Five Point Holdings LLC

Previous wording

•Five Point Office Venture Holdings I, LLC (the “Gateway Commercial Venture”), which owns portions of the Five Point Gateway Campus, a commercial office, research and development and medical campus located within the Great Park Neighborhoods; and

Current wording

•Five Point Office Venture Holdings I, LLC (the “Gateway Commercial Venture”), which previously owned portions of the Five Point Gateway Campus, a commercial office, research and development and medical campus located within the Great Park Neighborhoods; and

Previous wording

•Five Point Communities, LP and Five Point Communities Management, Inc. (together, the “management company”), which provide development and property management services for the Great Park Neighborhoods and the Five Point Gateway Campus.

Current wording

•Five Point Communities, LP and Five Point Communities Management, Inc. (together, the “management company”), which provide development management services for the Great Park Neighborhoods.

Previous wording

The operating company consolidates and controls the management of all of these entities, except for the Great Park Venture and the Gateway Commercial Venture. The operating company owns a 37.5% percentage interest in the Great Park Venture and a 75% interest in the Gateway Commercial Venture and accounts for its interest in both using the equity method. Please review “Structure and Formation of Our Company”, “Our Communities” and “Commercial” under Part I, Item 1 of this report for a description of our organizational structure, each of our communities and our commercial venture.

Current wording

The operating company consolidates and controls the management of all of these entities, except for the Great Park Venture and the Gateway Commercial Venture. The operating company owns a 37.5% percentage interest in the Great Park Venture and a 75% interest in the Gateway Commercial Venture and accounts for its interest in both using the equity method. Please review “Structure and Formation of Our Company” and “Our Communities” under Part I, Item 1 of this report for a description of our organizational structure, each of our communities and our commercial venture.

Previous wording

In 2023, we continued to focus on three main priorities: generating revenue and positive cash flow, managing our capital spend to match near-term revenue opportunities, and controlling our selling, general and administrative (“SG&A”) costs. Our execution on these priorities allowed us to have a strong year, notwithstanding the challenging economic environment. In 2023, California’s housing dynamics remained favorable for new home sales, driven in part by California’s housing shortage and compounded by production constraints created by the limited availability of land, labor and materials. Based in part on these continuing dynamics, we believe that we will see strong demand in 2024 for our land from the homebuilders in our markets. We are also cautiously optimistic that improvement in the capital markets will allow for commercial land demand to rebound potentially in the latter half of 2024.

Current wording

In 2024, we continued to focus on our three main priorities: generating revenue and positive cash flow; managing our capital spend to match near-term revenue opportunities; and controlling our selling, general and administrative (“SG&A”) costs. Our execution on these priorities allowed us to have a record year, and we remain well positioned to continue executing on land sales to our guest builders at the Great Park Neighborhoods and Valencia in 2025.

Previous wording

At Valencia, we closed the sale of 729 homesites on approximately 72 acres for an aggregate purchase price of $162.4 million in 2023. With a focus on managing capital spend to optimize the timing and amount of spending in relation to anticipated revenues, we were able to work with our homebuilder partners to shift some of the final land development costs to the builder, and we adjusted our sales pricing accordingly. We will continue to look to minimize our capital spend between revenue opportunities. Valencia guest homebuilders sold 297 homes during 2023, for a total of 1,244 homes sold since sales began in May 2021. By the end of 2023, 12 of our initial 18 neighborhoods had sold out, and our guest homebuilders had also opened three additional neighborhoods at our newest development area. Homes in these neighborhoods consist of a wide mix of attached and detached single family homes that are attracting first time buyers along with trade-up buyers.

Current wording

At Valencia, we closed the sale of 493 homesites on 54.4 acres for an aggregate purchase price of $137.9 million in 2024. With a focus on managing capital spend to optimize the timing and amount of spending in relation to anticipated revenues, we were able to work with our homebuilder partners to shift some of the final land development costs to the builders, and we adjusted our sales pricing accordingly. We will continue to look to minimize our capital spend between revenue opportunities. Valencia guest homebuilders sold 348 homes during 2024, for a total of 1,599 homes sold since sales began in May 2021. By the end of 2024, our guest homebuilders had sold out two of the three previously opened neighborhoods in our newest development area and opened five additional neighborhoods. Homes in these neighborhoods consist of a wide mix of attached and detached single family homes that are attracting first time buyers along with trade-up buyers. We expect to continue land sales at Valencia in the second half of 2025.

