Five Point Holdings LLC - Ordinary Shares - Class A Stock

Greetings, and welcome to the Five Point Holdings Second Quarter 2026 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, acquisitions, 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 future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risk 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, President and Chief Executive Officer.

Thank you. Good afternoon, and thank you for joining us. I have with me today Mike Alvarado, our Chief Operating Officer and Chief Legal Officer; Kim Tobler, our Chief Financial Officer; and Leo Kij, our Senior Vice President of Finance and Reporting. Today, I'll review our second quarter results, discuss the progress we've made in executing our strategy, and share why we believe Five Point is becoming a stronger, more diversified company that is positioned to create long-term shareholder value. Mike will then discuss our operational highlights in more detail, after which Kim will review our financial results. We'll then open the line for questions.

Over the past several years, our objective has been straightforward: unlock the substantial value embedded in our California assets while building a business capable of generating more consistent and predictable earnings over time. During the second quarter, we continued to make meaningful progress on both fronts. Our legacy master-planned communities remain among the highest quality residential land assets in California. At the same time, our investment in the Hearthstone Venture represents an important evolution for Five Point, expanding our capabilities beyond land development into land banking and asset management. Together, these businesses provide multiple avenues for creating value and position us to participate more broadly in the homebuilding ecosystem.

For the second quarter, Five Point generated net income of $29.9 million, driven in large part by the Great Park Venture sale of 17.7 acres of commercial land planned for a senior living retirement community for $159.3 million, which represents a land value of $9 million per acre. This transaction is another reminder of the significant value embedded within our master-planned communities, which continue to provide opportunities to develop additional products that are complementary to our traditional residential and commercial uses. During the quarter, we received $79.6 million in distributions and incentive compensation payments from our various joint ventures. And from a balance sheet perspective, we ended the quarter with total liquidity of $565.9 million, including $348.4 million of cash and cash equivalents.

Turning to our operating environment. Notwithstanding market conditions that remain somewhat choppy and complicated, we're seeing continued support for land values in our active communities. Given the scarcity of entitled land in Southern California and the exceptional locations of both Great Park and Valencia, we're still engaged with builders who continue to pursue buying homesites in these communities, which Mike will address in more detail in his remarks.

We remain highly confident in the long-term value of these communities and our ability to sell land and grow returns over time. Additionally, our balance sheet strength gives us the flexibility to work collaboratively with builders to structure transactions in a way to optimize land values through varying market cycles.

While our California communities remain an important source of future value creation, they no longer represent the entirety of our growth story. When I became CEO, our initial priorities were to simplify the business, reduce overhead, strengthen the balance sheet, and continue executing against our long-term land development strategy. We made substantial progress in each of those areas. Today, our debt-to-capital ratio stands at just 16.2%, providing us with considerable financial flexibility. With that foundation in place, our attention shifted toward building a business with more recurring revenue, lower capital intensity, and broader growth opportunities.

That strategic focus led us to Hearthstone, which represents the first step in the evolution of our business beyond our 3 core communities. Through Hearthstone, we now participate in land banking and capital solutions for builders across the country while generating recurring management and investment income, adding to the management fees and incentive compensation we already earn through our Great Park Venture. Unlike traditional land development, these activities require significantly less balance sheet capital, but still benefit from Five Point's community development expertise.

We believe this creates a highly complementary business model. Our California communities continue to generate long-term value through land development and monetization, and Hearthstone expands our reach nationally through fee-based management services and strategic capital deployment.

Importantly, these 2 businesses reinforce one another. Our experience developing some of the country's most complex master-planned communities gives us unique expertise in underwriting land, structuring transactions, managing development risk, and creating value. Those capabilities translate naturally into the capital management business and differentiate us as a partner to both institutional investors and national homebuilders.

Our long-term outlook for the housing market remains constructive. The United States continues to face a significant housing shortage. The industry's largest builders increasingly rely on capital-efficient, land-light operating models. At the same time, institutional investors continue seeking opportunities to deploy capital into residential land and development projects. We believe that we are uniquely positioned at the intersection of those 2 trends.

Looking ahead, our objective is to continue transforming Five Point into a company with 2 highly complementary value drivers: a portfolio of well-positioned master-planned communities, and an increasingly scalable national residential asset management platform. As recurring fee-based income becomes a larger contributor to our earnings mix over time, I believe our business will become more diversified, more predictable, and less dependent on the timing of individual land sales. With longstanding relationships across the homebuilding industry, partnerships with leading institutional capital providers, and the capabilities we've developed over decades of land development, we're well positioned to expand this platform and create meaningful long-term value for our shareholders.

Let me now provide an outlook for the rest of the year. We have great confidence in the value of our land in supply-constrained California markets. Accordingly, even in the currently evolving market conditions, we're not going to update or alter our prior guidance of approximately $100 million in consolidated net income at this time. Although market conditions remain uncertain, we currently believe our land will sell as expected, with the caveat that interest rates and affordability factors could affect timing. We currently expect our remaining land sales activity will occur in the fourth quarter. We'll have more to report on our Q3 earnings call as we finalize our land sale discussions with builders.

Let me now conclude with an operational update. During the quarter, our teams continued to execute against our development plans, advance infrastructure improvements, and prepare future phases for eventual delivery. Maintaining development momentum during periods of slower home sales activity positions us to respond efficiently as demand strengthens, and allows our builder partners to move quickly when they're ready to commit additional capital. Ultimately, our primary operational objective has not changed, which is to optimize the long-term value of these extraordinary assets. We believe that requires the patience, disciplined capital allocation, and long-term perspective that we have consistently demonstrated.

With that, I'd like to turn the call over to Mike, who will provide more detail on our operations this quarter.

Thanks, Dan. Let me start by providing you with some updates on our communities, starting with the Great Park Neighborhoods. At the Great Park, the second quarter highlighted the depth and flexibility of this community. As Dan mentioned, during the quarter, the Great Park Venture closed a sale of approximately 17.7 acres of land planned for a senior living retirement community for a purchase price of approximately $159 million. While this retirement community will be the first in our master plans here in California, we believe this type of development is capable of being included in each of our communities, especially considering the size and age of the baby boomer demographic.

On the residential side, builders sold 56 homes at the Great Park during the second quarter, compared to 82 homes in the first quarter. Even though absorption has moderated from the pace we saw in prior periods, particularly as certain collections have sold out, we continue to see steady engagement from the homebuyers and continued builder interest in the community. We currently have 14 actively selling programs in the Great Park Neighborhoods with 5 additional programs planned to open later this year.

As Dan mentioned, we have builders in various stages of due diligence and contracts on 5 new residential programs, totaling approximately 28.5 acres. With that said, while we currently expect to execute and close these deals -- these sales this fiscal year, market conditions could alter the timing.

As a reminder, some of these homesites are located on land that we acquired from the city as part of the land exchange transaction we recently completed with them, which was the same transaction that allowed us to convert approximately 100 acres from commercial land into residential land. We will continue to monetize this converted residential land in the quarters and years ahead.

Next, I'll discuss Valencia, our other active community. During the second quarter, builders sold 78 homes at Valencia compared to 90 homes in the first quarter. Although sales moderated sequentially, we continued to see homebuyer engagement at our first village. And we remain focused on pacing development and land sales in a way that aligns with builder demand and broader market conditions.

We currently have 12 builder programs open and actively selling, and we anticipate 5 new programs will open over the remainder of the year. We are also currently finalizing documentation for residential land sales in '26, although market conditions could alter the timing here as well. As of the end of the second quarter, we have sold over 3,000 homesites at Valencia since commencing homesite sales in 2019. That is still only a portion of the long-term opportunity in this master-planned community. Valencia is designed to deliver much-needed housing supply into a market that remains chronically undersupplied.

We also continue to advance the next phases of development in Valencia. As we discussed on our last call, the entitlement approvals we secured for Entrada South and Valencia Commerce Center significantly enhanced the long-term value and development potential of this community. Our teams continue to work through infrastructure plans, ministerial permits, and other development steps necessary to bring those next villages forward. We also continue to advance our regulatory approvals for 3 additional villages. Upon approval, these villages, together with our existing entitlements, would bring our total to more than 10,000 entitled homesites.

Turning to San Francisco. At San Francisco, we continue to advance the next phase of development at Candlestick. As a reminder, the approvals we received in 2024 and 2025 provide the ability to include up to approximately 2.8 million square feet of research and development and technology-oriented office space, approximately 7,200 homes, and approximately 550,000 square feet of space for retail, hotel, entertainment, and other community uses. In June, we recorded our subdivision maps for the next phase of development, and we are preparing to initiate grading activities in the third quarter.

