Greetings, and welcome to the Five Point Holdings First Quarter 2019 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 condition, operations, cash flows, 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 actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could affect 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 included in Form 10-K filed with the SEC. Please note that Five Point assumes no obligation to update any forward-looking statements. I'd now like to turn it over to Mr. Bob Wetenhall, EVP of Capital Markets. Please go ahead, sir.

Welcome and good afternoon. For investors new to the 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. With me today are 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 the remainder of 2019. Erik will then review our liquidity position and leverage as well as our first quarter 2019 financial performance.

Thanks, Bob. 2019 started with a lot of momentum. In this first quarter, we've seen a healthy home buying environment at Great Park in Irvine. We also participated in the grand opening of Five Point Arena at the Anaheim Ducks Great Park ice facility. This $110 million community ice facility has four ice sheets in an approximately 280,000 square feet of first-class building that also serves the -- as the new training center for the Anaheim Ducks and is adjacent to the Great Park sports park. The Ducks ice facility and other sports fields and stadiums in the sports park are built to a professional-level quality that provide both players and parents a much enhanced experience. The sports park is estimated to attract over 1 million visitors every year who will frequent our lifestyle and entertainment village next to the sports park. This village is designed to include a hotel and lifestyle retail focused on food and beverage offerings, which we expect to greatly enhance the visitor experience at the Great Park and our surrounding neighborhoods. The Great Park is becoming a vibrant mixed-use community that offers a wide range of homes catering to people from different generations and economic abilities. Our state-of-the-art high school and 2 lower schools provide our residents the opportunity to enroll their children in one of the best public education systems in the country. And on May 18, the summer concert season starts at the 12,000-seat Five Point Amphitheater with Live Nation. We expect hundreds of thousands of people to enjoy performances by numerous top flight acts such as Brad Paisley, Zac Brown Band, Santana and Florida Georgia Line. With the recent approval by the city of an additional 1,056 homes, we are now approved for approximately 10,500 homes and 4.7 million square feet of…

Thanks, Emile. A summary of our financial results was included in the earnings release issued earlier this afternoon. Our financial performance in the first quarter reflects our continued investment in Valencia, land sales at the Great Park Neighborhoods and the impact of the previously announced termination of the retail joint venture at Candlestick. Consolidated revenues for the first quarter totaled $13 million and primarily reflect recognition of revenue generated from management services. Selling, general and administrative expenses were $25.8 million for the quarter. Equity in earnings from our two unconsolidated entities was $8.9 million for the quarter. We recognized $9.4 million in income due to our proportionate share of the Great Park Venture's net income of $37.1 million for the quarter after adjusting for the amortization and the accretion of the basis difference. Offsetting the income related to the Great Park Venture, our share of Gateway Commercial Venture's $750,000 loss was approximately $560,000 for the quarter. As previously reported in our 8-K filed in February, the retail joint venture at Candlestick was terminated, and we repaid the outstanding principal of $65.1 million and interest on the outstanding promissory note held by Macerich. As a result, we were released from our obligation to convey parcels of property on which the retail project was intended to be developed by the mall venture. We were also released from certain development obligations. In return, we recognized a gain of $64.9 million, representing the settlement of the contingent consideration liability previously carried in the related party liabilities line item on our balance sheet. Net income for the quarter was $52.7 million, of which $28.9 million was allocated to the noncontrolling interests, leaving $23.8 million attributable to the company. Moving on to the segment results. The Valencia segment is a -- is consolidated for accounting purposes.…

[Operator instructions] And we have our first question from Scott Schrier of Citi.

Good afternoon. So two months ago, on your call, it was a different environment in housing, particularly in California, yet you guys were optimistic. You saw really good activity in the Great Park. It seems we had a strong-margin California housing with a lot of builders reporting a nice ramp-up in their absorption pace, so I'm curious over the past few months how things have changed from your perspective, whether it was your conversation with some builders with respect to more interest that you're seeing, particularly as Valencia starts getting ready for land sales later in the year. So I just want to get a sense of the demand environment.

Yes, Scott. This is Emile. You're right. I mean the environment was a little bit different the last time we talked. And we were very optimistic mainly because, I think, we are in different markets. We have markets that have a high demand, very little supply. And I think the fundamentals themselves in our micro markets were unique. In terms of demand from the builders, we are seeing a very high level of interest. In Valencia we have not made any deals yet, but we are having discussions. And we're getting closer to having offers being made, but there's a very high level of interest. In terms of the Great Park, the activity from the builders have been really very -- they've been performing very well. Sales have been going up month-over-month. And as we said on in our comments, we're starting to see profit participation come from the builders in the first round of sales, which is very encouraging. So I would say that, since we talked the last time, the environment in our markets has only gotten better and the interest has gotten deeper.