Previous wording

At the Great Park Neighborhoods, in which we have a 37.5% percentage interest and manage all aspects of the development cycle, the Great Park Venture recognized land sale revenue of $532.0 million from the sale of 38 acres of commercial land and 798 homesites on approximately 84 acres of land. For the homesite sales, the Great Park Venture recognized $357.8 million in revenue, consisting of $214.7 million paid at closing, plus $143.1 million of additional revenue representing estimated variable consideration from future price participation payments expected to be received when homes are sold to homebuyers. The Great Park Venture made distributions and related participating payments with proceeds from the land sales, of which we received approximately $195.8 million for both our ownership interests and incentive management fee compensation. Home sales by guest homebuilders totaled 628 homes in 2023, with very limited inventory available at the end of the year. Our next neighborhood, Luna Park, is comprised of 798 homes across 13 builder collections and is expected to open in phases from March 2024 through December 2024.

Current wording

At the Great Park Neighborhoods, in which we have a 37.5% percentage interest and manage all aspects of the development cycle, the Great Park Venture recognized land sale revenue of $480.0 million from the sale of 559 homesites on 56.1 acres of land and $25.4 million from the sale of 12.8 acres of commercial land. The Great Park Venture made distributions and related participating payments with proceeds from the land sales, of which we received approximately $231.0 million for both our ownership interests and incentive management fee compensation. Home sales by guest homebuilders totaled 441 homes in 2024. Our next neighborhood is comprised of 372 homes across five builder collections and is expected to open in phases throughout 2025. We expect the Great Park Venture will close the sale of approximately 979 homesites across fourteen different programs during 2025. Twelve of the fourteen programs consisting of 868 homesites and approximately 74 acres are under contract, and two of those programs consisting of 197 homesites on approximately 11 acres closed in February 2025. We currently expect approximately 210 additional homesites on approximately 18 acres to close during the first half of 2025, with the remaining 572 homesites on approximately 54 acres scheduled to close in the fourth quarter of 2025.

Previous wording

Our four reportable operating segments include our three community segments, Valencia, San Francisco and Great Park, and our Commercial segment:

Current wording

Following the sale of the Gateway Commercial Venture’s commercial operating assets in December 2024, our Commercial segment is no longer operating. Our three remaining reportable operating segments include our three community segments, Valencia, San Francisco and Great Park:

Previous wording

Revenues. Revenues increased by $169.0 million, to $211.7 million for the year ended December 31, 2023, from $42.7 million for the year ended December 31, 2022. The increase in revenues was primarily due to land sales at our Valencia segment in 2023 compared to no land sales in 2022 and an increase in management services revenue at our Great Park segment in 2023.

Current wording

Revenues. Revenues increased by $26.2 million, to $237.9 million for the year ended December 31, 2024, from $211.7 million for the year ended December 31, 2023. The increase in revenues was primarily due to an increase in management services revenue at our Great Park segment in 2024, partially offset by lower land sales at our Valencia segment in 2024 compared to 2023.

Previous wording

Cost of land sales. The cost of land sales for the year ended December 31, 2023 was attributable to land sales at our Valencia segment.

Current wording

Cost of land sales. The cost of land sales decreased by $15.5 million, to $90.1 million for the year ended December 31, 2024, from $105.7 million for the year ended December 31, 2023. The decrease in cost of land sales was attributable to lower land sales at our Valencia segment in 2024 compared to 2023.

Previous wording

Cost of management services. Cost of management services increased by $1.9 million, or 9.4%, to $22.2 million for the year ended December 31, 2023, from $20.3 million for the year ended December 31, 2022. The increase was primarily due to an increase in intangible asset amortization expense at our Great Park segment.

Current wording

Cost of management services. Cost of management services increased by $1.7 million, or 7.6%, to $23.9 million for the year ended December 31, 2024, from $22.2 million for the year ended December 31, 2023. The increase was primarily due to an increase in intangible asset amortization expense at our Great Park segment.

Previous wording

Selling, general, and administrative. SG&A expenses decreased by $3.1 million, or 5.7%, to $51.5 million for the year ended December 31, 2023, from $54.6 million for the year ended December 31, 2022. The decrease was mainly attributable to a decrease in employee related and selling and marketing expenses.

Current wording

Selling, general, and administrative. SG&A expenses decreased by $0.3 million, or 0.5%, to $51.2 million for the year ended December 31, 2024, from $51.5 million for the year ended December 31, 2023. The decrease was mainly attributable to a decrease in corporate general and administrative expenses.

Previous wording

Equity in earnings from unconsolidated entities. Our consolidated results reflect our share in the earnings or losses of our interests in our unconsolidated entities, including the Great Park Venture and the Gateway Commercial Venture, within equity in earnings from unconsolidated entities on our consolidated statement of operations. Our segment results for the Great Park segment and the Commercial segment present the results of the Great Park Venture and the Gateway Commercial Venture at the book basis of the ventures within the respective segments.

Current wording

Equity in earnings from unconsolidated entities. Our consolidated results reflect our share in the earnings or losses of our interests in our unconsolidated entities, including the Great Park Venture and the Gateway Commercial Venture, within equity in earnings from unconsolidated entities on our consolidated statement of operations. Our segment results for the Great Park segment present the results of the Great Park Venture at the book basis of the venture within the segment.

