Greetings, and welcome to the Five Point Holdings, LLC Second Quarter 2023 Conference Call. As a reminder, this call is being recorded. Today's conference may include forward-looking statements regarding Five Point's business, financial condition, operations, cash flow, strategy, and prospects. Forward-looking statements represent Five Point's estimates on the date of this conference call and are not intended to give any assurance as to actual or 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 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. Good afternoon, everyone, and thank you for joining our call. I have with me today Leo Kij, our Interim Chief Financial Officer; Mike Alvarado, our Chief Legal Officer; and Kim Tobler, our Vice President, Treasurer and Tax. Stuart Miller, our Executive Chairman, is joining us remotely. I'm pleased to update you today on the progress of the company through the second quarter of 2023. I will also update you on our team's focus during the quarter and the steps we are taking to implement our strategic priorities in 2023. Next, Leo will give an overview of the company's financial performance and conditions. We'll then open the line for questions for our management team. Let me begin by telling you we have made considerable progress since I last spoke to you in advancing our business, and to that end, we have continued focusing on controlling our business and executing on our three main priorities: generating revenue and other positive cash events; managing and right-sizing our SG&A; and managing and limiting our capital spend and matching those expenditures as much as possible to revenue events. As a result, we ended the quarter with consolidated net income of $50.6 million as compared to a net loss of $9.7 million for the first quarter. Our balance sheet reflects $193.2 million of cash on hand versus $106.6 million at the end of the first quarter, with $0 drawn on our $125 million revolver, giving us liquidity of $318.2 million today versus $231.6 million last quarter, and improving our debt to cap ratio to 24.7% versus 25.2% last quarter. We also have no principal debt repayment obligations on our senior notes this year or next. These results reflect the team's efforts and focus on our priorities. At the beginning of the year, we provided guidance that for the first half of the year, we expect a negative cash flow of $24 million to $56 million. In fact, for the first half of the year, we generated positive cash flow of $61.4 million, fortifying our balance sheet and positioning Five Point for future success. Along with significant improvement in revenue and cash flow, we've been able to hold our SG&A in check, with SG&A of $12.7 million this quarter versus $13.8 million last quarter and $26.5 million for the first six months of 2023 versus $29.4 million for the first six months of 2022. With respect to managing our capital spend, for the first six months, we spent $46.8 million before recoveries and capitalized interest as compared to our guidance at the beginning of the year of $45 million to $55 million and compared to $63.1 million for the first six months of 2022. We are clearly controlling our business. In many ways, our strong financial results are due to a combination of focused management as well as a constructive economic environment. From an economic perspective, the challenges from interest rate increases and the banking crisis from earlier in the year began to dissipate during the second quarter. And the housing market began to stabilize as homebuyers adjusted to and accepted higher interest rates. Interest rate fluctuations have moderated, and we're seeing more measured rate movements that allow the market to adjust in an orderly fashion. Of particular note, we see our home inventory remains very low, increasing interest in and demand for new homes. While affordability continues to be a challenge, housing continues to be in short supply in our California markets and there is still demand for well-located homes and master plan communities. On the commercial land side of our business, we're seeing strong interest in our unique commercial land offerings at the Great Park and Valencia. We continue to have low vacancy rates in the industrial market in our communities. We expect we'll continue to drive demand in this preferred asset class, notwithstanding the adjustments that capital markets have made in the commercial market segment. I'll now provide some updates on each of our communities. The open builder neighborhoods at the Great Park continue to sell homes with strong increases in sales in the first half of this year compared to the second half of 2022. During the second quarter, builders in our Great Park community sold 177 homes. Solis Park, which is a primary community with multiple active offerings, had its first model complex open in July 2022 and currently has only 200 homes remaining to sell out of the original 849 homes. As we discussed last quarter, we're seeing strong homebuilder interest in acquiring home sites at Great Park. On our prior call, I mentioned that we were actively engaged in the process of selling the remaining 81 home