Greetings, and welcome to the Five Point Holdings Second Quarter 2024 Conference Call. As a reminder, this call is being recorded. Today's call may include forward-looking statements regarding Five Point’s business, financial condition, operations, cash flow, strategy, and prospect. Forward-looking statements represent Five Point’s estimates on dates 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 factor section of Five Point’s 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. Now, I would like to turn the call over to Dan Hedigan, Chief Executive Officer.

Thank you, Paul. Good afternoon, and thank you for joining our call. Just a little announcement for you. I am recovering from a cold, so my voice is going to sound a little bit different. And hopefully it doesn't flare up in the middle of the call. But I just want to let you all know that. I have with me today Kim Tobler, our Chief Financial Officer; Mike Alvarado, our Chief Operating Officer and Chief Legal Officer; and Leo Kij, our Senior Vice President of Finance and Reporting. Stuart Miller, our Executive Chairman, is joining us remotely. On today's call, I'll update you on our Q2 results, on our team's focus during the quarter, and the steps we're taking to implement our strategic priorities. Next, I've asked Mike Alvarado to overview Five Point’s experience managing and participating in our joint venture at the Great Park, given the meaningful improvement and execution of the venture over the past two years. We believe this experience represents a proxy for potential opportunities to grow as we look towards the future in our existing master plan communities and beyond. Last, Kim will give an overview of the company's financial performance and condition with some limited guidance for the third quarter in the full year. We'll then open the line for questions to our management team. So let's begin. I'm very pleased to report a strong quarterly performance as we continue to focus on fortifying our balance sheet by generating revenue, controlling our expenses, and carefully managing our capital spend to match near-term revenues. In the second quarter, we generated net income of $38.2 million, which reflects the continued strength of builder demand for residential land. In this quarter, most of our performance is driven by execution in our Great Park community as evidenced…

Thanks, Dan. In the past, you have heard us talk about the life cycle of our three communities and where each one of them stands in terms of its development status. The Great Park is clearly the most mature of our communities in terms of development and revenue generation and is proving year after year the value creation within this community. What is more interesting about the Great Park, however, is its organizational and operational structure that we believe has resulted in excellent performance. The Great Park is the one master plan community asset in which we own a minority capital interest and operate under a joint venture management structure. We operate and manage the Great Park venture alongside our other capital partners with whom we engage on a weekly basis in order to maximize value and returns and to provide a built-in system of accountability. Our partners provide their own unique perspectives on a variety of matters when dealing with developments of this scale and together with aligned interests, we have executed our plan with continuously improved bottom line performance. We believe this is a structural advantage to our existing business model. As I mentioned, at the Great Park, we own an equity interest, but we also provide management services to the venture, and we earn an incentive promoted interest for excellent performance. We are paid for our management services through a stipulated management fee that allows us to recover our costs for delivering these services, plus that incentive compensation component [indiscernible] that has delivered significant revenue to and earnings for the company. We believe this structure and equity interests coupled with a management services component is one that can be repeated in the future, not only within our existing -- our other existing communities, but also in future…

Thank you, Mike. Let me give you a little more background on our operating results. For the second quarter of 2024, we reported consolidated net income of $38.2 million, which was generated primarily from $47.2 million of revenue from incentive management compensation and $15.5 million of equity and earnings from our investment in the Great Park Venture. As Dan noted, the Great Park Venture's income for the quarter was largely generated by the sale of 105 home sites on 12.3 acres of land with a sale price of $96.1 million and a profit margin of 70% before closing costs. We will note that the profit margin improved from last quarter's 60%. This sale comes out to $7.8 million per acre. The venture also recognized $6.4 million of profit participation revenue related to prior year land sales and $36.6 million of price participation revenue associated with last May's land sale of 798 home sites which is now the Luna Park community. I'll have more to say about that additional price participation revenue later in my comments. Turning back to Five Point’s consolidated results. For the first six months of the year, we have recognized net income of $44.3 million. Our first half results included $61.1 million of total revenue and equity and earnings from the Great Park Venture of $33.1 million. Consistent with our continued focus on managing our costs, our second quarter SG&A expense was $2.2 million compared to the prior year second quarter of $12.7 million and $12.9 million in the first quarter of this year. Now let me turn to liquidity and cash. We ended the quarter with $217.4 million of cash as well as $125 million of availability on our revolving credit facility, resulting in total liquidity of $342.4 million. At the end of the quarter, our…

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Alan Ratner with Zelman & Associates. Please proceed with your question.