Previous wording

Equity in earnings from unconsolidated entities increased by $55.1 million, to $76.6 million for the year ended December 31, 2023, from $21.5 million for the year ended December 31, 2022. Equity in earnings for the years ended December 31, 2023 and 2022 was primarily a result of recognizing our share of the net income of the Great Park Venture generated from land sales in 2023 and land and home sales in 2022.

Current wording

Equity in earnings from unconsolidated entities increased by $56.0 million, to $132.6 million for the year ended December 31, 2024, from $76.6 million for the year ended December 31, 2023. Equity in earnings for the years ended December 31, 2024 and 2023 was primarily a result of recognizing our share of the net income of the Great Park Venture generated from land sales during each period and the net income of the Gateway Commercial Venture generated from the sale of its remaining interests in the Five Point Gateway Campus.

Previous wording

Income taxes. All operations are carried on through our subsidiaries, the majority of which are pass-through entities that are generally not subject to federal or state income taxation, as all of the taxable income, gains, losses, deductions, and credits are passed through to the partners, including the partners of the operating company and the San Francisco Venture. We are responsible for income taxes on our allocable share of the operating company's income or gain. Pre-tax income of $109.3 million for the year ended December 31, 2023 resulted in a tax benefit of $4.4 million. The tax benefit was primarily the result of the increase in net deferred tax assets exceeding the net increase in deferred tax liabilities including the $17.6 million release of our valuation allowance. We assessed the realization of the net deferred tax asset and the need for a valuation allowance, based on positive and negative evidence, and determined that at December 31, 2023, it was more likely than not that such net deferred tax assets would be fully realized, and our valuation allowance was released. Pre-tax loss of $36.2 million for the year ended December 31, 2022 resulted in a tax benefit of $1.5 million. The tax benefit was primarily the result of the increase in net deferred tax assets exceeding the net increase in deferred tax liabilities after changes in our valuation allowance. We assessed the realization of the net deferred tax asset and the need for a valuation allowance, based on positive and negative evidence, and determined that at December 31, 2022, it was more likely than not that such net deferred tax assets would not be fully realized. Our effective tax rate for the year ended December 31, 2023 decreased from the year ended December 31, 2022 due to the release of the valuation allowance in the current period, net of changes in permanent differences, including executive compensation subject to limitations.

Current wording

Income taxes. All operations are carried on through our subsidiaries, the majority of which are pass-through entities that are generally not subject to federal or state income taxation. We are responsible for income taxes on our allocable share of the operating company’s income or gain. Pre-tax income of $205.1 million for the year ended December 31, 2024 resulted in a tax provision of $27.5 million. Pre-tax income of $109.3 million for the year ended December 31, 2023 resulted in a tax benefit of $4.4 million. The tax benefit was primarily the result of the increase in net deferred tax assets exceeding the net increase in deferred tax liabilities including the $17.6 million release of our valuation allowance. We assessed the realization of the net deferred tax asset and the need for a valuation allowance, based on positive and negative evidence, and determined that at December 31, 2023, it was more likely than not that such net deferred tax assets would be fully realized, and our valuation allowance was released. Our effective tax rate for the year ended December 31, 2024 increased from the year ended December 31, 2023 due to the release of the valuation allowance in 2023, net of changes in permanent differences, including executive compensation subject to limitations.

Previous wording

Net income (loss) attributable to noncontrolling interests. Until exchanged for our Class A common shares or, at our election, cash, noncontrolling interests represent interests held by other partners in the operating company and other members of the San Francisco Venture. Net income or loss attributable to the noncontrolling interests on the consolidated statement of operations represents the portion of earnings or losses attributable to the interests in our subsidiaries held by the noncontrolling interests.

Current wording

Net income attributable to noncontrolling interests. Until exchanged for our Class A common shares or, at our election, cash, noncontrolling interests represent interests held by other partners in the operating company and other members of the San Francisco Venture. Net income attributable to the noncontrolling interests on the consolidated statement of operations represents the portion of earnings or losses attributable to the interests in our subsidiaries held by the noncontrolling interests.

Previous wording

(1) Represents the removal of the Great Park Venture and Gateway Commercial Venture operating results, which are included in the Great Park segment and Commercial segment operating results at 100% of each venture’s historical basis, respectively, but are not included in our consolidated results as we account for our investment in each venture using the equity method of accounting.

Current wording

(1) Represents the removal of the Great Park Venture operating results, which are included in the Great Park segment operating results at 100% of the venture’s historical basis but are not included in our consolidated results as we account for our investment in the venture using the equity method of accounting.

Previous wording

(2) For the Great Park and Commercial segments, represents the revenues and expenses attributable to the management company for providing services to the Great Park Venture and the Gateway Commercial Venture, as applicable.

Current wording

(2) For the Great Park segment, represents the revenues and expenses attributable to the management company for providing services to the Great Park Venture as applicable.

