Earnings Call Transcript - FPH Q1 2021

Operator, Operator

Greetings and welcome to the Five Point Holdings LLC First Quarter 2021 Conference Call. Currently, all participants are in listen-only mode. As a reminder, this call is being recorded. Today's conference may include forward-looking statements regarding Five Point's business, financial conditions, operations, cash flow, 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 the actual future results. Because the 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. And now I would like to turn the call over to Mr. Emile Haddad, Chairman and CEO.

Emile Haddad, Chairman and CEO

Thank you, Jenny. Good afternoon, everyone and thank you for joining us today. As you know by now, we are not the quarterly business. The timing of our residential land sales is driven by the velocity of home sales by our guest builders. We time our delivery of specific home size to builders to dovetail with the build out of similar products that they are building and selling. The new home sites are designed to accommodate replacement for the size of type or type of homes that have been sold out. This is one of the mechanisms we use to control supply, thus maintaining the integrity of home pricing and protecting our builders. This is why our sales in each of our communities happen once or sometimes twice a year. As such, our quarterly reports do not necessarily provide an ability to monitor market conditions or the performance of the company. We use the pace of home sales by our builders as a way to measure the strength of the market. And we view the number of cancellations as a change in buyers’ sentiment or difficulty in mortgage qualification. To that end, at the Great Park, the rate of sales has been over two times year-to-date through April as compared to the same period last year, and the number of cancellations is very low compared to historical averages. More specifically, in the same period last year, our builders had approximately 162 net sales after 55 cancellations versus 339 net sales after just 16 cancellations. This feedback we are getting from our builders is that homebuyers are attracted to the quality of the public schools in our communities, the safety of our neighborhoods and the exceptional quality and number of amenities. Our fee-build program with the new home company is doing great. The rate of sales is approximately 300% from our underwriting and prices are above underwriting as well. We are nearing completion of the selection of builders for the next neighborhoods to be sold at the Great Park and currently anticipate completing the transaction in the second quarter of this year. The total number of home sites in this phase is expected to be approximately 850 with a mix of products like we typically sell. In the last year after over 17 years since the approval of this specific land for the project by the Los Angeles County Board of Supervisors, last week, our builders reported their first sales of the first phase with starting prices coming in above underwriting and a growing interest list in the hundreds. The first phase includes 1,268 homesites and is segmented into 18 products being built by five builders. This year buyers will be able to visit over 60 models to choose their preferred home. As a net zero energy and net zero greenhouse gas community, Valencia is being pointed to as the model of an environmentally responsible community. The wide range of market rate homes, coupled with the future affordable rate housing and the quality of public education provide a balance of social equity to this environmentally responsible community. A lot is being said about ESG these days, and every company is looking for ways to set goals in the areas of environmental responsibility, social equity and governance. For us, ESG is in our DNA. Soon, we will be publishing our ESG report that highlights all of the environmental and social responsibilities, we have been pursuing for many years at our communities, as well as other information about our company. We are very excited to share with you all that has been accomplished and know that more is to come. In San Francisco, we are seeing activity by the Navy in its resampling of areas within Hunters Point. The Navy recently updated the schedule showing estimated dates for the completion of its regulatory assessment process and for the transfer of the balance of the parcels. We are cautiously optimistic that the revaluation process that the Navy must undertake will proceed now without further delays. To that end, we will continue to work with the City of San Francisco and other agencies to more clearly establish the timing of these land transfers and the phasing of the project. On our last call, we shared with you that the issue of housing has moved up to the top of the priority list in the State of California and every city and county within it. As one of the largest owners of entitled residential land in the state, we have started engaging with some of our public partners about ways to help with housing requirements by potentially adding more homes in our communities. On the non-residential front, almost three years ago, we made a decision to designate a significant amount of our non-residential entitlement to healthcare and life science focused users. Our partnership with the City of Hope has laid the foundation for that. The $1 billion cancer center is under construction at the Great Park and is anticipated to open next year. The three markets we have a major presence in San Francisco, Los Angeles, and Orange County are now among the top markets targeted by healthcare and life science companies and capital providers. This reinforces the decision we made and we believe that with the proximity of housing, public education, open space, and a quality number of amenities in our communities, we are positioned to be the location of choice to build a campus for these users. Last quarter, we thought about holding an investor meeting, which we had postponed last year due to the pandemic. Our original thinking was to have it virtually in June. However, in light of the announcement by the state to allow for everything to be open as early as mid-June, we have decided to hold the meeting in person and have targeted for September 15. Bob Wetenhall will coordinate with you shortly in order to avoid any major time conflicts. And we will confirm that date with everyone shortly. Of course, we will get those who still want to participate virtually the option to do so. But we think that you all will be more informed by being able to see our communities in person. As we commented previously, the goal is to share more information in order to assist your understanding of the real value of the company. We believe that for a company like ours with elongated assets, the best way to look at valuation is the net asset value. We plan to share our calculation of the NAV at the meeting with approximately 2,300 remaining buildable acres in Valencia, where our current residential land sales are in the mid $2 million per acre and approximately 500 buildable acres at the Great Park where our current residential land sales are in the mid $5 million per acre. We are confident that when we finish our investor meeting in September, you will share our excitement about the real value of the company. There's a lot of noise today about the state of California and the number of people leaving the state. I came to California over 35 years ago and I've been hearing about the demise of the state since then. Sure, the state has a lot of issues to address, as a partner of the state and the communities in which we work, we will always bring perspective and help any way we can. California is the fifth largest economy in the world with a very diversified population. It is the epicenter of innovation, and the birthplace of many of the ideas that have changed the way the world lives and works today. For us, we know California, and California knows us. Finally, let me conclude by thanking all of our associates for all the contributions despite the top remote working conditions we are still operating under. It appears that we'll be ending shortly and I think we are all looking forward to seeing each other in person soon. Now, let me turn it over to Erik, who will report on our 2021 Q1 financials and we'd be happy to take your questions afterwards.