We believe our timing at Candlestick could not be better for a number of reasons. First, the AI and technology boom is creating renewed demand for office space, talent, housing, and large-scale campus environments, and San Francisco remains at the center of that activity. Second, San Francisco's new political leadership is increasingly focused on economic recovery, housing production, public safety, and making the city more business-friendly. Third, the commercial market is showing clear signs of recovery, with leasing activity improving and large users beginning to re-engage with the city, given the now business-friendly climate.

Fourth, residential fundamentals are strengthening with rents and home values moving higher while new housing supply remains chronically -- remains highly constrained. Fifth, San Francisco's enduring strengths, including world-class universities, a deeply educated labor pool, leading health systems, proximity to the center of technology and AI innovation, and its rich culture and history. All of these things will continue to support the city's long-term growth and attractiveness. Against this backdrop, Five Point controls the only project of this scale offering a potential campus location within the city and county of San Francisco and within commuting distance of Silicon Valley. Taken together, these trends create a very favorable business environment for Candlestick.

With our entitlements approved, maps recorded, public financing secured, and infrastructure work beginning, we believe Candlestick is well positioned to benefit from San Francisco's next cycle of growth. Accordingly, our next step is to begin engaging with potential large users who are looking for a unique campus environment and who can help anchor Candlestick's rebirth as a vibrant, mixed-use urban community located directly on the San Francisco Bay.

To wrap up, we are extremely excited about the opportunities ahead and remain focused on disciplined execution as we continue building the next chapter of Five Point.

Now I'll turn it over to Kim, who will provide more detail on our financial results for the quarter.

Thank you, Mike. As Dan mentioned, I will share additional information about our financial results for the second quarter. Our second quarter consolidated net income was $29.9 million and was largely made up of the following components. We had $14.7 million of management services revenue, $9.1 million of which was derived from our management of the Great Park Venture, $5.8 million of which was incentive compensation earned from the Great Park, and $5.6 million earned from our Hearthstone asset management platform. We had $5.6 million of costs and expenses associated with our management services activities, $2.4 million of which was associated with the Great Park Venture, and $3.2 million associated with Hearthstone.

We recognized $41 million of equity in earnings from our unconsolidated entities, $39.7 million of which came from the Great Park Venture. The equity in earnings from the Great Park Venture resulted from the net income to this venture of $114.2 million, which was largely attributable to the land sale that Dan and Mike discussed that generated revenue of $159.3 million and a 76.5% gross margin. Our second quarter SG&A was $14.3 million compared with the prior year second quarter of $15.6 million. Finally, we recognized $6.2 million of tax expense.

Now, let me provide an update about our cash and liquidity and debt positions. As Dan mentioned, we ended the quarter with $348.4 million in cash, as well as $217.5 million of availability on our revolving credit facility, resulting in total liquidity of $565.9 million. This doesn't include $229.6 million of cash that was held by the Great Park Venture as of June 30. The significant sources of cash this quarter included $79.6 million of distributions and incentive compensation payments from the following joint ventures: a $33.1 million distribution from the Gateway Venture, which came from the final payment of amounts due from the buyer following the sale of the last building owned by that venture at the Five Point Gateway campus here in Irvine; a $34.4 million distribution from the Great Park Venture; a $9.3 million incentive compensation payment from the Great Park Venture; and a $2.8 million distribution from our Valencia Land Bank Venture and our other co-investments in the Hearthstone managed funds.

The significant uses of cash this quarter were our semi-annual interest payment on our senior notes of $18.6 million, development costs at Valencia and San Francisco that totaled $32.2 million, EB-5 principal and interest payments of $2.2 million, and repurchase of approximately 623,000 shares of Five Point's Class A shares for $3.1 million.

Just a quick comment about our share repurchases. We continue to view our shares as attractive at these levels, but we're balancing buybacks against other capital allocation opportunities, including growing the Hearthstone platform and investing in our legacy communities. Given the current nature of the housing market, we believe maintaining financial flexibility is the right approach. However, we believe the authorization is an important tool in our efforts to maximize long-term shareholder value.

With respect to our debt at the end of the quarter, our total debt-to-capitalization ratio, as Dan mentioned, was 16.2% and our net debt was $101.6 million with nothing drawn on our revolving credit facility. This quarter, our Hearthstone Venture's assets under management and fee-paying assets under management remained unchanged at $3.4 billion and $2.8 billion, respectively.

With that said, let me turn it back to the operator, who will open the line for questions.

[Operator Instructions] Our first question comes from the line of Alan Ratner with Zelman & Associates.

You know, obviously, you guys have done a great job of maximizing the profitability in the Great Park, and maybe I'm reading too much into this, but it sounds like maybe you were hedging the timing of the next land sales, both there and Valencia, maybe a little bit more than the last quarter or so. And I'm curious, in your thinking on that, obviously there's no need to push sales just for the sake of it. Are you kind of thinking through, like, looking at the home sale trajectory in both of those communities and seeing the slowdown there and making a decision that it might not make sense to kind of push sales -- lot sales in the near term? Or is this more based off of feedback you're getting from builders where they're more cautious on either price or looking forward to deals and just trying to figure out whether you're sensing more cautiousness from the builder side or you're trying to kind of plan for the next phase based on what you're seeing on the home sale front.

Thanks, Alan. Appreciate that question. It's -- one of the things that we watch very carefully is home sales and what we have in our builders' hands, but what we also have is a continuing interest in our property, which is quite unique because it's entitled in the markets that it's in. And for now, the builders are looking at absorption that kind of supports moving forward, but we're also always trying to realize that our most important thing is to really optimize our land value, and we're not prepared to compromise on land value. But if I can help a builder a little bit with some structure, we're prepared to have those conversations. So really trying to match things that will help us optimize land value, but builders are still selling in our communities not as fast as they might have been 12 months ago, but we also think that there will be a turn in that market. I can't predict the timing. But so I think to answer your question, is we're trying to balance more than anything optimizing land value. And so we're just watching and working with the builders. But they are engaged.

Got it. That's helpful, Dan. I figured as much, but helpful to hear you talk through it. Actually, I have 2 more quick ones, if I could. The first one is just on the land banking side. As I look at the public builder lot count, it's been on a pretty steady decline over the last 5 or 6 quarters. And some of that is fewer acquisitions, but part of that also is walking away from option deals and in some cases, land bank deals. So I'm curious if you could talk through a little bit what you're seeing on the builder side with your partners on with Hearthstone. Are you seeing an increase in walkaways? Are you seeing builders requesting changes in pricing or terms? And ultimately, how does that affect the financials at Hearthstone?

I'll give that one to Kim.

Thanks, Alan. Yes, there's a lot of interest in that these days. I just want to say that when we looked at Hearthstone, I mean, their history was very strong in this area. They're still seeing good flow from the builders. We're not seeing builders coming back to them generally and asking for changes in terms or anything like that. So it's holding up well. I think that's a statement about their underwriting more than anything else and the nature of the transactions that they engage in. But they're still seeing good flow, and they're not seeing a lot of builders coming back and asking for changes.

Got it. Okay. Really helpful. And then the final one for me is, we see across the country, obviously, a huge demand for land for data centers. We've seen some high-profile transactions from builders selling land in other parts of the country. Personally, admittedly, I'm not totally familiar with kind of the local municipalities' stance on data centers in your areas of operation. But have you had any conversations related to maybe selling some land for data centers? Is that being contemplated at all across any of your assets? I'm just curious how you're thinking about that as far as potential use or demand of land within your communities.

I'm going to have Mike address that one.

Hi, Alan. We've got commercial business park uses in each of our 3 communities, and it has been a topic of conversation. I would say across the board, probably Los Angeles more than others. And as you note, a lot of the municipalities and many, if not most, in California are very in tune with that and things that make them difficult to implement. But we are absolutely looking at that with the continuing growing demand, the need for the data centers, it's absolutely something we continue to look at. They're not easy to execute on. They take a lot of time. But we're very comfortable in the infrastructure delivery world and understand what it would take to deliver those types of uses because we've been doing big infrastructure projects in all of these communities, frankly, that are building mini-cities. So we will continue to look at that. And it could turn out to be an opportunity we pursue, but a little too early to say definitively.

[Operator Instructions] We have reached the end of the question-and-answer session. And I would like to turn the floor back over to CEO, Dan Hedigan, for closing remarks.

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

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

Greetings, and welcome to the Five Point Holdings, LLC First Quarter 2026 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, acquisitions and prospects. Forward-looking statements represent Five Point's estimates on the date of this conference call and are assurance as to actual future statements to matters. 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, President and Chief Executive Officer.