Previous wording

(1) Represents the removal of the Great Park Venture and Gateway Commercial Venture operating results, which are included in the Great Park segment and Commercial segment operating results at 100% of each venture’s historical basis, respectively, but are not included in our consolidated results as we account for our investment in each venture using the equity method of accounting.

Current wording

(1) Represents the removal of the Great Park Venture operating results, which are included in the Great Park segment operating results at 100% of the venture’s historical basis but are not included in our consolidated results as we account for our investment in the venture using the equity method of accounting.

Previous wording

(2) For the Great Park and Commercial segments, represents the revenues and expenses attributable to the management company for providing services to the Great Park Venture and the Gateway Commercial Venture, as applicable.

Current wording

(2) For the Great Park segment, represents the revenues and expenses attributable to the management company for providing services to the Great Park Venture as applicable.

Previous wording

Our Valencia property consists of approximately 15,000 acres in northern Los Angeles County and can include up to approximately 21,500 homesites and approximately 11.5 million square feet of commercial space. The actual commercial square footage and number of homesites are subject to change based on ultimate use and land planning. The current communities under development in Valencia complement the neighboring communities that were previously developed by us. We began selling homesites in the first development area at Valencia in 2019, and as of December 31, 2023 we had sold 2,595 homesites for aggregate consideration of approximately $583.7 million. Homebuilders sold 297 homes at Valencia during the year ended December 31, 2023 and have sold a total of 1,244 homes since home sales began in May 2021.

Current wording

Our Valencia property consists of approximately 15,000 acres in northern Los Angeles County and can include up to approximately 21,500 homesites and approximately 11.5 million square feet of commercial space. The actual commercial square footage and number of homesites are subject to change based on ultimate use and land planning. The current communities under development in Valencia complement the neighboring communities that were previously developed by us. We began selling homesites in the first development area at Valencia in 2019, and as of December 31, 2024 we had sold 3,088 homesites for aggregate consideration of approximately $721.6 million. Homebuilders sold 348 homes at Valencia during the year ended December 31, 2024 and have sold a total of 1,599 homes since home sales began in May 2021.

Previous wording

Land sales and related party land sales revenues. Total land sales revenues increased by $153.0 million to $161.4 million for the year ended December 31, 2023, from $8.4 million for the year ended December 31, 2022. The increase in total land sales revenues was attributable to the recognition of revenue from the sale of land entitled for an aggregate of 729 homesites on approximately 72 acres during the year ended December 31, 2023 compared to no land sales during the year ended December 31, 2022. The aggregate base purchase price was $162.4 million for the 2023 sales. In 2023, 583 of the homesites were sold to an unaffiliated land banking entity whereby a related party retained the option to acquire the homesites in the future from the land bank entity.

Current wording

Land sales and related party land sales revenues. Total land sales revenues decreased by $22.3 million to $139.1 million for the year ended December 31, 2024, from $161.4 million for the year ended December 31, 2023. The decrease in total land sales revenues was attributable to the recognition of revenue from the sale of land entitled for an aggregate of 493 homesites on 54.4 acres during the year ended December 31, 2024 compared to the recognition of revenue from the sale of land entitled for an aggregate of 729 homesites on approximately 72 acres during the year ended December 31, 2023. The aggregate base purchase price was $137.9 million and $162.4 million for the 2024 and 2023 sales, respectively. In 2024 and 2023, 179 and 583 of the homesites, respectively, were sold to an unaffiliated land banking entity whereby Lennar retained the option to acquire the homesites in the future from the land bank entity.

Previous wording

Cost of land sales. Cost of land sales during the year ended December 31, 2023 was $105.7 million, compared to a credit of $1.0 million to cost of land sales during year ended December 31, 2022. The cost of land sales includes both actual and estimated future capitalized costs allocated based upon relative sales values. Since this method requires us to estimate future development costs and the expected sales prices for future land sales, the profit margin on subsequent parcels sold will be affected by both changes in the estimated total revenues, as well as any changes in the estimated total cost of the project.

Current wording

Cost of land sales. Cost of land sales during the year ended December 31, 2024 was $90.1 million, compared to $105.7 million during year ended December 31, 2023. The cost of land sales includes both actual and estimated future capitalized costs allocated based upon relative sales values. Since this method requires us to estimate future development costs and the expected sales prices for future land sales, the profit margin on subsequent parcels sold will be affected by both changes in the estimated total revenues, as well as any changes in the estimated total cost of the project.

Previous wording

Selling, general, and administrative. SG&A expenses decreased by $2.0 million, or 14.9%, to $11.6 million for the year ended December 31, 2023, from $13.6 million for the year ended December 31, 2022. The decrease was mainly attributable to a decrease in community related selling and marketing expenses and a decrease in employee related expenses.