Hey, guys. Good afternoon. Congrats on the continued progress. Great to see and thank you for all the additional color this quarter. Very helpful given all the moving pieces. My first question, I just want to make sure I understand the management service revenue this quarter, and I think you explained it well. But am I right to think of this quarter's revenue as more of kind of a gross up and going forward, assuming there's no major changes in your estimates from this point that the quarterly run rate would look more similar to kind of what it's been over the last several years, kind of in that $10 million per quarter range, or is this kind of resetting a higher bar and we should think about, for modeling purposes, a higher number going forward?

Yeah. Thanks, Alan. Always good to hear from you. Let me ask Kim to answer that question. Make sure we get it from the authority.

Yeah, Alan, you identified. It's a catch-up because of the additional projected income that we're expecting. And so there's a catch-up, but it'll go back to a more regular flow as you mentioned.

Got it. Okay. That's helpful. All right. Two more questions from me if I can. Number one, Dan, you mentioned some of the issues you're facing with fire insurance in the state and changing, I guess, a little bit the plans related to the product you're bringing forth. You mentioned Valencia, so I wasn't sure if that applies to Great Park as well. But I guess my question is if the plans, at least in the near term, are going to be skewed more towards detached product, which is what I think you said, does that change the density opportunity within the community? Meaning, are we now -- should we think about a smaller number of home sites over the length of the community if you're skewing more towards detached?

Well, Alan, those are actually very good questions. First, really not seeing any fire insurance issues in the Great Park just because of where it's at and how it's situated. In Valencia, because of its new development and it's on the edge of some open space areas, it does -- there is an issue, I shouldn't say there's an issue, there's fire insurance available but the premiums have increased. So working with the builders, what they have found in the attached projects, the higher HOA dues make that home and attached home uncompetitive from a cost perspective. So we're still moving with density, but they're using high density [indiscernible], duplexes, get separate insurance so they can still use duplexes. So what we really have gone away from is the kind of 10 unit, 11 unit high density buildings. Those are good for the market because they allowed us to have a lower price point for people to get entry into the market. So it's a segment that we actually liked and we do expect the state to sort out what's happening on prior insurance and we'll be able to go back to that type of product. Once again, it's really that entry-level product that we do think is important to the market. As far as we have so much land and so much time still there, our units really can move around. So I think we'll -- we would at this point still anticipate we'd have very similar unit counts because we think this is a temporary issue. But once again, the current market condition, the HOA dues are really material. So that's really why we've kind of -- the builders have come to us and said, we still want the land, we can still pay the same amount for land, but we do need to make some adjustments to products, so we've just been very proactive in getting ahead of that issue, but I think that long term, it fixes itself and we probably end up with similar unit counts. But one of the -- yeah.

No, that's really helpful, Dan, I appreciate that. And then, sorry, were you going to say something else there?

No, I was going to say, it doesn't really -- it hasn't really had an impact on any of our valuations on land. We still obviously, we think about it in units, but we're always selling land, and I'm going to use all the same land, and it hasn't had an impact on valuation at all. So it's really just about having a broader segmentation in the market, which we really like to have.

Got it. This wasn't my other question, but I guess just to follow up on that then, if you're kind of eliminating that entry-level price point, and maybe you can say what that was, now what is kind of, at least the way you see it in the near term, your kind of entry-level price point given this shift? Like, how much has it gone up by?

Well, with some of the density that we were able to get in detached and also with duplexes, we probably -- when we opened up the community a couple years ago and a lot of things happened a couple years ago, we were able to deliver high density detached product under $500,000 a home. That was naturally moving up through the pandemic and through cost increases and things of that nature. But I would say what we probably have done is probably moved from that high fives, low 6, more like high 6, low 7, as far as entry level. But that's hopefully a temporary situation and we'll be able to bring back -- in our future communities, we still have real opportunities for more density and more variability in the product, so we hope to be able to bring that back. But I would tell you now, if you're thinking about it, it's probably somewhere around the mid 6s.