Erik Higgins, CFO

Thanks, Emile. A summary of our financial results was included in the earnings release issued earlier today and our 10-Q has been filed with the SEC and is available for review on our website. The consolidated results for the first quarter are as follows. Revenues for the quarter were $13.2 million, which were primarily generated from management fees. The net loss for the quarter was $21 million, after $19.5 million in SG&A expenses, and $3.6 million in losses from our own consolidated entities. While there were no land sales during the quarter, we continue to invest in inventory, which increased by $52.5 million during the quarter, primarily related to land development expenditures in Valencia. Our cash balance at the end of the quarter was $230 million, and we had no outstandings against our $125 million unsecured revolving line of credit. Our debt to total capital ratio was stable at 25.1% and our net debt to capitalization ratio, when taking into account our cash balance was 17.5%. In April, the maturity date on our $125 million revolver was extended another two years to April 2024. Moving to the segment results, the company has four reporting segments: Valencia, San Francisco, Great Park, and Commercial. The segment results for the first quarter are as follows. The Valencia segment is consolidated for accounting purposes. The segment loss was $4.9 million for the quarter, and there were no land sales in Valencia during the quarter. The San Francisco segment is consolidated for accounting purposes and recognized $94,000 in income for the quarter. The Great Park segment includes operations of the Great Park Venture, the owner of the Great Park neighborhoods, as well as the management services provided by the management company to the Great Park venture. We own 37.5% of the percentage interest of the Great Park Venture and 100% of the management company. The operations of the Great Park Venture are accounted for under the equity method of accounting and therefore, the assets and the liabilities of the Great Park Venture are not included in our consolidated financial statements. The net loss for the Great Park segment was $10.9 million for the first quarter, which was comprised of approximately $1.6 million in income from the management company and a $12.5 million loss from the Great Park Venture operations. The company's equity and loss from the Great Park Venture after adjusting for a difference in investment basis was $3.9 million for the quarter. We're currently working on our next round of land sales at Great Park neighborhoods, which we anticipate will close later this year. We expect the cash proceeds from these sales and the venture's existing cash balance to result in distributions to the venture's partners sufficient to clear out the remaining $45 million priority distribution to the legacy interests and to commence distribution to Five Point's 37.5% percentage interest. Our commercial segment includes operations of the Gateway Commercial Venture and management services provided by the management company to the Gateway Commercial Venture. We own 75% of the Gateway Commercial Venture and 100% of the management company. The operations of the Commercial Gateway Venture are accounted for on the equity method, and therefore, the assets and the liabilities of the Gateway Commercial Venture are not included in our consolidated financial statements. Commercial segment income was $579,000 for the quarter, which included approximately $99,000 from the management company, and $480,000 from the operations of the Gateway Commercial Venture. Five Point’s equity and earnings from the Gateway Commercial Venture was approximately $360,000. With that, I'll turn it over to Jenny, our operator for questions.