Current wording

Selling, general, and administrative. SG&A expenses decreased by $1.2 million, or 10.5%, to $10.4 million for the year ended December 31, 2024, from $11.6 million for the year ended December 31, 2023. The decrease was mainly attributable to a decrease in community related selling and marketing expenses and a decrease in office lease expense.

Previous wording

Equity in earnings from unconsolidated entity. Equity in earnings from the Valencia Landbank Venture of $0.6 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively, was primarily a result of recognition of our pro-rata share of profits from land sold by the Valencia Landbank Venture to third-party homebuilders.

Current wording

Equity in earnings from unconsolidated entity. Equity in earnings from the Valencia Landbank Venture of $0.5 million and $0.6 million for the years ended December 31, 2024 and 2023, respectively, was primarily a result of recognition of our pro-rata share of profits from land sold by the Valencia Landbank Venture to third-party homebuilders.

Previous wording

Our development at Candlestick and The San Francisco Shipyard is not subject to San Francisco’s Proposition M growth control measure, which imposes annual limitations on office development and is applicable to all other developers with projects in the city. This means the full amount of permitted commercial square footage at Candlestick and The San Francisco Shipyard can be constructed as we determine, including all at once, even though Proposition M may delay new office developments elsewhere in San Francisco. In 2018, our disposition and development agreement with the City of San Francisco was amended to increase the total amount of commercial use at Candlestick and The San Francisco Shipyard by over two million square feet and increases our total commercial space to approximately 6.3 million square feet.

Current wording

Our development at Candlestick and The San Francisco Shipyard is not subject to San Francisco’s Proposition M growth control measure, which imposes annual limitations on office development and is applicable to all other developers with projects in the city. This means the full amount of permitted commercial square footage at Candlestick and The San Francisco Shipyard can be constructed as we determine, including all at once, even though Proposition M may delay new office developments elsewhere in San Francisco.

Previous wording

The Great Park Venture sold the first homesites in April 2013 and, as of December 31, 2023, had sold 8,124 homesites (including 853 affordable homesites) and 153 acres of commercial land, including the Five Point Gateway Campus, allowing for development of up to approximately 3.5 million square feet of commercial office and research and development space for aggregate consideration of approximately $3.8 billion.

Current wording

The Great Park Venture sold the first homesites in April 2013 and, as of December 31, 2024, had sold 8,683 homesites (including 853 affordable homesites) and 166 acres of commercial land, including the Five Point Gateway Campus, allowing for development of up to approximately 3.6 million square feet of commercial office and research and development space for aggregate consideration of approximately $4.4 billion.

Previous wording

Interests in the Great Park Venture are either “percentage interests” or “legacy interests.” Holders of the legacy interests were entitled to receive priority distributions in an aggregate amount equal to $476.0 million and up to an additional $89.0 million from participation in subsequent distributions. The holders of percentage interests are entitled to all other distributions. During the year ended December 31, 2023, the Great Park Venture made aggregate distributions of $48.2 million to holders of legacy interests and $411.2 million to holders of percentage interests. The Company received $154.2 million for its 37.5% percentage interest. As of December 31, 2021, the Great Park Venture had fully satisfied the $476.0 million priority distribution rights, and the remaining maximum participating legacy interest distribution rights at December 31, 2023 were $18.1 million. The remaining $18.1 million legacy interest will be paid on a pro-rata basis, with approximately 10% of future distributions paid to the holders of legacy interests and approximately 90% of such distributions paid to the holders of the percentage interests, until such time as the remaining balance has been fully paid.

Current wording

Interests in the Great Park Venture were previously either “percentage interests” or “legacy interests.” Holders of the legacy interests were entitled to receive priority distributions in an aggregate amount equal to $476.0 million and up to an additional $89.0 million from participation in subsequent distributions. The holders of percentage interests were entitled to all other distributions. During the year ended December 31, 2024, the Great Park Venture made aggregate distributions of $18.1 million to holders of legacy interests and $485.1 million to holders of percentage interests. The Company received $181.9 million for its 37.5% percentage interest. As of December 31, 2021, the Great Park Venture had fully satisfied the $476.0 million priority distribution rights, and with the distributions to the holders of legacy interests during the year ended December 31, 2024, the Great Park Venture fully satisfied the $89.0 million maximum participating legacy interest distribution rights, as a result of which, the legacy interests are no longer deemed to be outstanding.

Previous wording

Land sales and related party land sales revenues. Land sales and related party land sales revenues increased by $271.4 million to $554.8 million for the year ended December 31, 2023, from $283.4 million for the year ended December 31, 2022. In 2023, the Great Park Venture closed 38 acres of commercial land and land entitled for an aggregate of 798 homesites on approximately 84 acres. In 2022, the Great Park Venture sold approximately 42 acres of commercial land and land entitled for an aggregate of 61 homesites on approximately three acres.