sites in the Rise community and 770 home sites in our next community District 5 South. That transaction closed in May of this year, and the Great Park Venture recognized $357.8 million of revenue. Also in the second quarter, the Great Park Venture received $61 million of CFD proceeds as reimbursement for public improvements that the venture had completed or paid for. With this pace of new home sales, we are continuing to see strong builder interest in acquiring new home sites at Great Park. During the quarter, we entered escrow for the sale of another 82 homes, which we anticipate closing by year-end. We're also negotiating to sell another 104 home sites, with the close anticipated in early 2024. On top of the ongoing residential opportunities at Great Park, we continue to market and sell our commercial land, including the industrial land offerings that we brought to market in August last year as well as other commercial-oriented uses. While not the most optimal time to enter the market, our location in the heart of Orange County supports strong interest. Our commercial parcels are unique, our limited resource and offer the South Orange County market something that has not been available for years: large parcels of entitled land with flexible zoning that allows a multitude of uses, including industrial, distribution, life sciences, R&D, and office, among others. To that end, we anticipate closing sales on approximately 40 acres either by the end of this year or early next year. After these residential and commercial sales, the Great Park Venture will have about 295 acres remaining. Depending on the pace of sales, we would expect to be through the remaining inventory at Great Park in five to eight years. In Valencia, new home sales by builders totaled 79 homes during the second quarter. As of mid-July, 1,100 homes from our initial offering of 1,268 homes have been sold with only 168 homes remaining. Builders have now opened the models in two of the eight new neighborhoods in the next area of Valencia, which encompasses 598 homes. Like Irvine, builders are again engaged with us in Valencia, and we entered into one new land sale contract during the quarter, anticipating finalizing another, both of which we expect will close during the third quarter. We also anticipate signing a third land sale contract that we believe will close by year-end. We also continue to market a prime 35-acre commercial site in the community. We expect to have more to report on that later in the year. While we didn't have land sales in Valencia in the first half of the year, instead planning for sales to close in the second half of the year, we're still able to execute on some significant reimbursements and recoveries. If you recall, we reported a $17.7 million CFD reimbursement in the first quarter. Additionally, in the second quarter, we collected a $44.5 million recovery from a third party arising out of prior work performed on its project. From an accounting perspective, these amounts that have been offset against our inventory costs will ultimately increase our gross margin of Valencia sales. As you've heard me state in the past, San Francisco remains a priority for Five Point, and we are progressing our efforts to establish Candlestick as a standalone project, separate from, but complementary to, the ultimate development at the Hunters Point shipyard site when it has completed its remediation by the Navy. These efforts include working with the city and county agencies to rebalance the current development entitlements between the two areas. I am concurrently working with the city to update the existing tax increment financing timelines to account for the Navy delays at Hunters Point. I believe that we are building momentum on resolving these issues, which will allow us to unlock the standalone development of Candlestick, as the first phase of this larger mixed-use community, located on irreplaceable land along the San Francisco Bay. As we look ahead, we're starting to build confidence and certainty in our expectations for future accomplishments. Although our business is often dependent on government approvals and accomplishments can be pushed from one quarter to another, we are building visibility in the future quarters and years. To that end, we expect in the second half of 2023 to be able to produce an additional $50 million to $70 million of net income and generate additional cash flow as well, ending the year with a cash balance of $250 million to $300 million. While some of these results can be pushed quarter-to-quarter or to next year, we're focused on generating revenue, managing SG&A, and managing our capital spend. We have positive momentum and remain optimistic about our future. Land development is a long game, and we are just at the beginning of the game at some of our communities, but they are not making any more land and there will never be an abundance of entitled land in California. Our efforts today are ensuring we are well-positioned for that long game while recognizing the importance of focus on creating and maintaining shareholder value. Now, let me turn it over to Leo, who will report on the financial results.