Thank you. Good afternoon, and thank you for joining our call. I have with me today Mike Alvarado, our Chief Operating Officer and Chief Legal Officer; Kim Tobler, our Chief Financial 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 first quarter results and will provide an overview of the current state of our business, including our operating strategy and expectations for remainder of 2026. Mike will then discuss our Hearthstone Venture and other growth initiatives in more detail, after which Kim will review our financial results and outlook, we'll then open the line for questions. Turning to the first quarter. As expected, we began 2026 with a relatively quiet quarter from a land sales perspective and reported a consolidated net loss of $5 million. This result was driven primarily by the timing of land sales as we did not have any significant residential land closings during the quarter.

As we discussed in prior periods, our earnings are inherently tied to the timing of land transactions and we expect variability from quarter-to-quarter payment when the sales occur. From a revenue standpoint, we generated $13.6 million during the quarter, primarily from management services associated with our Great Park and Hearthstone segments. From a balance sheet perspective, we ended the quarter with total liquidity of $550.1 million, including $332 million of cash and cash equivalents. This level of liquidity continues to provide us with substantial flexibility to operate the business, manage through market cycles and pursue strategic opportunities, including the $40 million share repurchase that we announced today, which I'll discuss in more detail later in my remarks.

Operationally, activity across our communities remain steady. At the Great Park, builders sold 82 homes during the quarter, our Valencia saw 90 home sales. These volumes reflect a more measured pace than we saw at certain points in 2025. They demonstrate continued engagement from homebuyers even in a more challenging environment. As we look ahead, we continue to expect our earnings in 2026, we weighted toward the third and fourth quarters as land sales close and fee-based income Hearthstone grows.

Let me now turn to the market. The current market environment is unsettled, and consumer confidence has been impacted by a number of factors including geopolitical uncertainty stemming from the conflict in the Middle East, increased volatility in financial markets and mortgage rates that have risen again recently after trending down briefly. We're seeing the impact of these dynamics across the homebuilding sector as consumers have been hesitant to make large purchase decisions in uncertain environments. Prior to start the conflict in Middle East, we saw green shoots of improvement in consumer confidence driven in part by a reduction in mortgage rates, and we believe that markets and demand will recover following the resolution of the conflict.

These recent trends have translated into slower absorption rates and a more cautious approach by builders and committing to new land purchases in the near term. That said, since our communities are located in California markets are remain chronically undersupplied, we continue to see demand for our home sites. With our liquidity and balance sheet, we have the flexibility to adjust the pace and structure of our land sales in order to protect long-term value. I'll share more about our land sales during my community updates.

Let me now turn to the $40 million share repurchase that our board has approved. We believe this share repurchase gives us the ability to opportunistically deploy capital at an attractive return given that our shares are currently trading at a significant discount to book value. Importantly, the repurchase has been structured to preserve financial flexibility -- even after execution, we expect to maintain substantial liquidity to support our operations, development activities and strategic growth initiatives.

Let me now turn to our operating strategy. As a reminder, our strategy is built around 4 key elements. First, we are focused on optimizing home site value within our master planned communities by aligning land sales with homebuilder demand. In the current environment, this means being disciplined and patient. And in some cases, moderating the pace of land sales are using different land sale structures to maintain long-term value. Second, we are maintaining a lean operating structure and carefully managing our fixed costs and overhead. This discipline has been a defining characteristic of Five Point over the past several years, remains a core focus as we move forward.

Third, we are matching development expenditures with revenue generation. We continue to take a measured approach to infrastructure spending, ensuring that capital is deployed in near-term monetization opportunities. And fourth, we continue to expand our platform through capital-light growth initiatives, addition of the Hearthstone platform was an important step in this strategy, and we continue to evaluate new land development opportunities focused on managing capital dedicated to providing housing in select U.S. markets.

Our folks will remain on executing against these priorities as we navigate the current environment and position the company for long-term growth. Let me now provide some updates on our communities, starting with the Great Park Neighborhoods. At the Great Park, we continue to see steady builder activity with 82 homes sold during the first quarter. While absorption has moderated compared to prior periods as certain collections have sold out, builder interest in the community remains solid.

We continue to work closely with our gift builders on future land sales and program development. We currently have 12 active selling programs in the -- Great Park Neighborhoods with 7 additional programs planned to open later this year. These current and upcoming programs will ensure our gift builders can continue delivering a wide variety of housing options throughout Great Park Neighborhoods. We also recently completed the bidding process and have selected the builders for 5 new residential programs totaling approximately 28.5 acres.

These builders are currently in due diligence, and we expect to close these land sales by the end of this year. We anticipate pricing will be consistent with our most recent land sales. Next, I'll discuss Valencia, our other active community. Valencia is in the beginning phases of a long-term development time line and is poised to provide critical housing in the Los Angeles market. Builders sold 90 homes here during the quarter, reflecting continued progress at our first village in the community. We currently have 11 builder programs open and actively selling anticipate 6 new programs opened over the course of 2026.

We're also currently in discussions with builders about potential residential land sales in 2026, which may include a rolling option land sale structure that helps enhance our land values by reducing the carry cost for the builder. As I noted earlier in my comments, our balance sheet and liquidity allow us to be patient and to pursue creative solutions in order to optimize value obtained for our home sites.

As we discussed on our last call, the entitlement approvals we secured for Entrada South and Valencia Commerce Center in 2025, have significantly enhanced the long-term value and development potential of this asset. As a reminder, and Entrada South is expected to consist of approximately 120 net acres of residential land, over 1,300 market rate home sites and approximately 40 net acres of commercial land, Valencia Commerce Center is expected to include approximately 110 net acres and will cater towards industrial and light manufacturing-focused uses.

We are now working with our engineering teams to prepare the infrastructure plans and ministerial permits in order to start development of these 2 villages which we expect to start in the first half of 2027 with our first land sales projected to occur in 2028. We'll have more to report on our development activities for these 2 villages in the coming quarters. Additionally, we continue to advance approvals for 3 additional villages. Upon approval, these villages, together with our existing entitlements to bring our total to more than 10,000 in tattered home sites providing a substantial long-term pipeline of home sites to support L.A. County's chronically undersupplied housing market.

Turning to San Francisco. We're waiting for issuance of final permits to initiate the next phase of land development at Candlestick expect that this initial work will begin shortly. Our development is starting at a time when residential rents and home price in San Francisco are rising. The demand coming from AI and other tech companies in the commercial space seem to be growing quarter after quarter. Our intentions are to start engaging with potential large users who are ready to build on the momentum San Francisco has been generating and become an anchor in Candlestick rebirth as a thriving mixed-use urban community located directly under San Francisco Bay.

Before moving on, I just want to reiterate that across all of our communities, our approach remains consistent. We're focused on pacing development and homesite sales in a way that aligns with market conditions and optimizes long-term value.

Now let me touch on Hearthstone briefly. The integration of the Hearthstone team and operations have continued to progress well, and we expect our management fee revenues to increase as recently committed capital is deployed into new projects. Mike and Kim will provide additional detail on operational financial results for Hearthstone in their remarks.

Before I wrap up, let me provide an outlook for the rest of the year. We are reaffirming our guidance and continue to expect consolidated income in 2026 to be approximately $100 million, with our earnings weighted more heavily towards the second half of the year.

Let me conclude by saying that while the market environment has become more challenging in recent months, Five Point remains well positioned. We have a strong balance sheet, substantial liquidity and a deep inventory of well-located land in supply-constrained markets. These strengths provide us with the flexibility to navigate near-term uncertainty while continuing to focus on long-term value creation. We also have a very experienced team with seasoned professionals who have been through numerous market cycles and disruptions and have the depth of knowledge to navigate through these cycles in a constructive manner. As always, we'll continue to monitor market conditions directly and adapt as needed.

With that, I'll turn it over to Mike.

Thanks, Dan. Let me begin by discussing our Hearthstone Venture, which provides management services to residential land banking funds. As a reminder, Hearthstone is the manager for multiple separate fund vehicles where Hearthstone receives management fees and generally invest 1% of the equity required for the operations of each particular fund.

As Dan mentioned on our last call, -- we anticipated securing commitments from significant new capital partners for the Hearthstone platform during the first quarter, and we successfully closed 2 new funds for a total of $600 million in new equity commitments. This will provide the platform with the ability to deploy approximately $1 billion in capital with leverage. The Hearthstone platform currently has approximately $3.4 billion in assets under management and has over 30,000 homesites under control with 13 homebuilders in 16 states.

Needless to say, this platform is operating in an active housing markets across the U.S. and with the country's leading public homebuilders. We are very excited about the strength of the Hearthstone team and the potential to scale this business. Moving beyond Hearthstone, you have heard us discuss that we are exploring additional growth opportunities available to Five Point particularly in our core land development business by utilizing outside capital partners to joint venture with on these projects and to create additional fee-based revenue streams.