Operator, Operator

Thank you. And we'll go to our first question from Michael Rehaut of JPMorgan.

Elad Hillman, Analyst

Hi. Good afternoon. This is Elad Hillman on for Mike. Thanks for taking my questions. So first, I was wondering if you could provide some more details on the first home sales in Valencia last week, and the level of traffic and excitement that you're seeing from consumers in that development? And then additionally, I was wondering if there are any production constraints in either materials or labor, is that the builders are facing to be able to deliver those comps? Thanks.

Emile Haddad, Chairman and CEO

Thank you. Well, I think that in light of the conditions we're living in, as relates to the sales process and the constraints of COVID-19, and the fact that you can't really conduct sales in a normal way, it's all by appointment and streamlining, it's really not easy to look at the process of the sales as the litmus test or the indicator of demand. I think that's why I wanted to highlight the fact that what we're hearing from builders is that they're starting to compile a very, very long list of potential buyers. I just talked to one of the builders about half an hour ago, and they're saying that the challenge they have is the logistics of making sure that that list moves through as fast as possible, and can visit the models and make decisions quickly. So, if your question is, is there a high level of interest? The answer is absolutely, for a lot of reasons. One, LA County is one of the most constrained markets in housing in the whole state. And there hasn't been really anything significant in terms of new products. This is probably the largest opportunity to buy homes in this county, maybe historically, because as I said, you're going to have the ability to visit 60-plus models, which you know, practically speaking will take you probably about three days to do. So, there's a lot of interest; our builders are excited. The other indication is, typically we do not see the builders start, especially in the beginning of the masterplan community where everybody is looking for momentum. What we have typically seen is builders trying to be more conservative on the pricing of homes and come at a price that might be a little bit lower than their underwriting to just create the momentum. The fact that we have now our first sales coming above underwriting speaks volumes, at least to somebody like me who's been in this business for a long time in terms of the depth of that market.

Elad Hillman, Analyst

That's great. And then in terms of the production side, any constraints to say?

Emile Haddad, Chairman and CEO

No, we haven't heard any constraints. Actually, the activity on site is pretty impressive. If you go see the amount of activity, what we hear from the builders, I'm sure what you're hearing, which is the pricing of lumber and some of the challenges that are coming from the disruption of the supply chain as a result of COVID-19. But none of this has impacted the production, and in the county, who we view as our partner has been extremely cooperative in terms of the process and everything else because everybody is looking at this as a big answer to the housing crisis that they have in LA.

Elad Hillman, Analyst

Thank you. Turning to the Great Park, it seems there's been a notable increase in sales. Last quarter, there were about 247 net sales from late December to mid-March, and this year, there are around 300 net sales. Can you share your thoughts on this growth? Is it improving due to seasonal trends? Also, are the builders adjusting their sales pace or implementing significant price increases?

