shipyard? Any retesting plans update on the navy or indication of when the land could potentially be delivered.

No, we haven't received any indication from the navy, any updates from the navy. I mean nothing has changed, but again I want to make sure that I keep on underscoring the same point. Our take down from the navy is going to be when the navy is ready and everybody signs off and there's no more ambiguity as to whether there is a part of it that’s cleaned up to a certain standard or not. So we don't own that land. It’s still in the ownership of the navy and we would make sure that before we take it down, that all the issues that are in question have been answered completely. In the meanwhile, even if we were to take the land today, our focus has shifted to Candlestick and expect for this coming several years to be talking about Candlestick regardless about the weekend or cannot take pieces of land down at the shipyard. Our focus for the next several years is going to be on Candlestick.

Got it. Thank you.

Ladies and gentlemen, we have reached the end of the question-and-answer session and this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Thank you.