Great. And then you also spoke last time and in your press release about the weather in Los Angeles County and how it's impacted things, but it seems like you're back on schedule. I'm curious if -- one, is there any implications from some of this weather, whether it's from a cost or a development cost perspective? And you're still on schedule to produce some lots later this year. Any indication as to magnitude or how we should think about the amount that could potentially come online or that will be coming online later this year?

Sure. In terms of costs, the answer is no. We have not seen any cost change. We have locked in our contracts and pricing for several, actually, phases, so we are very comfortable with our costs. We're -- as I said before, the team has really proven the expertise we have in managing these situations, and we are still on schedule. In terms of the number of deliveries, we said that we are looking for something north of 500, and I'm comfortable that we are going to be able to deliver over 500 homesites by the fourth quarter in this year.

[Operator instructions] We now have our next question from Paul Przybylski, Wells Fargo.

Switching gears here a little bit to the Candlestick. It's nice to see that the plan has been submitted. I guess, typically, how long does it take for the city to get back to you when something like this happens? And how many iterations does that typically go through before you get a final approval?

I'm sorry. Could you repeat the question? I couldn't hear the question.

Yes. On Candlestick, you've submitted your plan. How many times or iterations will that go through with the city before you receive a final approval, I guess?

Well, I mean there's a process we go through. This is not brand-new entitlements. We already have our entitlement, so this is just submitting a master plan for what we are doing in the first phase. And as I said, we're very comfortable that we're going to get our approvals this year. And we will have an ability to give you more visibility as to the timing and the products and all that as we get into 2020.

Okay. And going back to Newhall. Do you have an amount that you have invested so far for Mission Village? And how much more you would expect to invest to get the super pad finished.

I don't have the number. Maybe Erik can look up a bracket of how much money we've spent, but I can give you a feel for what's transpired so far. Our grading operation is completed. Our mass grading is completed. We are putting now pipes in the ground and infrastructure and getting close to starting our street improvements. So the bulk of the costs in terms of grading is already spent. And we are right now in a phase of infrastructure, but I will see if we can get you some numbers in terms of how many dollars we've spent so far. Yes. I think -- yes. So to answer the question before: I think we're -- probably somewhere between $350 million and $400 million have been spent already. I'm sorry. Go ahead, operator.

We do have another question from Thomas Maguire of Zelman & Associates.

Just on Great Park, really strong results here. And great to see all the investment and work on the lifestyle side coming together, but I just wanted to touch on the cash flow there for a second. Are there any thoughts on when we could see distributions to Five Point or updates on how we can think about cash flow to the company there?

Yes. We are still maintaining the same position in terms of distributions to Five Point by next year. The legacy priority capital should be satisfied by the early part of next year, and we should start seeing distributions in 2020 to Five Point.

Got it. Awesome. And then just on the new homesite approvals at Great Park, can you talk a little bit more about those, just maybe the density, if there are any planned sale of land before and any other details on just the incremental homes?

No. I mean we -- the approval is for 1,056 homes. We have the land to plot it on. And our decision on densities and products will be driven by market demand. And those are -- as I said before, we still have 4,600 homesites to go. So those will be going into the bucket of the total number. And we will decide what the segmentation of products will be based on, as I said, what the market is looking for.

We have another question from the Nishu Sood of Deutsche Bank. Please go ahead.

Hi, it's actually Tim Daley on for Nishu. So now that the contingent consideration liability for Candlestick is officially off the books with the conclusion of the Macerich agreement. Just curious as, was this I guess, the kind of conclusion of this agreement something that the -- the kind of new plan approvals was waiting for? Like did you need to I guess fully end this Macerich deal before the City would start looking at these approvals? Or you would submit them? Or just if you could help us understand a bit of the kind of back and forth with the planning there?

Sure. Well, the answer is, yes. We had to wait to come to a conclusion on the Macerich agreement because the area that we are actually going to be starting our first phase in Candlestick is actually the area where the outlet model was supposed to be. And we had to wait until we came to the conclusion, we came to in terms of the unwinding of the agreement before we can move forward. We started actually in anticipation of potentially unwinding that agreement. We started the planning of the new phase and that's why we were able to move very quickly and submit to the City and get a jump-start, but the answer is, yes. We couldn't do anything until we came to that conclusion with that.