Thanks, Dan. A summary of our financial results was included in the earnings release issued earlier today, in which we reported consolidated net income of $50.6 million for the quarter. We recognized $21.3 million in revenue that was primarily generated by management services provided by our management company. Selling, general, and administrative expenses were $12.7 million, which is consistent with the average of $12.9 million that we have reported over the past four quarters. Cost of management services was $9.7 million, which includes $8 million for intangible asset amortization expense at our Great Park segment. Equity and earnings from our unconsolidated entities for the quarter was $52.1 million and primarily represents our interest in net income generated at the Great Park Venture. Turning to the balance sheet and liquidity. Our net decrease in inventory for the quarter was $5.7 million. This includes a decrease for a non-recurring $44.5 million recovery from a third party related to certain project development costs at our Valencia segment and includes an increase for accrued capitalized interest on our senior notes of $12.3 million. Excluding the recovery and capitalized interest, the resulting increase in inventory of $26.5 million was consistent with prior quarters and 13% lower than the prior year increase of $30.6 million. In addition to $700,000 of interest, we paid $2.5 million against our San Francisco segment's related party reimbursement obligation during the quarter. Approximately $8.4 million of this reimbursement obligation that was previously expected to be paid in the second quarter has been deferred to 2024. Our related party has a history of receiving maturity date extensions, and we expect additional deferrals during the second half of 2023. Total liquidity was $318.2 million at quarter-end and is comprised of $193.2 million of cash and cash equivalents, and $125 million of available borrowing capacity under our revolving credit facility. No borrowings or letters of credit were outstanding against the revolver as of June 30. In addition, no principal payments are currently due on our senior notes, nor are any payments currently due on our payable pursuant to our tax receivable agreement. Our debt to total capitalization ratio was stable at 24.7%, and our net debt to capitalization ratio after taking into account our cash balance was 18.5%. Turning to our statement of operations. The company has four reporting segments: Valencia, San Francisco, Great Park, and Commercial. Segment results are as follows: The Valencia segment recognized a $4.5 million loss for the quarter. As no sales were closed, most of this loss was comprised of selling, general, and administrative expenses of $3.4 million related to employee compensation as well as selling and marketing expenses in support of our active development areas and the pursuit of 2023 land sales. The San Francisco segment recognized a loss of $885,000 for the quarter. This loss is comprised of general and administrative costs incurred to support the segment's continued focus on rebalancing the current entitlements between Candlestick and Hunters Point shipyard sites, as well as working with the city to update the existing tax increment financing timelines. Our Great Park segment reported net income of $179.1 million for the quarter. This was comprised of net income of $168.2 million for the venture's operations and $10.9 million in net income generated by our management company. The venture's operations recognized revenue of $360.6 million during the quarter. Most of this revenue is comprised of $357.8 million recognized from the sale of 798 home sites on approximately 84 acres of land adjacent to the venture's Solis and Rise neighborhoods. The venture's land sale agreement was comprised of a fixed amount paid at closing and a price participation rate to be paid from future homebuilder sales. Accordingly, the revenue recognized consists of $214.7 million paid at closing plus $143 million for recognition of a contract asset, representing the venture's estimate of variable consideration from future price participation payments. The venture recognizes contract revenue upon satisfaction of contract performance obligations and records contract assets when there is a timing difference between recognition of revenue and the variable consideration becoming due. After completing the land sale, the Great Park Venture made aggregate distributions of $25.5 million to holders of legacy interest and $218 million to holders of percentage interest. We received $81.8 million for our 37.5% interest. Offsetting these revenues were cost of sales of $165.7 million, SG&A of $1.8 million, and related party management fee expense of $27.4 million. Management fee expense is comprised of $3 million of monthly base fee payments and a $24.4 million increase in accrued incentive compensation, mostly resulting from a change in estimate of aggregate payments probable of being made as the venture makes future distributions. As it relates to the management company, Five Point recognized $20.7 million in management fee revenues during the quarter, $3 million of which was from monthly base fee payments and a $17.7 million increase in its incentive compensation contract asset, most of which is related to changes in estimated incentive compensation payments expected to be received as future distributions are made from the venture. Offsetting these revenues were expenses of $9.7 million, comprised of $1.7 million for the cost of providing management services, primarily the project team compensation, as well as $8 million of our development management agreement intangible asset amortization expense, resulting from incentive compensation revenue recognized in the quarter. Concurrent with the venture's distributions paid to its holders of legacy and percent interest, we collected $22 million in incentive compensation payments due under our development management agreement. We own 37.5% interest in the Great Park Venture and 100% of the management company. Although the Great Park segment reports the full interest of the Great Park Venture, our investment is reported under the equity method of accounting, and therefore, the assets, liabilities, results of operations, and cash flows are not consolidated within our financial statements. The company's equity and earnings from the Great Park Venture after adjusting for a basis difference was $52.3 million for the quarter. The Great Park Venture is a self-funding operation with no debt and had a cash balance of $140.9 million at the end of the quarter. Lastly, our Commercial segment venture is a self-funding operation and had a cash balance of $5.1 million at the end of the quarter. Like the Great Park Venture, we only own 75% of the Great Park Commercial Venture. Our investment in the venture is reported under the equity method of accounting, and therefore, the assets, liabilities, cash flows, and results of operations of the venture are not consolidated within our financial statements. With that, I'll turn it over to the operator for questions.