Emile Haddad, Chairman and CEO

I don't see this as seasonal since we assess it based on the same period or season and also consider the pre-COVID-19 situation. This issue is not specific to our project; the overall housing market is currently one of the strongest historically, influenced by where mortgage interest rates are and a phenomenon I refer to as the "cocoon factor," which emphasizes people reconnecting with their homes. These elements are fueling the housing market. Additionally, even before COVID, there was already a significant shortage of housing supply, which became more severe during the pandemic. What we are experiencing aligns closely with the market trends regarding the strength of housing. One aspect worth noting is the heightened attention on any increases in mortgage rates, which can affect certain markets or buyers regarding their qualification and payment capabilities. Our situation is somewhat insulated compared to other markets sensitive to interest rates since 35% of our buyers are cash buyers, while the remaining 65% typically put down about 35%. The median price in the great park is around $1.2 million, indicating a buyer profile that is diverse in product offerings and interests but less impacted by interest rate fluctuations compared to buyers in smaller markets. This is an important point to mention. We've also noted the cancellation rate, as many focus on sales, a key indicator of housing market strength. However, I always monitor cancellations because they serve as a leading indicator of sentiment changes or emerging trends, particularly in mortgage qualification. A low cancellation rate suggests that buyers feel positive about purchasing a home. This ties back to your second question regarding builders raising prices; they aim to capitalize on current opportunities without missing out on buyers. This means builders are qualifying buyers, enabling them to secure mortgages, which is critical for our operation since we are not constructing large volumes of homes. We have a significant runway ahead of us, making trends highly relevant for our perspective. I'm not sure if that provides clarity, but that's my view of the situation in the great park.

Elad Hillman, Analyst

Great, thank you. I just wanted to clarify one thing there. I think you mentioned that cash buyers this time was 35%. I think last time you mentioned, they were 22%.

Emile Haddad, Chairman and CEO

Yes, the last information I received from the builders was about four or five weeks ago. We had 35% of the buyers coming in with cash.

Operator, Operator

And we'll move to our next question from Stephen Kim of Evercore ISI.

Stephen Kim, Analyst

Thanks very much, guys. Appreciate all the info. One of the things that we've been seeing recently, given the incredibly strong housing market, is a return to different kinds of price discovery mechanisms, i.e. I'm talking like auctions and in some cases, moving to like sealed bids. And I know that's probably not what you're seeing at this juncture. But my question relates to whether you have a policy and/or intend to ever enforce some kind of policy to restrict price discovering behavior by the builders and what your thoughts are basically around that kind of approach to managing your communities a little bit more finely.

Emile Haddad, Chairman and CEO

Stephen, nice to hear from you as always. The answer is no to policy, but we have a long memory and we have communities where builders want to make sure that they do not disrupt a program that is going to be a long-term program that's meant to be homeownership and not speculators. As such, I think that we have a relationship with our builders that doesn't require a policy by us because it's them who are selling their homes; they understand very well that we've spent a lot of time, a lot of money, and a lot of focus to make sure that our communities are not communities of speculators. I can share with you that one of the things I do to see whether we are seeing some trends or not, is I often enough take a drive through the community in the evening and see if the lights are on, and because if our driveway or a good percentage of the homes are dark, it's probably in my opinion, the best way to see if you have people who are investors or not. But we don't have a policy, Stephen, and neither should we. But we haven't seen it; we are not seeing any of that so far, even when it was happening back in the days. In our massive planned communities, we didn't see it to the same level as standalone tracks were seen.

Stephen Kim, Analyst

Yes, that's helpful. Thank you for addressing the investor aspect as well. I'm curious about the current strong housing market where builders are selling at an increasing pace, alongside rising prices. What are your thoughts on how you plan to progress through your long-term community? Specifically regarding Valencia, do you think you'll want to advance through the project in a shorter timeframe compared to a year and a half ago? Will you be looking to speed up the residential portion or part of it? If so, what decisions are you making regarding infrastructure and the timing of major cash outflows needed to support that?