Got it, okay, that's helpful. All right, I've taken a lot of time here, so I'll pass it on and get back in the queue. Appreciate it.

Thanks, Alan.

Thank you. Our next question is from Matt Jackson with Mycor Capital. Please proceed with your question.

Hey guys, thanks for taking the question. Just two quick ones and congratulations on the progress on Candlestick. Just curious, did you also mention that you would look to do a similar structure for Valencia and kind of move that to being more of a joint venture? And then I guess on both of those projects, like, how should we think about that? Are you just going to look for a partner -- like a partnership there, or is there going to be some capital that could come into the business to help you guys? Obviously you have this expensive debt still outstanding. Just kind of curious, like, how you think all the moving parts will shake out maybe a year in the future and what you ultimately hope the company looks like?

Well, Matt, thank you for that question. First on both of those communities, Candlestick and Valencia, we were working from a entitlement first strategy. We think that before we look at partners or additional capital joining us, we need to deliver on the entitlement. And so both of those are our highest priorities for both of those communities. And so Valencia's got a longer runway to get to that additional entitlement that we're working on. As I noted, Candlestick and City and County of San Francisco are -- we're all working hand in hand to move that towards completion. And we've had a number of folks reach out to us in the past. So there's not any one particular structure we're looking at. And once again, it's going to be making sure that we do whatever is best and creates the most value for our shareholders. So we haven't tried to land on a structure. As Mike indicated, we do have a model that has worked very well for us here at the Great Park. So that's probably how we lean, but as part of it, it's going to be seeing who we end up working with in that area. So -- and from a pure structure perspective, the idea would be to attract a partnership that would include capital coming into the company.

Great, that's super helpful. And then, I guess just more on a housekeeping item. Actually, looks like sometimes you've reported the home sites at Valencia and other times not, haven't been following the name that long. Just curious, does that imply no home sites were sold at Valencia this quarter, am I correct?

This quarter we didn't close any sales at Valencia. Any land sales to builders you're talking about, is that correct?

Yeah, yeah, land sales to builders.

Yeah, we did not close any land sales to builders this quarter at Valencia. The sales we have queued up there, the ones we're talking about, will all close in the fourth quarter.

Okay, great. Great. Awesome. Thanks guys and good luck.

Thank you. Our next question is from Kyle Chung, private investor. Please continue with your question.

Hi. I actually have kind of a big picture question if I can. Dan, I think, you and your team for the past 2.5 years, you guys have done a great job of highlighting the valuable assets that are in this company. You've lowered SG&A, you've pushed out the debt maturity, you've done all these things and you're selling to commercial, residential and all these things. And despite all that, your stock is trading at $3 a share, the public investors just don't seem to care. So my question is that, what's the benefit to staying public? I mean, why, I mean, I guess another way to it is, why not launch a formal process to see if there are private investors who will value these assets as something that's closer to book value than what the public investors are doing?

Well, Kyle, thank you for the question. I'll kind of just start with one of the things you should always know is that our Board of Directors is always very engaged, and if there are opportunities, as you mentioned, that would come towards us, our Board would certainly take a look at those opportunities. And once again, we're always about trying to support our shareholders. But one of the things that we do understand is that we don't really get to set the price in the market. And you're right, we're trying to -- there's a lot of good things going on here, and we're hopeful that the market will, at some point, recognize some of those things. We're really focused on -- we've been focused on the G&A and cash and capital outweigh. And so, we think that will sometime, hopefully in the market, be recognized, but going back to your original question, we are always open to considering all options. It's just what presents itself to us.

Well, I guess, a different way to ask that question is I think what I'm hearing you say is that you are waiting for like an inbound inquiry. And I mean, there's a -- you're doing all the right things, you're pulling all the right levers and the public investors don't seem to care. And you also, being a public company, you incur costs along with that. And there doesn't seem to be any strategic reason to have a small low stock trading in the public market. Why not formally launch a process, put a -- let the private investors out there know that the company is exploring options?