This is a familiar structure for us as we have used it successfully at the Great Park. Our confidence in finding future opportunities lies in the fact that the U.S. homebuilding market is anchored by large national builders with significant and recurring demand for finished homesites. The numbers are substantial to say the least, especially when it is widely reported that these numbers continue to reflect a significant shortfall compared to demand. Based on the home deliveries reported by the larger public homebuilders, the size of the addressable market is north of 250,000 home sites per year.

This demand should create the underpinnings of a durable and growing opportunity for institutional land developers like Five Point. We are continuing our work to identify opportunities will provide recurring management fees and attractive returns on investment, and we expect to have more to report on these initiatives on future calls.

Now let me turn it over to Kim, who will report on our financial results for the quarter.

Thank you, Mike. As Dan shared, as expected, this was a quiet quarter without land sales, and we recognized a small loss of $5 million. Our first quarter loss of $5 million was largely made up of the following components: we had $13 million of management services revenue, $6.9 million associated with our management of the Great Park Venture, $3.5 million of that, which was incentive compensation and $6.1 million associated with Hearthstone.

There is $6.9 million of management services costs and expenses associated with that revenue. We recognized a small loss from our unconsolidated entities of $145,000 largely because we did not have any sales at the Great Park Venture. Our first quarter SG&A was $14.7 million, consistent with the prior year first quarter of $14.8 million. Finally, we recognized $900,000 of tax benefit.

Now a few words about our cash and liquidity. As Dan mentioned, we ended the quarter with $332.6 million of cash as well as $217.5 million of availability on our revolving credit facility, resulting in total liquidity of $550.1 million. At the end of the quarter, our debt to total capitalization ratio was 16.3%, and our net debt was $117.4 million. I'd also like to note that during the quarter, we paid down principal of $40.1 million in accrued and current interest of $6.2 million with respect to our related party EB5 reimbursement obligation.

This leaves approximately $18.5 million due on this obligation. I would like to now provide a little more information regarding our Hearthstone Venture. First, Mike shared that as of the end of our first quarter, the assets under management were $3.4 billion. When considering this number, I would like to note that we do not earn fees on a portion of the AUM that is attributable to builder deposits. As of March 31, such builder deposits were approximately $600 million which leaves $2.8 billion of fee-paying assets under management. Also, I want to mention that historically, Hearthstone's asset management fees have been made up of a monthly base fee plus a deferred performance fee.

The performance fee is based on overall returns at the end of the fund or tranches within the fund. I mentioned this because you will see some volatility in the implied fee associated with changes in estimates of the performance fees and true-ups when funds or tranches are complete. Finally, as Dan mentioned, we are reaffirming the guidance we gave at the beginning of the year, and we expect to end the year with approximately $100 million in earnings with the expectation that we will have material sales in the third and fourth quarters. Dan also mentioned that our Board has approved a share repurchase of up to $40 million. While we are not predicting at this time over what period the share repurchase will be effectuated -- we anticipate that we will finish the year with more than $300 million in cash and total liquidity of over $500 million even after taking share repurchases into account.

With that, let me turn it back to the operator, who will open the line for questions.

[Operator Instructions] Our first question comes from the line of Alan Ratner with Zelman & Associates.

First question, maybe I'll start with Hearthstone. Just listening to homebuilder conference calls this quarter, I think land banking has been a pretty topical issue that investors are focusing on. And I'm curious if you could just talk through a little bit how your typical land banking deals with builders are structured in terms of deposits, in terms of -- are they monthly payments for interest or quarterly annual -- and have you seen more recently any changes in appetite from builders in terms of their appetite for land banking?

Alan, Dan. Thank you for the question. I'm going to give this one to Kim, if you don't mind. He can give you a little more detail. .

Alan, just quickly without getting too granular, our land banks use a contract where there's a monthly option payment. The builder has the right to buy the land at the cost that we purchased to that plus any improvements that were made during the life of the contract. So that's the typical arrangement that we have.

Got it. And have you seen any changes in appetite from builders? I know it's a short time period, but I guess over the last few months here, has there been any kind of changes in what they're seeking in terms of terms or they've been pretty consistent?

No, very consistent. And we're still seeing reasonable interest and progress.

Great. Another question shifting to the development side. With fuel prices on the rise here, I'm curious, have you started to see any inflation creeping back into your development expenses? Is that something you about or focused on? And just generally, if you could talk more broadly about what you're seeing on inflation, that would be great.

Thanks, Alan. The -- right now, I think from the standpoint of your question on fuel cost is it's a good time for us. We're not actively grading -- we won't be starting an active grading up in Valencia the end of the year. So that hopefully gives us a real opportunity for these markets to stabilize on the fuel side. We are doing some grading at the -- Great Park, but pretty much most of our work have been done there, so we're kind of doing the fine grading. So we haven't really seen any major impact to any costs in our budgets caused by fuel -- but obviously, we'll have more to say or think about that as we get towards the end of this year and we start some active grading. Overall, though, we are not seeing any additional increases in our budgets right now for our land development.

[Operator Instructions] We have reached the end of the question-and-answer session. And therefore, I'd like to turn the floor back over to CEO, Dan heading in for closing remarks.

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

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

Greetings and welcome to the Five Point Holdings' Fourth Quarter and Year-End 2025 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, acquisitions 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 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 over the call to Dan Hedigan, President and Chief Executive Officer.

Thank you, Vaughn. Good afternoon, and thank you for joining our call. I have with me today, Kim Tobler, our Chief Financial Officer; and Leo Kij, our Senior Vice President of Finance and Reporting. Stuart Miller, our Executive Chairman; and Mike Alvarado, our Chief Operating Officer and Chief Legal Officer, are joining us remotely.

On today's call, I will review our fourth quarter and full year 2025 results, which marked another important milestone for Five Point. I'll discuss our operational progress during the year, highlight several major accomplishments across our communities and outline our strategic priorities as we move into 2026. Ken will then walk through our financial results in more detail and review our outlook. We'll open the line for questions following our prepared remarks.

Turning first to our results. I'm very pleased to report that 2025 was another record year for Five Point despite challenging market conditions. In the fourth quarter, we generated $58.7 million in net income, resulting in annual consolidated net income of $183.5 million, exceeding our prior record set in 2024. Our net income for the year exceeded the revised guidance we issued in Q2 2025 by roughly $6 million, reflecting our team's expertise and consistent execution across our platform, disciplined capital management and continued pricing strength at the Great Park.

Beyond our strong financial results, we also obtained critical entitlement approvals during the fourth quarter at both Valencia and the Great Park. I'll provide additional detail later in the community updates. These entitlements will enhance our near-term cash flows by creating a foundation for the company's future development. It goes without saying that we could not have hit these operational and financial milestones over the past few years without the dedicated and focused efforts of our small and efficient hard-working team.

During the 3 months ended December 31, 2025, we were able to close meaningful land sales of both of our active communities. In Valencia, we closed an industrial land sale consisting of 13.8 acres for a purchase price of $42.5 million. At the Great Park, the venture closed 3 new home programs with 187 homesites on 19.7 acres for an aggregate base purchase price of $181.5 million. As a result of Great Park operations during the quarter, we received $73.6 million in distributions and incentive compensation payments from the Great Park Venture.

Let me now talk about the market. 2025 unfolded against the housing market that remained challenging, shaped by economic uncertainty, elevated interest rates and affordability constraints. Even so, our results underscore the resilience of our assets, which in part derived from the consequences of operating in supply-constrained California markets. At the Great Park, homebuyer and builder demand remained strong throughout the year, allowing us to close the sales on 13 different programs consisting of 920 homesites while maintaining -- while also maintaining pricing discipline. In Valencia, although home sales volumes were more modest and we like to delay residential land sales to our guest builders, the long-term value of the asset was significantly enhanced by securing major entitlement approvals that will support the next phase of our residential and industrial development activity.

As a number of public homebuilders have recently noted, homebuyer demand nationally has continued to be tempered by ongoing affordability headwinds. We have seen this impact more in Valencia than in the Great Park, but we believe that demand will continue to be supported by the persistent undersupply of housing in our core markets. As we look ahead, we expect that despite intermittent challenges from interest rates or other factors that affect consumer sentiment, we should see growing buyer confidence and moderating interest rates translate into improving demand for well-located homesites.

Against this backdrop, in 2025, we significantly strengthened our company. From a financial perspective, during the year, we materially enhanced our balance sheet and capital structure. We refinanced our senior notes, issuing $450 million of 8% notes due October 2030 and repaying another $75 million, which will reduce our annual interest expense by approximately $20 million. Since January 2024, we have paid down a total of $175 million in debt. Additionally, we expanded and extended our revolving credit facility to $217.5 million with a new maturity of July 2029. These actions greatly reduced our near-term refinancing risk while preserving substantial liquidity.