All right. Thanks for that, Emile. And then I guess the next question is for Erik. Can you help us understand a bit of the -- a bit more detail from the Class C interest in the San Francisco Venture. Maybe kind of when the timings of these payouts will occur and I guess kind of the general magnitude. Obviously, you mentioned the $25 million, but just the total -- I guess total revenue that could come from that -- I guess the assets that are generating this income there?

So the source of repayment of the redemption of the $25 million Class C units is the CFD proceeds. And so in order for that to happen, you need to have homes out in San Francisco. So as the homes are developed and bonds are sold then ultimately the property taxes from those new homes service the bonds. So as bond proceeds come in, 50% of the proceeds will go to redeem these Class C units until all of the units are redeemed. So 50% of $50 million of proceeds would be the $25 million necessary to redeem the Class C units. And so that'll happen well into the future after we have development and homes on site.

All right, thanks for that. And then just one more is -- if you guys could just help us understand a bit more on the SG&A expense that should expect for the year? Was the $25 million or so that was-- that was put up this quarter. Is that a good run rate quarterly for the rest of the year? Or should we expect kind of any movement up or down in that number? And thanks again for the time.

No, that's a pretty good run rate.

Great, thank you.

[Operator instructions] We will now take our next question comes from the line of Mike Eisen of RBC Capital Markets. Please go ahead.

Good afternoon. Thank you guys for taking the questions. Just want to start off on the land sale in the Great Park. If I look at what the value was per acre on that land and compare to what you sold last year, there's some solid price appreciation higher than we were expecting. I just wanted to get a sense, if you could, how that compares to what you're seeing in the surrounding market and really what's driving such strong value of the land there.

Thanks, Mike. Yes, it is higher than we were talking about before. And we believe that with -- and what we are seeing today in the data is that, with all of the amenities being built and completed now, whether it's schools, sports bar, sports facilities, entertainment and what will be coming in terms of health care, people are starting to see the value. And we're starting to see that translate into a premium, and that's what I was talking about when I talked about the incremental value. And I think it's actually flowing through to the price per acre because builders are being able to see that premium in their sales numbers.

And do you have any sense of what land sales in the surrounding area are appreciating at? Is it comparable, or are you guys exceeding the market or growing in line with the market? How should we think about that?

Yes, it's very difficult because, as you know, in the Irvine market there are only two developers, the Irvine Company and ourselves. And the Irvine Company is not selling land or not disclosing at least sales. They're doing a lot of fee building and a lot of building themselves with their homebuilding arm. So I don't have that data point. I know that -- and that's one of the benefits we have, in that our neighbor is very conscious about getting the right value per acre. And that helps us a lot, but no, I don't have anything to compare. All I can tell you is that we're seeing our home sales prices start to really achieve a higher rate than some areas around us.

Understood and appreciate that. And if I can just sneak in one more just housekeeping on the San Francisco process that's going on. When I think of the new plans that are being approved, can you help us frame this in an acreage basis or the magnitude of the plan that was submitted relative to the overall land that you guys will ultimately be developing?

Yes. I mean, the first phase, I can try to see if, while I'm describing the first phase, we can get you an acreage on that. I know Kofi is on the line. He might have that number in a second. But what we did with the first phase is we created the first phase that has the balance between housing, office and lifestyle retail so we can actually start proving up the concept that we are envisioning for that area. So we have 1,600 homes; 750,000 square feet of office; and 300,000 square feet of lifestyle entertainment, mainly food and beverage. And we believe that, if somebody is looking for a office space in San Francisco with housing and lifestyle, this will be a good-size opportunity for somebody to look at. And we keep on hearing from people who are interested in that. I don't have that acreage. If you want, I can have Bob follow up with you and give you that acreage once we get it. I don't want to quote a number that's not accurate.

Thank you. It appears there are no further questions at this time. Mr. Wetenhall, I would now like to turn the conference back to you for any additional or closing remarks. Please go ahead, sir.

Thanks, everybody. We look forward to chatting with everyone during the next conference call. Have a great afternoon.

Thank you.

Ladies and gentlemen, the conference is now over. Thank you for your participation. You may now disconnect.