Well, the team we have here on the phone today, we really focus day to day on running the business, but I can just assure you our Board has considered all options and we're not waiting necessarily for inbound offers. The Board has and continues to consider all options that are available to them.

Okay, I understand. Thank you.

Thank you. Our next question is from [Robert Cohen] (ph), private investor. Please proceed with your question.

Yeah, hi. My first question relates to the 75% owned gateway commercial venture. I just wanted to clarify one thing on that venture. I believe a few years ago, they said that that venture owns 50 acres next to your office building. Is that correct? And if so, are you planning on selling those acres at some point?

So, Robert, I might have Kim talk about that, but understand what that really is, is there's a campus here, and part of those acres are looking at as part of an REA, it's a parking lot, it's the other aspects of the overall campus. But let Mike actually -- Mike can probably speak to that. He's been here longer when the building was built and purchased.

Yeah, this campus was originally sold to Broadcom. It was 70 acres where they were going to build a 2 million square foot campus. In 2017, we acquired the campus back and [ended that] (ph) venture, that venture in which we owned the 75% interest. So the campus has really been envisioned as an R&D and now of course the City of Hope R&D plus, cancer/medical uses. So the acreage is really living on the campus, ready for future commercial development.

Okay, so at some point you could be selling that?

Yes, absolutely.

75% owned, that could be quite valuable.

Yeah, and now keep in mind that we already sold two other buildings to a triple net investor that Broadcom is their tenant. And then we sold, of course, another building to City of Hope. So three of the four buildings are owned by other parties at this point.

Okay. And my next question relates to the value of the land in Valencia. So I know, obviously, the land in the Great Parks has appreciated quite rapidly over the past year. I was wondering if you could comment on how much, if any, the land in Valencia has increased in value over the past year.

Well, Robert, one of the things that we've been working on in Valencia, just like we've been working on here at the Great Park, is really trying to work with our builders to be sure that we're developing and identifying the highest value land for that property. And I think we're, once again, with Great Park in a much more mature, one of our master plans, we've been able to really make some big changes quickly, both kind of market and product-driven changes. In Valencia, we're doing the same thing, and we actually have seen land values increasing in Valencia, but not to the same level as Great Park and I think part of the processes there, there are certain fixed pieces that we can't change we have to stay with and we're now in Great Park we're fully into the areas where we can change all the pieces, haven't been able to achieve that. We haven't gotten to that point, I should say. We haven't got to that point in Valencia, but we expect to achieve it. But Irvine is always going to be a little bit of a unique market. But we are seeing appreciation, And we're going to continue to work with the builders to find ways to create higher value for that land.

Okay. And my last question relates to your largest shareholder, Lennar. I don't know if you can answer this question. But they're moving to an asset-light model. And I was just wondering if you know how Five Point fits into their plans? Will they be transferring, I believe, their 40% stake into a planned spin-off or will they be selling the stake? Do you have any knowledge about what they'll be doing?

Robert, we do not.

Okay, I wasn't sure. I know there's a lot of, I know they've been going back and forth in their communications about their plans, but so you have no input on -- you have no knowledge of what's going to be taking place. Okay. I appreciate. Those are my only questions. Thank you.

Thank you. Our next question is from [Andrew Ocon] (ph), private investor. Please proceed with your question.

Hi. Thank you very much for taking my question. My question is associated with Candlestick, and I read in the news recently that it appears that you guys are setting up to do approximately 7,000 residential units, and the rest would be office and lab space. And I'm wondering, is that mix -- is that what the mix is going to be? Because obviously, office and lab seem like a pretty difficult market right now. Thank you very much.