We ended the year with cash of $425 million and total liquidity of $643 million. Importantly, our balance sheet and liquidity provide us with exceptional flexibility around capital allocation, including the ability to engage growth opportunities, which I will discuss later, as well as the ability to potentially return capital to shareholders over time. To be clear, however, our first priority is to pursue our growth strategy as we seek to expand recurring revenues.

From an operating standpoint, 2025 was defined by securing critical entitlement approvals in Valencia and the Great Park, steady demand at the Great Park, continued progress on land development activities for the next phase of infrastructure at Candlestick and the successful closing and integration of the Hearthstone land banking platform, which added a pivotal new earnings stream to our business.

Before turning to community updates, I want to briefly review our operating and growth strategy, which continues to guide our decision-making. Our strategy rests on 4 core pillars. First, maximizing the value of our existing communities. This means aligning land sales with builder demand, pacing development appropriately and maintaining the flexibility to be patient when market conditions warrant it. Second, maintaining a lean operating structure. Even as we've grown earnings and expanded our platform, we remain disciplined in managing overhead and fixed costs. Third, matching development spending with revenue generation, ensuring capital is deployed efficiently and not too far in advance of monetization. And fourth, expanding our platform through targeted growth initiatives, most recently through the addition of Hearthstone and its short-term land banking business.

Let me now provide you with some updates on our communities, starting first with the Great Park Neighborhoods. During the fourth quarter, builders in our Great Park community sold 78 homes versus 187 in Q3. This decrease in sales is primarily attributable to seasonality and reduction in available home supply as existing collections sold out. We currently have 12 actively selling programs in the Great Park Neighborhoods with 8 additional programs planned to open later this year. These current and upcoming programs will ensure our guest builders can continue delivering a wide variety of housing options throughout Great Park Neighborhoods.

During the year, we closed multiple large residential land sales, many of which incorporated price participation structures designed to balance near-term certainty with long-term upside. The 3 programs we closed in the fourth quarter utilized this price participation model. An average base purchase price for these fourth quarter sales was $9.2 million per acre before taking into account potential price participation. These transactions spoke for our ability to adapt structure without sacrificing value. We currently are in the bidding process with builders for 4 new residential programs totaling approximately 27 acres. We expect to complete the bidding process and close these land sales by the end of this year.

Importantly, we also received approval from the City Council for new entitlements that will allow us to convert approximately 100 acres of commercial land into additional market rate homesites, further advancing the value of this community.

Next, I'll move to Valencia, our other active community. Valencia is still in the early stages of its development and has many future phases of land delivery ahead of it, which will enable us to provide much-needed housing in the Los Angeles market. Home sales showed improvement during the quarter as our guest builders sold 70 new homes versus 50 in Q3.

During the fourth quarter, 2 programs sold out in Valencia, and we now have 10 builder programs open and actively selling. Additionally, we anticipate 6 new programs will open during 2026, offering prospective homebuyers additional home product options. As I mentioned, we closed our first significant industrial land sale in over 15 years at Valencia during the fourth quarter, consisting of 13.8 acres for a purchase price of $42.5 million. In order to optimize land values, we elected to delay residential land sales in 2025. We are currently talking to our guest builders about potential land sales in 2026.

Although we did not complete any residential land sales, 2025 was a transformational year for Valencia as we received unanimous approval from Los Angeles County Board of Supervisors for the Entrada South and Valencia Commerce Center entitlements. Like California and Valencia, in particular, have a long history of land use litigation, challenging new housing projects, which unfortunately, we've had to build into our business planning, we're happy to report that no litigation was filed to challenge the approval of these communities, an outcome that will allow us to accelerate our development time line.

Entrada South is expected to consist of approximately 120 net acres of residential land, over 1,300 market rate homesites and approximately 40 net acres of commercial land, while Valencia Commerce Center is expected to include approximately 110 net acres and will cater towards industrial-focused uses.

We're also pursuing approvals for 3 additional villages. When approved, these villages, combined with existing entitlements will provide over 10,000en titled homesites, creating a deep pipeline for future land sales to help meet demand in the county's chronically undersupplied housing market. These approvals will substantially enhance the long-term value of Valencia and will position it to become an increasingly meaningful contributor to our results.

Turning to San Francisco. We're finalizing engineering for the next phase of infrastructure and we're working with local agencies and ministerial infrastructure permits for the initial site work. We still expect to begin this initial site work at Candlestick in the first half of 2026.

Now let me discuss Hearthstone. We closed the acquisition in Q3 of 2025 and the Five Point and Hearthstone teams hit the ground running. I want to reiterate how excited we are to have this incredible talented and experienced group from Hearthstone as part of Five Point. At closing, Hearthstone had approximately $2.6 billion of assets under management and that figure has since grown to approximately $3.4 billion. Additionally, we anticipate securing $300 million to $500 million of newly originated capital commitments in the first quarter. In 2025, Hearthstone contributed $11.8 million of management fee revenue and $3.5 million of net income to Five Point's consolidated results.

Beyond the near-term financial contribution, Hearthstone considerably expands our relationship with institutional capital partners and builders and provides a scalable platform for fee-based earnings growth. With Hearthstone, Five Point now participates in both long-duration master planned community development and shorter duration land banking, creating a more balanced and diversified earnings profile. Now that we are well into the process of integrating Hearthstone, we're exploring additional revenue growth options available to Five Point. We're currently evaluating middle duration opportunities in the land ecosystem in order to grow a durable platform for the future. While I can't provide further information at this juncture, our management team is focused on leveraging our experience, balance sheet and capital relationships to pursue opportunities utilizing outside capital partners to create additional fee-based revenue streams using an asset-light approach. We expect to have more to report on these initiatives on future calls.

Before I wrap up, let me provide an outlook for 2026. Based on what we have seen today, we expect consolidated net income in 2026 to be approximately $100 million. We expect our earnings will be weighted more heavily towards the second half of the year as land sales and fee-based income accelerate. The volume and timing of our planned land sales are largely a reflection of our strategy of matching sales to absorption of homes in our communities in order to optimize land value.

Let me conclude by saying how proud I am of what our team accomplished in 2025. We delivered record earnings, strengthened our balance sheet, advanced major entitlements and expanded our platform in a meaningful way, all while maintaining a disciplined and patient approach to capital deployment. Five Point enters 2026 with exceptional liquidity, a deep pipeline of entitled land and a broader set of tools to create value across the land development cycle. We believe this positions us well to continue delivering consistent performance and long-term value for our shareholders.

With that, I'll turn it over to Kim to walk through the financial details and outlook in more depth.

Thank you, Dan. As Dan shared, we finished a challenging year strongly and are positioned to effectively bring land in our existing communities to market, grow our Hearthstone land banking platform and seek other growth opportunities in coming years. I'm going to review our fourth quarter and annual results for our fiscal year ended December 31, 2025. I will then conclude with some guidance on what we are expecting in 2026.

In the fourth quarter, we recognized $58.7 million of net income. This is made up of the following components: we added $42.5 million industrial land sale at our Valencia community and reported a 31.25% gross margin. We also had $33 million of management services revenue, $24.6 million associated with our management of the Great Park Venture and $21.2 million of which is incentive compensation. And finally, $8.4 million associated with Hearthstone.

Our fourth quarter SG&A was $16 million. We recognized $44.9 million of equity in earnings from our unconsolidated entities, $44.2 million of which was generated by the Great Park Venture. The equity and earnings from the Great Park Venture resulted from net income of $128.2 million, which was largely attributable to land sales revenue of $181.5 million from closings in the quarter, for which we reported a 75.5% gross margin. Finally, we recognized $8.9 million of tax expense.

As previously noted by Dan, our results for 2025 improved relative to 2024, demonstrating the impact of the sustained focus and operational discipline we have maintained over the past several years. For the year 2025, we recognized $183.5 million in net income that is made up of the following components: our fourth quarter industrial land sale at Valencia that I previously mentioned. We also had $65.3 million of management services revenue, $53.5 million associated with our management of the Great Park Venture, $40 million of that, which is incentive compensation, and $11.8 million associated with Hearthstone's 5 months of activity.

2025 SG&A was $60.6 million, which was more than 2024 SG&A of $51.2 million. That increase was largely attributable to the Hearthstone acquisition costs, increased share-based awards granted over the past 2 years, and performance-based awards reaching established goals. We recognized $203.6 million of equity in earnings from our unconsolidated entities, largely made up of $201.3 million from the Great Park Venture. The equity in earnings from the Great Park Venture was attributable to Five Point share of the venture's net income of $584.5 million, which was derived from revenues of $825.7 million. Additionally, we recognized $28.9 million of tax expense.