At this time, we will begin a question-and-answer session. Our first question comes from Alan Ratner with Zelman & Associates. Please go ahead with your question.

Hey, guys. Good afternoon. Congrats on the success in the quarter, and thanks for all the detail and guidance so far. Dan, I'd love to drill in a little bit on pricing power that you might have with homebuilders right now. Obviously, the land market has really shifted quite a bit over the last year. It was pretty quiet in the back half of last year, and now it seems like builders have returned pretty aggressively. And I know it's always a little bit hard to tell just from your reported results exactly what's going on with lot prices. I look at your lot sale in Great Park this quarter, and on a per-acre basis, it looks like the price you guys got was a bit lower than what you've received in prior offerings. But I'm sure there's some mix component to that. And you got the Valencia deals under contract. So, any commentary and color you can give on what's going on with lot prices in your communities would be helpful. And also, any guidance you can give on specifically the Valencia sales would be great as well.

Hello, Alan. It's always a pleasure to hear from you. I understood the first part regarding lot prices. What was your last question about Valencia?

I know you mentioned you have two deals under contract right now. Can you provide specifics about that and what we might expect in the second half of the year?

Okay. Well, first of all, just starting on all of our land, remember that we're using a price participation with all of our builders. And as prices go up, obviously, the revenue we receive is also going to be increasing. And so, as far as what market we're seeing today, Alan, you're absolutely right, there is a lot of interest in land, which is driving up the price of land. But I think part of that where we're also trying to work with the builders to really maximize value is really trying to work with the builders on product. As we've all talked about, there's really a constraint in the market on resale homes. So there is a stronger interest in new homes. But we also have to worry about affordability. So, what we're finding is that being able to work with the builders one-on-one, work with them on product and plotting is allowing us to actually increase our land prices, and it's really kind of unique around product and builders. But on all of our transactions, we are getting participation. And the larger transaction that you referenced, there is a participation component in that, and if that participation comes through, the per-acre land price there will be comparable to other similar products at the Great Park. So, what we've seen in the market and the fact that it will be producing revenue over the next couple of years or participation over the next couple of years, we think there's a real good opportunity to see additional revenue from that transaction. And as far as Valencia goes, there's a couple of sales we have there. In some respects, we have some fixed pieces at all of our communities from the standpoint of past development. So, we're working with a couple of builders up there on products that we think are very saleable in the current market, and I have other negotiations going on. So, I don't necessarily want to get into how I'm valuing different sites. It's kind of hard to negotiate these things in public. But what we're finding is that the more we can work with builders to come up with products that address the market segments that have demand, it really is helping us generate stronger land revenue.

Got it. That's all really helpful, Dan. And I guess just I want to make sure I'm thinking about it correctly. I think you had previously mentioned that the next phase in Valencia was roughly 600 home sites, I think, eight communities. So, I'm assuming that's kind of the summation of these three deals that you're referencing? Or am I mixing things up?