So, Andrew, Candlestick and Hunters Point were designed as kind of a comprehensive community with a -- with kind of a preset amount of commercial square footage and within that commercial square footage are certain uses that are allowed in a preset number of residential units. And the -- all that we're doing right now, what we've been working with the city and county on because of the delays at Hunters Point, we needed flexibility because we -- early on before they anticipated delays, there was a strategy of how you would balance between the two because you'd build them both concurrently. Well, what happened with the delay is that we can't build them both concurrently. So we really are working with them. When we talk about the rebalancing, it really gives us flexibility to be able to meet the market. And if the market is more residential oriented, it'll be more residential. If it's more commercial, it'll be more commercial. But the type of commercial we're looking at there is really R&D. It isn't commercial office. It's something that needs different floor plates and needs labs and different uses. There's a whole different market segment out there than what the traditional commercial office that you would think of. But, the idea -- we don't have a set plan for our next development. What we're really doing is working with the city to say, let us have an opportunity to work where the market is strongest but we need flexibility to do that. And this is where the city and county understand that. We still, long term, only have one basket of entitlement. But now we're going to be able to use it more flexibly to really meet the market. So we're going to build what the market tells us creates the best value out there.

Okay, so are you saying that your residential units will be capped at what the combined was previously entitled before when you guys were going to build together?

Yeah, once again, we're not trying to add or subtract anything out there. It really is to kind of keep the master plan in place and just have flexibility to move them around. So once again, your question though, once again, Candlestick is a long development process. That's not to say that, pick your favorite timeframe that we couldn't go back and ask the city for more residential, there'll be opportunities to adjust that, but there's nothing today that tells us we need to adjust what was approved. It's really about flexibility, how and where we use it.

Okay. Thank you very much.

Thank you. Our next question is from [Myron Kaplan] (ph), private investor. Please proceed with your question.

Yeah, hi, guys. Thanks for taking questions. I just have one, this is just a technical thing. In the first paragraph of today's release, you say that the Great Park Venture distributions totaled $29.7 million. And then when I go to the next page where there's equity and earnings from unconsolidated entities, first on that paragraph, it says that the share of net income was $15.5 million. And if I turn the page, then you have a contribution of $23.4 million for the [indiscernible] 37.5% interest. So how can there be three different numbers?

First of all, Myron, it's good to hear you again today. This is Kim. And what you want to note is that there are distributions that are being received. So one of the numbers is the cash that we're receiving. The other is our share of the earnings. And they'll be quarter-to-date numbers. And they'll be year-to-date numbers. And so you need to line those up so you know which one you're looking at.

So what was the cash contribution from Great Park Venture to Five Point in the second quarter?

In the second quarter?

Yeah.

The cash distribution was $23.4 million. And the equity and earnings was $15.5 million. So $15.5 million was our share of their earnings, and $23.4 million is the amount of cash they gave us.

Okay. Thank you.

And then for the six months, Myron, we had equity in earnings of $33.1 million and we received cash of $47.3 million.

Right. Okay, well, that's good. It's certainly welcome.

Very welcome.

And I'm glad to see that you're stepping up. I think you're trying to step up your throttle or, let's say, push the pedal down on Valencia which you've been -- pretty much been running on about three cylinders for a long time. It's such a vast project and you would think that there's opportunities to do a lot more volume if you can get these villages entitled.

We agree.

Well, can I ask you why you haven't done it before?

As you said, it's the pace at which we can get the entitlements through the county of Los Angeles. That's what our limiting factor is.

I see. And this sale that you're talking about that's going to take place where there's a contract in the fourth quarter, is that the piece that's -- that 35-acre mixed-use parcel that you had that was near the county line?

Yes.

So that's going to become mostly residential or commercial?

It's going to be traditional SFD for sale.

I’m sorry?

It’s going to be traditional housing, single family detached housing.

Very good. I mean, it's terrific. I mean, it's all good. Yeah. I mean -- so I guess basically we just have to snooze till the end of the year and then you'll have a great outcome, and the company's going to be on an even more secure basis.

I assure you, this team will not be snoozing till year end. We're going to be working hard.

No, you're like cowboys. You've got to whip the steers so you get them to keep moving. But at the end of the day, when it gets dark, you'll be in the town and they'll be in a corral and you'll have the money in the bank. That's about it.

Thanks, Myron.

You're doing pretty well. I think you're doing things, it looks like things are going quite well for the company. I guess we stockholders ought to be, we ought to be pleased even though the market -- the retail investor doesn't care.

Well, thank you.

Yeah.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Dan Hedigan for any closing comments.

Well, thank you everyone. On behalf of our management team, we thank you for joining us on today's call. And we look forward to speaking with you next quarter.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.