Emile Haddad, Chairman and CEO

Well, now you're asking about the secret sauce of the company and let me tell you, the answer all things aside, we have to look at more than one constraint when we look at this and more than one opportunity. First of all, in a master plan community like this, especially in the beginning of it, infrastructure and the speed of providing the infrastructure to open up new areas is really critical because you are putting a lot of infrastructure upfront, which is going to help open up a lot of phases in the future as you are building a city. You might not have the luxury to put that infrastructure in at the same speed as you would like to and open up more areas, but the reality is what we tend to look at is avoiding any cannibalization by the builders, and therefore we spend a lot of time, as you know, making sure that we slide in as many products as possible with the segmentation. When you look at today, 1,268 home sites in the first phase being segmented into 18 products, that's as far as you probably can go without starting to provide a product that's going to start cannibalizing another product and therefore, destroying the long-term prospects of value creation out of the land. Our land is replaceable. The thing that I think will hurt us the most is if we focus so much on speed and end up discounting per acre because that actually has a bigger impact. So, you have to always optimize by finding the balance. Having said that, you know, today, we feel very comfortable that between the floor of pricing that exists in Valencia, and the ceiling of pricing that we are comfortable with, which typically as we hit 40% of median home price as a floor, and about 170% as a ceiling, between the floor and ceiling, we were able to slide in 18 different product types with five builders and feel very comfortable that that's going to actually be optimal. Now, what will happen though is as the market moves and as the committee establishes itself, we will start seeing an opportunity to push the ceiling a little bit more and get something more on top, which if you’ve been following us for a long time, we've done that with Toll Brothers and even going back to the Dakota, the government base or here, where we now start looking for somebody who's comfortable to go above and start looking at the products above. We're also looking at products on the lower side that are higher density, as well as potentially apartments, which is really what our focus right now is at Valencia; to start looking at bringing apartments to the market, and therefore absorbing some of the land by having an apartment program. So that's really what we try to do. I would say, where we are right now in Valencia knowing that we have 21,000 homes ahead of us, the most important thing is to lay the foundation properly. The market will allow us to do what we need to do. But we're going at an optimal pace; I wouldn't say at the highest pace maximum. The way we look at these things is optimization, not maximization.

Stephen Kim, Analyst

So that's very helpful. Thanks for me all for that. So, as we look ahead over the next five years, let's say, take that kind of a horizon, in Valencia, would it be your expectation that there might be a point in time, where there would need to be a net cash outflow, a meaningful net cash outflow, that would outstrip the pace of cash inflows from residential land sales, in an attempt to sort of maintain or maintain a higher level of velocity maybe than you initially envisioned? You know, such that you would need to sort of have a bulge in the infrastructure development and the cost associated with that. So that you would be generating significantly negative cash flow some time within the next five years?

Emile Haddad, Chairman and CEO

So, I would say that a lot of the infrastructure that is global in nature, we call it, which is the infrastructure that is meant to open up other areas has been growing. Since we started development in October of 2018, I think is when we started or 2017, a lot of it is already complete. That's why we want to have the investors meeting in person so all of you can see with your own eyes the amount of development that's been taking place. What we expect to see in Valencia is not really anything different than what we have seen at the Great Park, because that is the evolution of our master plan communities. We put a lot of money in the ground and in the Great Park, we started development in 2013, we put a lot of money in the ground. We turned the corner to a positive cash flow. Over the last few years, since I think 2017 or 2016, we have made distributions of a billion dollars. That's after all the money that we invested in the project, and you've seen some of the amenities we built. The Great Park today is a big cash flow positive contributor. A lot of distributions are being made. As Erik highlighted, we'll be making some major contributions to even retire a $470 million legacy distribution that we had since 2017. Valencia is going to follow the same way. For the last two years or three years where we spent a lot of money, we started having sales, we started generating revenue. Over the coming couple of years, we will find that balance and all of a sudden, you're going to start seeing a major positive cash flow. That's what we expect to happen, assuming the market stays good, and we don't have a correction in the market. Our expectation is that Valencia will become a very big contributor to positive cash flow for the company, I'm going to say sometime in the 2023, 2024 period we will start turning that corner.