In addition to what Dan shared about our cash and liquidity, I also want to add that at the end of the year, our debt to total capitalization was down to 16.3% compared to 9.6% at the end of 2024.

Now a few words about our Hearthstone operations. As Dan mentioned, we ended the year with approximately $3.4 billion of assets under management, which is tracking with what we had expected. In the fourth quarter, Hearthstone generated revenue of $8.4 million and net income of $3 million. For the 5 months of 2025 that Hearthstone was part of Five Point, it generated revenue of $11.8 million and net income of $3.9 million. I'd like to note that included in calculating that income was intangible asset amortization associated with the purchase accounting of approximately $800,000. We are expecting to exceed $4 billion of assets under management before the end of 2026 and expect revenue and net income to grow commensurately.

Last year, I recounted the financial progress that Five Point had made since 2022. I'd like to review that again while including our 2025 results. At the end of 2022, we reported a $34.8 million net loss and finished the year with $131.8 million of cash and senior notes outstanding of $625 million. For 2023, we reported $113.7 million of net income and finished the year with $353.8 million in cash and senior notes still of $625 million. For 2024, we reported $177.6 million of net income. We paid our senior notes down by $100 million to a balance of $525 million and ended the year with $430.9 million of cash and total liquidity of $555.9 million. This year, we are reporting $183.5 million in net income. We paid our senior notes down by an additional $75 million to a balance of $450 million and are now ending the year with $425.5 million of cash and total liquidity of $643 million. We are confident in the actions we have taken to strengthen our financial condition as well as the successes we have recently reported with additional entitlements at the Great Park and Valencia.

I'd like to conclude by giving some context to the guidance that Dan shared in his remarks. At the beginning of 2026, we have total -- we have a total of approximately 155 net acres of residential land remaining at the Great Park. We also have approximately 55 net acres of residential land, 11 net acres of retail land and 13 net acres of industrial land available at Valencia. These numbers do not include the recently approved entitlements at Entrada South and Valencia Commerce Center that Dan mentioned. We expect to start generating sales from these recently approved entitlements early in 2028.

In 2026, we currently expect to sell 20 acres of land in Valencia and 50 acres of land in the Great Park. These sales, together with the contribution of the Hearthstone activities, is expected to result in approximately $100 million of net income for 2026. We expect the majority of the income to be earned in the second half of the year and are expecting a small loss in the first quarter of the year since we are not planning to close land sales in that quarter.

In closing, our guidance reflects a challenging housing market, and our strategy remains focused on discipline. By aligning land sales with home absorption, we are projecting -- protecting value, managing risk and positioning the business for normalized demand over time. We believe this approach balances near-term caution with long-term opportunity.

With that, let me turn it back to the operator, who will now open it up for questions.

[Operator Instructions] Our first question comes from Alan Ratner with Zelman & Associates.

Congrats on all the progress in 2025, really impressive results in a tough market, tough housing market, at least. So a lot to run through. I guess just thinking about '26, and I appreciate the guidance there, especially on the revenue and the income generation. I'm just curious when you think of your...

Alan, we lost you. Can you repeat the question?

Can you hear me okay? Can you hear me now guys?

We couldn't hear Alan.

Can you hear me now?

Hear you, but we could not hear Alan. Alan, is that you?

Alan, can you hear the speakers?

I can hear the speakers. Can you hear me?

We hear you now, Alan.

Okay. Sorry about that. I don't know what happened. So I will start over. And first off, just congratulating you guys on all the great progress you made in '25. So what I was hoping to get, and I appreciate the guidance on the income drivers for '26. When you look, I guess, specifically at the 2 wholly owned projects, Valencia and San Francisco, I was hoping you could walk through a little bit what the expectation is for development expenditures in '26 and beyond. I know you mentioned the new entitlements on Valencia. So curious if we should expect to see a ramp in development spending there. And in San Francisco as well, if you can kind of quantify the ramp there now that you're expecting to begin some work there.

Thanks, Alan. Just as it relates to San Francisco, we're in the process of permitting right now, which is requiring a great deal of capital. And we also have permitting that's going to be done at Valencia as well. What I'd suggest you use is for both of those projects, about the same as the capital we spent in the current year, which is about $125 million. So that will be spread between the projects and continue at that pace. We're trying to keep that pace constant as we increase the development in both places.

Got it. That's helpful. And then I think -- I just want to make sure I'm understanding the entitlement approvals that you guys got. You walked through the Valencia one. I think you also have a reference to approvals in Great Park as well. And I wasn't sure, is that additive to the acreage that you guys have previously disclosed as far as what remains saleable in Great Park? Or is that just part of the main...

Alan, Dan here. Can you hear me?

I can. Yes. I can hear you.

Alan says he can hear you.

Alan, can you hear me?

Yes, I can hear you.

Alan, are you there?

Yes. I am.

We're having a little audio problem here. Okay. On your question on -- I think I heard most of your question on Great Park. So Great Park, I think we've been talking about it. We have 100 acres of land that was identified for commercial uses. But we have worked with the city because they were also identified in their RHNA plan. These sites were identified for RHNA units. So we have actually worked with them to convert that commercial to residential uses. So that is -- I think you're asking, that's really additive to anything we had before.

Got it. So it was 100 acres and now you're up to what you said 150 based on this new approval?

I'm sorry, I missed part of that, Alan.

You were at 100 acres and now with this RHNA approval, you're at 150. Is that correct?

No -- I'm sorry, yes. So what that is when -- we have land that we have -- we have existing residential land that we have not transacted on. So we still have additional original entitlement. The 100 are additive to that. And so Kim...

Alan, just to be clear, we have 155 acres left at the Great Park. The 55 was already residential. And that's what was left of the residential that we were working our way through. The 100 was commercial land that has now been redesignated as residential as a result of the entitlements.

There are no further questions at this time. That concludes our question-and-answer session. I would like to turn the floor back over to Dan Hedigan for closing comments.

Well, first, I apologize for that audio problem we're having. So I appreciate everyone's patience. 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.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. Please disconnect your lines and have a wonderful day.

Greetings, and welcome to the Five Point Holdings, LLC Third Quarter 2025 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, acquisitions 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 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, President and Chief Executive Officer. Over to you, sir.

Thank you. Good afternoon, and thank you for joining our call. I have with me today Mike Alvarado, our Chief Operating Officer and Chief Legal Officer; Kim Tobler, our Chief Financial 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 review our Q3 results, which reflect another profitable quarter for Five Point as we continue to build on our track record of consistent quarterly earnings. I'll also provide an update on our current operations and outline our strategic focus as we move towards the end of 2025. Then Mike will discuss the integration of Hearthstone into our platform. Finally, Kim will review the details of our financial results, address the successful refinancing of our senior notes and discuss our outlook for the balance of the year. After our prepared remarks, we'll open the line for questions.

Turning to the third quarter. I'm pleased to report another profitable quarter for Five Point. We generated consolidated net income of $55.7 million, continuing our pattern of steady earnings performance. This quarter's results were primarily driven by strong performance from our Great Park Venture, which sold 326 homesites on 26.6 acres for an aggregate base purchase price of $257.7 million, resulting in net income for the venture of $201.6 million. Our share of those earnings was $69.5 million, and the Venture made distributions of $216 million, of which Five Point received $81.8 million.

From a balance sheet perspective, we ended the quarter with total liquidity of $47.6 million, comprised of cash and cash equivalents of $351.1 million and borrowing availability of $125 million under our unsecured revolving credit facility.

During the quarter, we also took significant steps to strengthen our capital structure and position the company for long-term growth. We closed the acquisition of a 75% ownership interest in our new Hearthstone Residential Holdings land banking venture for $57.6 million. We issued $450 million in new 8% senior notes due 2030, and we used the proceeds from the offering, along with cash on hand to fund the repurchase and redemption of our prior $523.5 million, 10.5% senior notes due 2028. The prior notes were due to step up to 11% coupon in November. The step down in coupon will benefit the future cash flows for the company.

Additionally, Moody's upgraded our corporate credit rating and senior notes rating to B2 with a stable outlook, underscoring our financial resilience and improving credit profile. And last week, we upsized our revolving credit facility from $125 million to $217.5 million and extended the maturity by two years to July 2029. Reducing the outstanding principal on our notes while maintaining substantial liquidity to allow us to operate our business and execute on our growth strategy were important goals for us this year, and we're pleased to have been able to achieve them as planned.

Let me now share our outlook on the market. Our third quarter performance was underpinned by resilient homebuyer and builder demand at the Great Park, which remains solid despite continuing pressure from higher interest rates and affordability headwinds. While buyers remain somewhat cautious, the underlying imbalance between housing supply and demand in this core California market continue to support our land sale activity and our disciplined lot sales strategy allowed us to capitalize on that environment.