Current wording

Land sales and related party land sales revenues. Land sales and related party land sales revenues increased by $58.0 million to $612.8 million for the year ended December 31, 2024, from $554.8 million for the year ended December 31, 2023. In 2024, the Great Park Venture sold 12.8 acres of commercial land planned for retail uses and land entitled for an aggregate of 559 homesites on 56.1 acres at the Great Park Neighborhoods. In 2023, the Great Park Venture closed 38 acres of commercial land and land entitled for an aggregate of 798 homesites on approximately 84 acres.

Previous wording

Revenue recognized of $357.8 million for the 2023 homesite land sales consisted of $214.7 million paid at closing, plus $143.1 million in estimated variable consideration from future price participation payments expected to be received when homes are sold to homebuyers. The 798 homesites were sold to an unaffiliated land banking entity whereby a related party retained the option to acquire the homesites in the future from the land bank entity. The aggregate purchase price was $174.2 million for the 2023 commercial land sales.

Current wording

The base purchase price was $25.4 million and $480.0 million for the 2024 commercial land sales and homesite land sales, respectively. Revenue recognized of $357.8 million for the 2023 homesite land sales consisted of $214.7 million paid at closing, plus $143.1 million in estimated variable consideration from future price participation payments expected to be received when homes are sold to homebuyers. The 798 homesites were sold to an unaffiliated land banking entity whereby Lennar retained the option to acquire the homesites in the future from the land bank entity. The aggregate purchase price was $174.2 million for the 2023 commercial land sales.

Previous wording

During the years ended December 31, 2023 and 2022, revenues also included changes in estimates of variable consideration, including profit participation, from those amounts previously recorded by the Great Park Venture. During the years ended December 31, 2023 and 2022, the Great Park Venture recognized $21.0 million and $19.6 million in profit participation revenue, respectively.

Current wording

During the years ended December 31, 2024 and 2023, revenues also included changes in estimates of variable consideration, including profit participation and price participation, from those amounts previously recorded by the Great Park Venture. During the years ended December 31, 2024 and 2023, the Great Park Venture recognized $39.8 million and $21.0 million, respectively, in profit participation revenues, primarily from amounts received from homebuilders. During the year ended December 31, 2024, the Great Park Venture recognized additional estimated variable consideration of $66.6 million related to a residential land sale that closed in 2023 for future price participation payments expected to be received when homes are sold to homebuyers. The increase in estimated variable consideration reflects updated pricing and absorption assumptions used to calculate expected price participation payments.

Previous wording

Cost of land sales. Cost of land sales during the years ended December 31, 2023 and 2022 were $237.1 million and $155.7 million, respectively. The cost of land sales includes both actual and estimated future capitalized costs allocated based upon relative sales values. Since this method requires the Great Park Venture to estimate future development costs and the expected sales prices for future land sales, the profit margin on subsequent parcels sold will be affected by both changes in the estimated total revenues, as well as any changes in the estimated total cost of the project.

Current wording

Cost of land sales. Cost of land sales during the years ended December 31, 2024 and 2023 were $144.9 million and $237.1 million, respectively. The cost of land sales includes both actual and estimated future capitalized costs allocated based upon relative sales values. Since this method requires the Great Park Venture to estimate future development costs and the expected sales prices for future land sales, the profit margin on subsequent parcels sold will be affected by both changes in the estimated total revenues, as well as any changes in the estimated total cost of the project.

Previous wording

Management fee revenues. Management fee revenues are revenues generated by the management company from development management services provided to the Great Park Venture. Previously, the management company received a fixed base fee, reimbursement for certain variable costs and the right to receive certain variable incentive compensation. The initial term of our development management agreement with the Great Park Venture expired on December 31, 2021 but had been extended by mutual agreement of the parties through December 31, 2022 (the “2022 extension”) and further renewed by mutual agreement of the parties through December 31, 2024. In connection with the 2022 extension of the development management agreement, the variable cost reimbursement component was eliminated and the annual fixed base fee was increased to $12.0 million for 2022. For the year ended December 31, 2023, we recognized $12.0 million in revenues attributable to the revised base fee, and as a result of changes in estimates of the amount of variable incentive compensation, we recognized $35.2 million in additional revenue. For the year ended December 31, 2022, we recognized $12.0 million in revenues attributable to the revised base fee, and as a result of changes in estimates of the amount of variable incentive compensation, we recognized $19.0 million in additional revenue.

Current wording

Management fee revenues. Management fee revenues are revenues generated by the management company from development management services provided to the Great Park Venture. The increase in management services related party revenue was mainly attributable to an increase in variable incentive compensation revenue recognized during the year ended December 31, 2024. For the years ended December 31, 2024 and 2023, we recognized $84.0 million and $35.2 million, respectively, attributable to variable incentive compensation, mostly as a result of changes in estimates of the amount of variable incentive compensation we expect to receive.