So, the next area that we talked about has eight communities, and your memory is very good, it is about 600 homes. Those sites were all sold to the builders at the end of 2021. So, we've had other land that actually was ready to go. And with all the homes that were selling in the first phase, which was close to 1,200 homes, we hadn't brought those to the market because of segmentation. But now as that first phase is winding down, we're taking other land that we had prepared already, and we're moving forward with individual transactions that fit well from a segmentation perspective. Those 600 homes, they will be coming on the market over the remainder of the year, but we find that there are segments we can address with other land we already have ready. And those are the two transactions we're talking about. Then we have some other opportunities on land that is actually ready to go. We're spending a lot of time on those because we're really looking at product. I really want to ensure that we're thoughtful about product as we move forward and maintain good segmentation.

I see. Okay. Thank you for that clarification. And if I could just squeeze in one more. The CFD reimbursements or the, I guess, the development reimbursement, that's been a nice surprise. I'm not sure if it's a surprise for you, but a surprise for us. About $60 million year-to-date. And I know you referred to them as non-recurring, but I'm just curious if, as you look out into the future, you could give us any visibility on the prospect of getting more reimbursement over the next couple of years?

Well, in the context of our CFDs, absolutely. We talked about Valencia as a one-time recovery there. But all of our CFDs, for the most part, our public improvements should be heavily funded by CFDs, both at the Great Park and in Valencia. As we complete additional work, invest additional capital here in Great Park, it will come back to us through the CFD. At the same time in Valencia, as we sell more homes, we're going to have more opportunities to collect under CFD.

Hey, guys. Thanks for taking my question, and congrats on a good quarter.

Thank you.

I guess, for the second half, maybe just piggybacking off the CFD reimbursement, it definitely was a nice surprise. When we think about the cash guide, which I think is implied to be $50 million to $100 million of cash flow generation over the back half, is there a way to understand what you expect to be from earnings versus maybe additional CFD reimbursement? And anything else we should be focused on?

So, I think what we're certainly indicating is that there'll be limited CFDs on the numbers that we gave you. I think we're talking about a range on net revenue, and then we're also talking about increasing our cash. But almost all of those are going to be from transactions that we are working on today and entering into. We don't have a lot of CFD in those. Now, the CFD will keep coming in over time as either work is completed or homes are completed that allow us to sell additional CFD bonds. But for the most part, what we'll be looking at in the second half of the year will be actual transactions that we're working on with various builders.

Got it. That's helpful. And so, for the sales that you're thinking about for the back half, it sounds like you have that land already prepared. Maybe you can help us just think about how we should be viewing CapEx spend for the back half? And then, maybe as demand seems to be coming off of a trough, how you're thinking about it for '24 across different developments?

Certainly. I'll start with Irvine because the Great Park has some backbone infrastructure still being completed, mainly Marine Way. However, most of the backbone is already in place in the Great Park. Marine Way is the largest section that remains to be completed. As for the Great Park, nearly all the sites we discuss have most of the necessary infrastructure already established. A few components still need to be finalized, and those will be reimbursed. In Valencia, we have several graded areas from previous work that we are now able to bring to market. Primarily, what we are evaluating this quarter requires limited capital investment. There are certain tasks that must be completed when we deliver land, but most of the heavy lifting has already been accomplished on those sites. Looking ahead to 2024, we anticipate additional capital investment needs. However, we are also considering ways to collaborate with builders, having them invest some of that capital. Regarding Valencia's future, we have land that is largely ready. We aim to work with builders to handle much of the upfront capital investment, which will benefit both parties and contribute to the project's success. We believe this approach will be effective since builders have a significant need for a pipeline. Collaborating with them on the capital front will help ensure their pipeline is maintained and our land is fully developed. While discussing transactions in Valencia or other areas, these can shift from quarter to quarter due to various government approvals involved. However, we currently feel optimistic about what we are proposing. I want to emphasize that we must still navigate government permitting requirements, which is a common challenge in our industry.

Makes sense. Maybe my last question. Regarding the CFDs, can you tell us when the work related to the $60 million received year-to-date was completed? Additionally, can you provide any guidance on what a reasonable estimate might be for the first half of 2024 or the whole year?