Stephen Kim, Analyst

That's great. Yeah, I'm really looking forward to seeing some of these projects again. So I'm glad you guys decided to do an in-person. So thanks a lot, guys.

Erik Higgins, CFO

Thank you, Steve.

Operator, Operator

And we'll go to our next question from Alan Ratner with Zelman and Associates.

Alan Ratner, Analyst

Hey, guys, good afternoon. Thanks for taking my question. Emile, first question, last quarter, you indicated that you were starting to have some conversations with the board about crafting a strategy for potential build-for-rent product within your communities, that segment of the market seems to be all the rage these days. I'm curious if you have any update there, whether it's going to see a Great Park and any other projects in terms of where that might go?

Emile Haddad, Chairman and CEO

We haven't had a board meeting recently, so I don't have an update on that discussion. However, we are currently evaluating the possibility of building apartments in Valencia. This is our starting point. Buyers in Valencia tend to prefer lower density products, so introducing a for-rent program might not be advisable. It’s important to note that while we’ve shared our plans with the board and intend to test the apartment market, a single-family detached for rent program would be challenging because our homes are quite expensive. For example, in the Great Park, the median home price is $1.2 million, which isn't typically the kind of home someone looking to rent would consider. Even in Valencia, homes are starting to push around $700,000. Nevertheless, we explore all options, although I haven't found much excitement for a for-rent program aside from apartments.

Alan Ratner, Analyst

Got it? I appreciate your thoughts on that. Second question, I think you did this maybe in a small scale on your Valencia lot sales. But, when you look at what the homebuilders are doing on lot acquisition, clearly, there's a lot of interest in keeping as much off balance sheet as long as possible. I know you're delivering effectively finished lots to builders, so it's not like they're necessarily sitting on the balance sheet for a while. But I think you did option some lots to builders in the last round. I'm curious, as you embark on the next round in the Great Park, whether there's any conversations about doing that at a greater scale there and if kind of land banking, in general, could potentially be a growth opportunity for the company.

Emile Haddad, Chairman and CEO

Yes. As we mentioned in the last call, we have established a land bank. Builders have taken advantage of our land bank at Valencia, which is specifically dedicated to land banking. We hold a 10% stake in it, while 90% is funded by a capital provider. This program was created not solely for the return on our 10% investment, but as a way to support our builders as we identified their pressure points. We provide finished home sites, offering the product along with all the necessary amenities in advance. Based on my prior experience, we anticipated a time in the cycle when builders might face balance sheet pressure, particularly with costly land like ours. Thus, we developed the land bank, which is operational, and builders are utilizing it. We plan to implement the same program at the Great Park, and we are aware that builders are already engaging with the land bank. It functions traditionally: the land bank purchases land from us as a land company, retains the land, and has agreements with builders who make certain deposits and commit to acquiring a specific number of home sites over time. The land bank typically charges an interest rate between 9% and 9.5%. This program has been very effective for us in Valencia, and we expect it to work similarly at the Great Park.

Alan Ratner, Analyst

Great. Yes. Thank you for that detail. And final question, I apologize if I missed this. But I believe you had estimated the distribution from Great Park that you anticipated this year to be roughly $100 million. I just want to make sure that that's still the current estimate.

Emile Haddad, Chairman and CEO

Yes. As I mentioned earlier, I indicated that Erik was giving me an inquisitive look, which isn’t due to anything in particular; it’s just that I noted there will be some variability. What we need to determine is how much we want to allocate for prebuilding, similar to what we did with the New Home Company, and that approach has been quite successful. Currently, we are considering a similar strategy for the upcoming sales at the Great Park. If we choose to reserve a portion of the distribution or some capital within the Venture to capitalize on the prebuild opportunity or the land bank, these are options that could generate cash for reinvestment. That’s why Erik had that expression. Ultimately, I believe that the $100 million estimate remains valid, and I suggest viewing it as a solid figure.