Previous wording

Management services costs and expenses. Included within management services costs and expenses are general and administrative costs and expenses incurred directly by the management company’s project team that is managing the development of the Great Park Neighborhoods. We also include amortization expense related to the intangible asset attributable to the incentive compensation provisions of the development management agreement with the Great Park Venture. Corporate and non-project team salaries and overhead incurred by us are not allocated to management services costs and expenses or to our reportable segments and are reported in SG&A costs in the consolidated statement of operations. During the year ended December 31, 2023, management services costs and expenses increased by $1.9 million, or 9.4%, to $22.2 million, from $20.3 million for the year ended December 31, 2022. The increase was mainly attributable to an increase in intangible asset amortization expense recognized, partially offset by a decrease in employee related project team expenses during the year ended December 31, 2023.

Current wording

Management services costs and expenses. Included within management services costs and expenses are general and administrative costs and expenses incurred directly by the management company’s project team that is managing the development of the Great Park Neighborhoods. We also include amortization expense related to the intangible asset attributable to the incentive compensation provisions of the development management agreement with the Great Park Venture. Corporate and non-project team salaries and overhead incurred by us are not allocated to management services costs and expenses or to our reportable segments and are reported in SG&A costs in the consolidated statement of operations. During the year ended December 31, 2024, management services costs and expenses increased by $1.7 million, or 7.6%, to $23.9 million, from $22.2 million for the year ended December 31, 2023. The increase was mainly attributable to an increase in intangible asset amortization expense recognized during the year ended December 31, 2024.

Previous wording

Management fees—related party. Management fees increased by $12.1 million, to $65.4 million for the year ended December 31, 2023, from $53.3 million for the year ended December 31, 2022. Management fees incurred by the Great Park Venture were comprised of base development management fees and incentive compensation fees. In general, incentive compensation fees will be paid as a percentage of distributions made to holders of the Great Park Venture’s membership interests. When payments are deemed probable of being made, the Great Park Venture recognizes the expense ratably over the period services are expected to be provided. When estimates of the amount of incentive compensation probable of being paid change, the Great Park Venture records a cumulative adjustment in the period in which the estimate changes. The increase in management fees—related party was mainly attributable to an increased estimate of the amount of incentive compensation fees probable of being paid. The Great Park Venture recognized expense of $53.4 million and $44.0 million for incentive compensation fees during the years ended December 31, 2023 and 2022, respectively.

Current wording

Management fees—related party. Management fees increased by $48.5 million, to $113.9 million for the year ended December 31, 2024, from $65.4 million for the year ended December 31, 2023. Management fees incurred by the Great Park Venture were comprised of base development management fees and incentive compensation fees. In general, incentive compensation fees will be paid as a percentage of distributions made to holders of the Great Park Venture’s membership interests. When payments are deemed probable of being made, the Great Park Venture recognizes the expense ratably over the period services are expected to be provided. When estimates of the amount of incentive compensation probable of being paid change, the Great Park Venture records a cumulative adjustment in the period in which the estimate changes. The increase in management fees—related party was mainly attributable to an increased estimate of the amount of incentive compensation fees probable of being paid. The Great Park Venture recognized expense of $101.9 million and $53.4 million for incentive compensation fees during the years ended December 31, 2024 and 2023, respectively.

Previous wording

At December 31, 2023, we had $353.8 million of consolidated cash and cash equivalents, compared to $131.8 million at December 31, 2022. As of December 31, 2023, no funds had been drawn on and no letters of credit were outstanding on the operating company’s $125.0 million revolving credit facility.

Current wording

At December 31, 2024, we had $430.9 million of consolidated cash and cash equivalents, compared to $353.8 million at December 31, 2023. As of December 31, 2024, no funds had been drawn on and no letters of credit were outstanding on the operating company’s $125.0 million revolving credit facility.

Previous wording

Our short-term cash needs consist primarily of general and administrative expenses and development expenditures at Valencia and the Candlestick and The San Francisco Shipyard communities, interest payments under our senior notes and payments under a related party reimbursement obligation. In January 2024, we exchanged $623.5 million of our existing 7.875% senior notes due November 2025 for $100.0 million in cash and $523.5 million in new 10.500% initial rate senior notes due January 2028. The new senior notes due January 2028 will accrue interest at a rate of 11.000% starting in November 2025 and at a rate of 12.000% starting from November 2026 through the maturity date. In 2024, we will make aggregate interest payments of $54.1 million on our existing and new senior notes, and $46.1 million in principal payments that were deferred from 2023 and are due under our related party reimbursement obligation. Reimbursement payments may be deferred when our related party receives an extension on the maturity date of the associated EB-5 loan liability. Our related party has a history of receiving maturity date extensions, however, such further extensions are not within our control and there can be no assurance that any such extensions will be obtained in the future.