Well, first, going back to those, I think we've been over the last year, there was a lot of work done by our team with the city of Irvine to allow us to expand on the public improvements that we can get reimbursed for through the CFD. So, a lot of those efforts that we put in mostly happened last year. We were seeing those earlier this year where we were literally catching up for work that we had done. I would say that for the most part, we're close to caught up there. As we complete work, we'll still achieve near-term reimbursement. In Valencia, we're out ahead. As we complete work, that's about completing rooftops and getting buyers in, then we have the ability to issue additional bonds and get reimbursed. I don't actually have a number for next year on reimbursement, so I'm not going to try to guess on that at this moment. But for the most part, we're moving through it as quickly as we can, both from a standpoint of completing work that is subject to reimbursement and then having the bonding capacity that's needed through the rooftops in place.

Yeah, hi. Thanks for taking my questions. My first question is, are you planning on doing any actual development in Great Park, Valencia, or San Francisco, or are you just planning on doing land sales?

Robert, that's actually a very good question. We have the opportunity because of our land positions to look at vertical development in all of those communities. I think our near-term plan is to stick to the horizontal development, which is kind of where our expertise is. But as we look at Valencia and San Francisco, we think there are some really unique opportunities probably to partner with people with that vertical expertise. That's something we do look at, but it's not near-term. We think long term, there's some real interesting opportunities there.

Okay. So you would be thinking about bringing in maybe larger real estate investments, larger real estate companies to invest with you to fund these developments?

Part of it is, once again, if we were moving into an area, we don't have the necessary expertise to do industrial development. So you'd want to work with somebody that has that expertise both to develop and operate it, and we have the land. Those are the types of things that we look at as long-term opportunities. But I think that rather than trying to develop all that expertise inside of the company, we think there's a lot of expertise in other places that we could tap into, which would be a good match between their expertise and our land positions.

Okay. And do you have any timeframe for maybe doing some of that actual development?

We are primarily focused on commercial development opportunities. Currently, one of our significant prospects in Valencia is at the Valencia Commerce Center, where we are working on securing the necessary entitlements. In San Francisco, we anticipate various opportunities emerging once we establish that community, as it features a diverse mix of uses throughout the site. However, we expect to be a few years away from moving forward because we need to ensure we have the right land position to engage effectively in that market segment.

Okay. That makes sense. My final question is regarding the stock price, which has decreased by nearly 80% since its IPO. Have you or the Board of Directors considered the possibility of selling the company, given that the company's assets seem to significantly surpass its stock valuation?

Robert, once again, I appreciate that question. I think how I would comment on that is that the Board is always looking at any type of opportunities that come their way to really enhance shareholder value. Whereas it's not something that we have on the table, we will consider all alternatives that may be presented to the Board. But at this point, we know that we want to look at opportunities to enhance shareholder value. If something like that came up, we would always look at those alternatives.

Yes. Hi. Thanks for taking my question. Just a couple from me. Your cash balance guidance for the rest of the year, exiting 2023, does that include the Valencia land sale completed or expected to be completed post-Q2, and then also the land parcel sales, as well as, I guess, the third land sale contract that you expect to close in Q3?

Yes, it does.

Okay. Got it. Thank you. And then as far as capital expenditure for the back half of the year and then capital expenditures for next year, do you have a rough sense for where they could shake out from where you stand right now?

We really think it will be similar to the first half of this year is what we estimate. Once again, we're in a pretty good land position in Valencia from a standpoint of where we're at, and in Irvine, we're in a really good land position from a standpoint of finishing. So, I would say comparable over the same six-month period.

Similar. Okay. Got it. Thank you. And then SG&A, a nice reduction again sequentially. Do you think there are further opportunities in SG&A reduction, or should we expect this type of run rate for, I guess, the next few quarters?

We are consistently focused on managing our SG&A. I believe we are reaching a steady state, and what you're observing is more in line with the direction we plan to take moving forward. Nevertheless, we will continually seek opportunities to improve that figure. I want to emphasize three main priorities: increasing revenue, managing our SG&A, and effectively overseeing our capital, while maintaining focus on our business operations. Everyone is aligned towards these goals.

Got it. Thank you very much and nice job this quarter. Appreciate it.

Thank you. Thank you. 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. Thank you, everyone.

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.