Looking ahead to the rest of 2025 and into 2026, we remain cautiously optimistic. We expect improvement in buyer confidence if mortgage rates ease and affordability begins to loosen. Given the structural undersupply in our markets, we believe the long-term fundamentals remain in our favor. We anticipate a gradual rebound in home sales activity as the rate environment normalizes, which we believe will result in demand from builders seeking to maintain a pipeline of home sites.

On my last call, I indicated that we expected to end the year with net income consistent with our 2024 earnings, and we still believe we're on track to meet that guidance. That said, the housing landscape continues to evolve, and we are closely watching how shifting economic factors may influence buyer sentiment and buyer activity. Kim will provide more details on our guidance for the remainder of 2025 during his remarks.

Our performance in the third quarter demonstrates the strength of our operating model and the effectiveness of our disciplined approach. As we move into the final quarter of the year, we remain focused on the same four key strategic priorities that have guided our progress throughout 2025.

First, optimizing the value of our home sites within our premier master planned communities by aligning land sales with homebuilder demand. Even as national housing demand has moderated amid higher interest rates, our California markets remain chronically undersupplied, sustaining long-term builder interest. That said, because we don't have to sell when home sales absorption slows, optimization sometimes means moderating land sales with the goal of maintaining long-term value in these communities. Second, maintaining our lean operating structure by carefully managing fixed costs and overhead. We continue to demonstrate the growth and efficiency can go hand-in-hand even as we integrate Hearthstone into our platform. Third, matching development expenditures with revenue generation, ensuring that capital deployment remains disciplined and aligned with near-term monetization. And fourth, pursuing selective growth opportunities through acquisitions, joint ventures and strategic relationships like our Hearthstone investment, which we expect to be accretive to earnings.

Let me now provide you with some updates on our communities, starting with our Great Park neighborhoods community. At the Great Park, builders sold 187 homes during the quarter, an increase from the 112 homes sold in quarter 2. We currently have six active selling programs with several expected to sell out by early 2026. 10 additional new programs are anticipated to start sales either later this year or in early 2026. I previously reported that we had completed bidding and contracting for nine new residential programs totaling 572 homesites. We closed the sale of five of those programs consisting of 326 homesites in the third quarter. Shortly following quarter end, we closed the sale of another two programs consisting of 113 home sites. We anticipate one other program to close later in the fourth quarter. We anticipate the final program consisting of 59 homesites will close in early 2026.

These recently closed land sales were modified to include base purchase price paid at closing range from approximately $8.5 million to $11 million per acre, plus price participation rights that can allow us to capture upside in the event there is an improving market at the time of the home sales, the homes are sold to homebuyers.

Now let me discuss Valencia, our other active community. In Valencia, builders sold 50 homes during the quarter compared to 47 homes in the second quarter. We currently have eight actively selling programs with eight new programs anticipated to open over the next few quarters. On the commercial side of our Valencia community, following the end of the quarter, we closed on the sale of a 15.8-acre industrial site. We also continue to advance regulatory approvals for our next phase of development are expected to add approximately 8,900 homesites and 183 net acres of commercial land. These approvals will allow us to continue delivering much needed housing to one of California's most supply-constrained housing markets.

Turning to San Francisco. We are finalizing engineering for the next phase of infrastructure and expect to begin construction in the first half of 2026. We are very focused on optimizing product design for the San Francisco market and remain engaged in discussions with potential capital sources to advance development of our Candlestick and Shipyard communities.

As I mentioned earlier, we closed the Hearthstone acquisition in July, marking a major milestone of Five Point's strategic evolution. I want to welcome the Hearthstone team to the Five Point family. We are generally excited to have them join Five Point as this acquisition gives us an established national platform providing capital solutions to homebuilders. Mike will discuss Hearthstone further in his remarks.

Let me conclude by saying that we are very pleased with our progress through the first nine months of 2025. Our third quarter results reflect strong execution, continued profitability, balance sheet strength and meaningful strategic advancement through the addition of the Hearthstone platform. Even as the broader housing market continues to adapt to interest rates and affordability challenges, Five Point remains well positioned financially, operationally and strategically to continue creating long-term value for our shareholders.

With that, I'll turn it over to Mike to provide more color on how Hearthstone fits into our long-term vision.

Thanks, Dan. As Dan mentioned, the Hearthstone acquisition was not only a first step towards our growth strategy, but a meaningful one to set us up to be an institutional platform that can own, develop and finance land at various stages in the development cycle. Immediately after the closing of this acquisition, we focused on expanding Hearthstone's capital relationships, pulling resources and communication lines together to increase the builder deal flow to Hearthstone and enhancing its already strong operational controls. All of these efforts will be ones that we will remain focused on as we work through the integration, but we are off to a strong start.

First, we are engaged in meaningful discussions with capital providers to continue to expand the assets under management for the Hearthstone Venture. When we first started talking with Hearthstone, they had approximately $2.6 billion of assets under management. And today, we are at approximately $3 billion and growing with ongoing discussions for additional investments from new capital sources of $300 million, which could grow to over $1 billion. As a reminder, a substantial majority of capital deployed through Hearthstone's land baking business will be provided by third-party capital sources, while Hearthstone's returns will largely be generated by recurring asset management fees. Hearthstone's current portfolio spans 16 states and approximately 33 market areas, geographically diversifying the investment base of Hearthstone's lot option program.

Second, builders have been contacting us with an eye towards expanding their lot option financing deal flow. As I noted on our last call, it's been reported that over 70% of land pipelines for homebuilders are optioned rather than purchased outright and that the public homebuilders buy and develop over $35 billion in land per year. We believe our venture has the opportunity to capture a meaningful portion of that market, and our recent communications with builders appear to justify that belief.

Third, we have already started integrating our public company level controls of our financial and operational reporting into the Hearthstone venture, and we intend to bring technological enhancements to the platform to allow us to grow this business in an efficient and effective manner. Capital providers are selective when choosing to invest with operators, emphasizing strong risk mitigation controls over growth at an all-cost approach.

Hearthstone has a proven track record of disciplined underwriting and their focus on risk managed capital deployment aligns with Five Point's commitment to delivering strong long-term returns for shareholders. While we intend to scale this business, we intend to do so with the same discipline that Hearthstone has done for many years and to bring the full scale of our public company platform to Hearthstone's operations.

Five Point now has two legs of the land development cycle stool. We have top-tier master planned communities in supply-constrained markets that will generate revenue for decades. And now we have a short-term land financing program through Hearthstone that we anticipate will increase our fee-based income substantially in the coming years.

Next, we intend to focus on our midterm land strategy, where we will continue to take an asset or investment-light approach, bringing in capital partners to acquire residential land that is neither generational in nature nor short term that fits the typical land bank model. This midterm land is what the homebuilders have traditionally held on their balance sheets as a necessary element of their inventory in key markets.

As we have already reported, this is a market segment currently unserved by traditional capital providers. With the undersupply of homes and home sites in this country, particularly in the metropolitan areas that are experiencing growth, we believe that capital will be available to pursue and execute on these opportunities.

In short, we are extremely excited about welcoming the Hearthstone team to Five Point and to taking the next steps to position Five Point to be a meaningful participant in the land development ecosystem and to generating long-term sustainable growth for our company.

Now let me turn it over to Kim to report on our financial results for the quarter.

Thank you, Mike. Dan has provided a good summary of the financial results for the third quarter. I'm now going to review our results for the 9 months ending in the third quarter and provide some additional information about the Hearthstone venture since this is the first time that information will be included in our 10-Q. Then I will conclude by updating our earnings guidance for what we are expecting for the balance of 2025.

We recognized $158.7 million -- excuse me, for the nine months ended September 30, we have recognized $124 million of net income. The nine months net income is made up of the following significant components. We recognized $158.7 million of equity and earnings from our unconsolidated entities, $157.1 million of which came from the Great Park Venture. The equity and earnings from the Great Park Venture was attributable to the venture's net income of $456.3 million, which resulted from land sales revenue of $613.6 million and at approximately a 75% gross margin. The sales revenue I just noted includes $13.3 million of price participation consideration. Additionally, the venture also had $17.1 million of profit participation revenue. Five Point added $32.3 million of management services revenue, $18.3 million of which is associated with the incentive compensation from the Great Park Venture and $3.4 million is associated with two months of the Hearthstone Venture operations.

Our SG&A for the first nine months was $44.6 million. We had interest income of $13.5 million. And finally, we recognized $20.1 million of income tax for the nine months.

