Five Point Holdings, LLC (NYSE: FPH)

Five Point Holdings, LLC is an owner and developer of mixed use planned communities in California. The company’s primary operations involve acquiring land obtaining all necessary governmental entitlements performing horizontal infrastructure improvements and selling the resulting residential and commercial lots to builders and end users. Its three master planned communities are located in Los Angeles County San Francisco County and Orange County and together they offer the potential for tens of thousands of homesites and millions of square feet of future office retail and hospitality space. Valencia spans roughly 15000 acres in the Santa Clarita Valley and is planned for up to 21000 homesites and about 9.3 million square feet of commercial uses. The Candlestick and The San Francisco Shipyard combination covers approximately 800 acres of bayfront property in San Francisco and is envisioned to provide up to 12000 homesites and roughly 6.3 million square feet of commercial space. Great Park Neighborhoods occupies about 2100 acres on the former El Toro Air base in Irvine and is designed to accommodate up to 11800 homesites and approximately 4.1 million square feet of commercial area. Each community proceeds through phases of planning entitlement infrastructure development and lot sales allowing the firm to match capital outlays with market demand.

Revenue is generated primarily from the sale of residential and commercial land parcels to homebuilders and commercial developers through development management fees earned for overseeing infrastructure work in joint venture communities and through asset management fees received for administering land banking programs on behalf of institutional investors. In land sales the firm typically receives a base price plus a share of the builder’s profits through participation agreements that align incentives. Development management fees are calculated as a percentage of project costs and are paid by the venture partners for services such as scheduling budgeting and coordination with municipal agencies. Asset management fees are charged on the gross value of assets under management and may be supplemented by performance fees when investor return thresholds are met. Although the company does not currently hold any income producing real estate it may elect to retain certain commercial or multi family properties to generate recurring rental income in the future.

The company operates through the following segments: Valencia San Francisco Great Park and Hearthstone.

• Valencia segment encompasses a mixed use planned community in Los Angeles County covering approximately 15000 acres with potential for up to 21000 homesites and approximately 9.3 million square feet of commercial space activities include obtaining subdivision maps approval of improvement plans and final maps performing grading installing roads sewer water power and telecom utilities landscaping parks and trails and selling graded lots to homebuilders who then construct single family residences and to commercial developers who build office retail and hotel structures.

• San Francisco segment comprises the Candlestick and The San Francisco Shipyard bayfront property in San Francisco totaling about 800 acres with potential for up to 12000 homesites and approximately 6.3 million square feet of commercial space activities involve securing environmental clearances preparing subdivision maps constructing storm drain water sewer power and telecom infrastructure building streets sidewalks and curbs and selling land parcels to residential builders for multifamily and single family housing and to commercial developers for research and development office and hotel uses.

• Great Park segment covers the Great Park Neighborhoods former El Toro Air base site in Irvine California spanning roughly 2100 acres with potential for up to 11800 homesites and approximately 4.1 million square feet of commercial space activities consist of entitlement processing horizontal development including roadway grading utility installation storm drain construction and park improvements followed by the sale of residential lots to homebuilders and commercial parcels to developers seeking office industrial and research and development space.

• Hearthstone segment operates a residential asset management platform that provides capital solutions to the US homebuilding industry through land banking it manages funds that acquire fully entitled residential parcels enters into option agreements with homebuilders and earns asset management fees based on assets under management and performance fees when investor return hurdles are surpassed the platform works with capital partners such as state employee pension plans and private equity firms and sources opportunities from large publicly traded homebuilders across multiple states.

The company holds a notable position among developers of large scale mixed use projects in California where land availability is limited and demand for housing office and retail space remains strong. Its competitive advantages stem from the considerable size and scope of its Valencia San Francisco and Great Park communities which provide a platform for phased development over many years the presence of recreational cultural and educational amenities within or near each project the existence of established commercial centers that serve residents and workers longstanding relationships with major homebuilders that facilitate lot sales proximity to major metropolitan areas and transportation corridors experienced leadership with expertise in securing governmental approvals and managing complex joint ventures flexibility in adjusting the timing and scale of land development expenditures according to market cycles and a conservative capital structure that enables sustained investment without excessive leverage.

The company sells land to homebuilders and commercial developers who build the finished homes and buildings that are ultimately occupied by individual households renters and retail customers. Development management services are provided to joint venture partners that include affiliates of Lennar and GFFP as well as other institutional investors who share in the upside of community build out. Asset management fees are earned from land banking funds that are backed by state employee pension plans sovereign wealth entities and private equity firms seeking stable returns through diversified lot option programs. The end users of the developed properties consist of families purchasing primary residences tenants leasing apartments and shoppers visiting stores restaurants and service establishments located within the finished communities.