Alan Ratner, Analyst

Perfect. Thanks a lot. Good luck guys.

Emile Haddad, Chairman and CEO

Thank you.

Operator, Operator

And we'll go to our next question from Ken Hansen of Stifel.

Ken Hansen, Analyst

Good afternoon. For full disclosure, I'm a CFA, but I'm here as a shareholder, not representing the Stifel research department. I believe having the meeting on September 15 in person is a great idea because I don't think the investment community fully appreciates what you've accomplished. Homeowners recognize the value since they're eager to buy the product, but without visiting the site, walking the trails, and interacting with the facilities, it's hard to understand the quality of what you've developed. By sharing that on-site experience along with a net asset value calculation for the project and overall development, I think investors will realize this is a fantastic opportunity. I visit the Great Park site at least once a week, and I played beach volleyball there last week. I've noticed that the beach volleyball courts have nicely positioned tables, but all the chairs are on the ground. This isn't due to people moving them; it's because the design of the courts has three sides that slope away from the playing surface. As a result, people use the chairs as a barricade to prevent balls from rolling too far away and into the parking lot. Just a small detail, but important for maintaining the experience for visitors. If your team could come up with a solution to keep the volleyballs contained better, it would make a significant difference. Aside from that, the amenities are outstanding. Irvine is consistently one of the safest cities of its size in the U.S., and the schools are excellent. You have something special here, and I hope the investment community recognizes that on September 15.

Emile Haddad, Chairman and CEO

First of all Ken, it's nice to hear from you again, and I truly appreciate your comments. I hope that after September, as many people as they go, they will all have the same excitement that you have about what we want to build over that and what we do. Yes, you are 100% right. I am about the small details because at the end of the day, I am a big believer that if you pay attention to the details, people will know how much hard you have and whatever product you build. Just to tell you that, I don't only drive around, but I walk around. Probably about two years ago, I was walking around with a suit and a tie on a warm day. I think I might have been walking somebody to proudly show them what we're working on. I had to chase one of these balls at sand volleyball and I went down running after it, which I realized I am too old to try to sprint. All kidding aside, I was talking to some of the players over there. One of the issues that they raised was one, the descending slope and the balls running and chasing the world, and to the fact that they thought there could be a need for more sand volleyball courts as such. As you know, we have built the facility and we have delegated that and given it to the city. So, we don't have the operational right to do anything over there. But I can tell you that we are working with the city now on plans to add, I think about three additional sand courts and deal with the issue you just highlighted in a way that doesn't take chairs and block the ball. COVID has delayed some of the thinking, but I can assure you that even as small as the detail you just highlighted, it got my personal attention.

Ken Hansen, Analyst

Fantastic. I think the rest of the project shows that, and I think even looking at the major trees that you saved and salvaged from the old base and replanting is just a reflection of that attention to detail. So, I look forward to that September.

Emile Haddad, Chairman and CEO

We look forward to meeting you in person as well. Thank you very much.

Operator, Operator

And with no other questions in the queue at this time, I would now like to turn the call back to Mr. Emile Haddad for any additional closing remarks.

Emile Haddad, Chairman and CEO

Well, again, thank you all for sharing your time with us today. I am glad that we are starting to look at a light at the end of the COVID tunnel. I hope that next time we talk, the situation will be much more stabilized. We really look forward to seeing you all in September. As Ken said, I think that it will be worth your while to come and see these things in person and be able to get to know this company a little bit more than just financial reporting. Lastly, as I look at the screen and see the amount of associates who have taken the time to dial in and listen to us, tell the world about their effort. I want to thank you all for everything you do out there and for being on the call today. Thank you very much, until next time.

Operator, Operator

And that does conclude the call. We would like to thank you for your participation. You may now disconnect.