Dan shared our liquidity and cash position and the improvements that we have accomplished this last quarter with the refinancing and $75 million reduction in our senior notes and the recent upsizing of our revolving credit facility. We have been working very hard to position the company for long-term growth and flexibility. Our new senior note covenant package is substantially similar to our prior notes with the exception that the prohibition against dividends and stock buybacks has been removed. Those actions are now subject to common covenant limitations. I'd like to emphasize that with the rate improvement and reduced principal, we are saving over $20 million a year in cash flow.

I'd also like to note that in September, we received initial senior notes and corporate ratings of BB- and B, respectively, from Fitch Ratings. Moody's ratings upgraded us to B2 for both our senior notes and corporate ratings, as Dan noted, and S&P Global Ratings reaffirmed our ratings at B+B.

Now let me turn to the Hearthstone transaction. On July 31, the company acquired substantially all of the assets associated with the asset and investment management business of Hearthstone Inc., a provider of capital solutions to the U.S. homebuilding industry. We purchased 75% of the outstanding Class A units of the Hearthstone Venture for an aggregate purchase price of $57.6 million, while Hearthstone Inc. and affiliate trust and certain employees of Hearthstone retained the remaining 25% of the outstanding Class A units all of the Class B units and certain other less significant distribution priority rights. The Class B units are temporary in nature and will be extinguished proportionally as and when the company contributes additional capital to the Hearthstone to grow its business.

This acquisition represents a significant expansion of Hearthstone's capabilities, positioning Five Point as an active manager of capital solutions for the homebuilding industry through investment fund structures while positioning the Hearthstone Venture to scale its platform. We are accounting for the transaction as a business combination and have identified the assets acquired, liabilities assumed and noncontrolling interest held by the legacy Hearthstone owners of the acquiree and recorded them with limited exceptions at the fair market value on the acquisition date.

You will note that we have preliminarily recorded $69.8 million of goodwill. The goodwill primarily represents the value of expected operational synergies, enhanced scale and market presence, the assembled workforce and other intangible benefits expected to be realized from integrating the Hearthstone Venture platform with Five Point's existing operations. While we don't expect any changes to the preliminary fair value recorded, the accounting rules allow for changes during the measurement period, which will not extend beyond one year from the acquisition date. We are excited about the growth opportunities that the Hearthstone Venture presents.

As Dan mentioned, we continue to expect to close out 2025 with net income close to last year's income of $176.3 million. As he described in October, we already closed a commercial land sale in Valencia and residential land sales in the Great Park. And we have an additional land sale in the Great Park expected to close later in the fourth quarter. These sales, together with Five Point and Hearthstone's continuing management services revenues will all contribute to a strong finish in 2025.

With that, let me turn it back to the operator, who will now open it up for questions.

[Operator Instructions] The first question comes from the line of Alan Ratner from Zelman & Associates.

Congrats on all of the progress in the quarter. Really great to see and thank you for all the information so far.

Dan, I guess first question, obviously, Hearthstone is kind of the topic you guys spent a lot of time discussing. And I'm curious, since the deal closed, we've gone through a number of homebuilder earnings reports thus far. And we've seen a fair amount of walkaways on option deals from builders, and I know there's a distinction between land banking and traditional options.

But I'm just curious, a, as you kind of jump in here into Hearthstone's business and begin to work with existing option deals and bank deals that were in place before you acquired them, how have those discussions been going? I'm assuming there are situations where builders are coming to you guys looking to either renegotiate terms or pricing, et cetera. So just curious if you can comment a little bit on how the existing book of business is going.

And then I guess, just going forward, how should we think about the revenue and income stream? I mean I see the table in the release, it looks like roughly $1 million or so was the segment profitability for the two months or I'm guessing the two months that the deal closed. So is that fairly representative of how we should think about it, at least in the near term until you grow the assets under management?

Thanks, Alan. Appreciate the questions. I'm going to split these up. I'm going to talk about the contracts on your first part, and I'll give it to Kim to talk about the numbers.

But one of the things when we made a decision to buy in, partner up with Mark Porath at Hearthstone, we did a lot of diligence, and they have a 30-year history of -- in this business. And one of the most important aspects is their underwriting discipline and their structure and their deals and the deposits that they get.

So as far as the question of their current existing book of business, it has some of the best underwriting, I think, in the industry, and we have not seen any issues there at all, and we don't expect to see any issues there because of that disciplined underwriting that is really their hallmark.

So, and Kim, do you want to take the second part about numbers?

Yes. Alan, as it relates to the representation there, I think that the $1 million for two months is accurate in the sense of looking forward in the near term, we're expecting that to grow as we move into later in the year, next year. So I think you'll see that we'll continue that, and then it will start to get a little velocity as we get into the later part of the second quarter and moving forward.

Great. I appreciate that. Thank you both for those responses. Very helpful.

Second question, obviously, land sale activity has been pretty robust in Great Park, and you're continuing to do great there. I didn't hear any mention of any residential lot sales in Valencia, and it's -- I think it's been about a year or so since your last transaction there. So curious if you can give just a rough time line on when we should expect to see the next residential lot sale coming in Valencia.

Yes, Alan, good question. And we actually are looking very carefully at Valencia. The kind of short answer is it's going to be in 2026 because as we've said, one of the things we don't want to do is push lots out if there's not a market for it. And in Valencia, we're monitoring that market very carefully. We've kind of got a steady flow of sales quarter-to-quarter.

But on the other hand, we have looked at some additional transactions there and decided based on the current pace in the market that we should probably wait on those because we think we get better pricing by waiting, and there's enough inventory in the market to keep the master plan moving forward.

But on the other hand, we actually have programs ready to go, and we can enter the market quickly if we start seeing the market having more demand. So, but right now, the direct answer to your question is we think it'd be 2026. We aren't looking at closing anything else there on the residential side this year.

[Operator Instructions] We take the next question from the line of [ David Langran ], who is a private investor.

Hi, Dan. Thanks for taking my question. Congratulations on the quarter. I'm trying to understand from your balance sheet and the number of outstanding shares, you have like 69 million roughly basic Class A shares, 149 million diluted. And so trying to understand from your balance sheet, what would you say is your book value per share?

Well, David, I'm going to turn that one to Kim, if you don't mind.

Sure.

Yes, David, I would say that our book value per share is about between $8 and $10 a share.

Okay. So that's different than what I calculated because the way I would look at it is you have like $11.5 would be the book value per share. If you look at -- if you have 69 million basic and then from the balance sheet, total members' capital is $803 million, I guess, and then the noncontrolling interests are $1.476 billion. So I guess there's some -- at least for me, trying to calculate it's kind of confusing. Can you give -- can you elaborate on how you came up with the between $8 and $10 per share book value?

That's what I just -- I mean, I had it in my head from the standpoint of when I'm going through the numbers, I'll have to get back to you on that.

Okay. Yes, I appreciate it because I mean, it's a struggle for me as I try to calculate it myself, and that's why I wanted to ask that question just so I have some clarity. But thank you for taking my question. Congratulations on the quarter. Good luck with the next quarter.

Thank you. And Kim will follow up with you.

We take the next question from the line of Alan Ratner from Zelman & Associates.

I'm back again with another -- the prior question just kind of spurred another thought. I noticed on your balance sheet, the -- I think the nonredeemable line -- equity line on your balance sheet, it increased by about $40 million from last quarter, $45 million. Can you explain exactly what's driving that?

Kim, I'll let you answer that.

Yes, Alan, that's the temporary equity associated with the Hearthstone transaction. We have -- there's a put call on the remaining 25% that we didn't acquire. And so that's temporary equity.

I see. So is that going to remain on the balance sheet, I guess, until if that call is ever made?

It will. And then there are certain other interests that may, over time, simply amortize off.

Got it. And I guess just going back to that last question because I know I get this question a lot from investors. Correct me if I'm wrong, but that 149 million diluted share count, that's going to be pretty close adding up your various kind of Class A, Class B shares. So kind of thinking about the overall equity of the company, assuming those other classes ultimately convert to common Class A. I've always thought about that being the ultimate denominator in terms of calculating your book value per share. Is that something you would agree with?

Yes. I would agree with that.

Okay. Yes. So I think that probably -- I get to a slightly higher number than the range that you discussed. I think it's maybe north.

You know what. Yes, I hear. Just the number actually as of the end of '25, I mean, the September '25 is actually $15 -- about $15.5.

Yes. Okay. That's what I was getting, which is, I guess, just the total shareholders' equity of $2.2 billion, $2.3 billion divided by the 149 million or so.

Yes. That's right.

Ladies and gentlemen, as there are no further questions, I will now hand the conference over to Dan Hedigan for his closing comments.

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. Ladies and gentlemen, the conference of Five Point Holdings has now concluded. Thank you for your participation. You may now disconnect your lines.