Current wording

Our short-term cash needs consist primarily of general and administrative expenses and development expenditures at Valencia and the Candlestick and The San Francisco Shipyard communities, interest payments under our senior notes and payments under a related party reimbursement obligation. In January 2024, we exchanged $623.5 million of our existing 7.875% senior notes due November 2025 for $100.0 million in cash and $523.5 million in new 10.500% initial rate senior notes due January 2028. The new senior notes due January 2028 will accrue interest at a rate of 11.000% starting in November 2025 and at a rate of 12.000% starting from November 2026 through the maturity date. In 2025, aggregate interest payments of $55.1 million on our existing and new senior notes are due, and $57.5 million in principal payments are due under our related party reimbursement obligation. Pursuant to a reimbursement deferral agreement, principal and interest payments under our related party reimbursement obligation are deferred through March 31, 2025. Reimbursement payments may be further deferred when our related party receives an extension on the maturity date of the associated EB-5 loan liability. Our related party has a history of receiving maturity date extensions, however, further extensions are not within our control and there can be no assurance that any such extensions will be obtained in the future.

Previous wording

The development stages of our communities continue to require significant cash outlays on both a short-term and long-term basis, and we expect to invest significant amounts on continued horizontal development at Valencia over the next 12 months. We manage our development activities and expenditures to coincide with projected demand for our residential and commercial land with the objective of maintaining an appropriate level of liquidity. We expect to meet our cash requirements for at least the next 12 months with available cash, distributions from our unconsolidated entities, collection of management fees under our development management agreement with the Great Park Venture, proceeds from land sales, reimbursements from public financing in Valencia and access to financing sources, including our revolving credit facility.

Current wording

The development stages of our communities continue to require significant cash outlays on both a short-term and long-term basis, and we expect to invest significant amounts on continued horizontal development at Valencia over the next 12 months. We manage our development activities and expenditures to coincide with projected demand for our residential and commercial land with the objective of maintaining an appropriate level of liquidity. We expect to meet our cash requirements for at least the next 12 months with available cash, distributions from our unconsolidated entities, collection of management fees under our development management agreement with the Great Park Venture, proceeds from land sales, reimbursements from public financing and access to financing sources, including our revolving credit facility.

Previous wording

Our long-term cash needs relate primarily to future horizontal development expenditures and investments in or vertical construction costs for properties that we may acquire or develop for an income-producing portfolio, along with debt service and general and administrative expenses. We budget our cash development costs on an annual basis. Budgeted amounts are subject to change due to delays or accelerations in construction or regulatory approvals, changes in inflation rates and other increases (or decreases) in costs. We may also modify our development plans or change the sequencing of our communities in response to changing economic conditions, consumer preferences and other factors, which could have a material impact on the timing and amount of our development costs. Budgeted amounts are expected to be funded through a combination of available cash, cash flows from our communities and reimbursements from public financing, including community facilities districts, tax increment financing and local, state and federal grants. Cash flows from our communities may occur in uneven patterns as cash is primarily generated by land sales and reimbursements, which can occur at various points over the life cycle of our communities.

Current wording

Our long-term cash needs relate primarily to future horizontal development expenditures and new investments and acquisitions, along with debt service and general and administrative expenses. We budget our cash development costs on an annual basis. Budgeted amounts are subject to change due to delays or accelerations in construction or regulatory approvals, changes in inflation rates and other increases (or decreases) in costs. We may also modify our development plans or change the sequencing of our communities in response to changing economic conditions, consumer preferences and other factors, which could have a material impact on the timing and amount of our development costs. Budgeted amounts are expected to be funded through a combination of available cash, cash flows from land sales at our communities and reimbursements from public financing, including community facilities districts, tax increment financing and local, state and federal grants. Cash flows from our communities may occur in uneven patterns as cash is primarily generated by land sales and reimbursements, which can occur at various points over the life cycle of our communities.

Previous wording

We currently expect to have sufficient capital to fund the horizontal development of our communities in accordance with our development plan for several years. The level of capital expenditures in any given year may vary due to, among other things, the number of communities or neighborhoods under development and the number of planned deliveries, which may vary based on market conditions. We may seek to raise additional capital by accessing the debt or equity capital markets or with one or more revolving or term loan facilities or other public or private financing alternatives, including entering into joint ventures. These financings may not be available on attractive terms, or at all.

Current wording

We currently expect to have sufficient capital to fund the horizontal development of our communities in accordance with our development plan and to pursue our growth strategies for several years. The level of capital expenditures in any given year may vary due to, among other things, the number of communities or neighborhoods under development and the number of planned deliveries, which may vary based on market conditions. We may seek to raise additional capital by accessing the debt or equity capital markets or with one or more revolving or term loan facilities or other public or private financing alternatives, including entering into joint ventures. These financings may not be available on attractive terms, or at all.

Previous wording

We are a party to a tax receivable agreement (“TRA”) with current and former holders of Class A units of the operating company and the holders of Class A units of the San Francisco Venture. The TRA provides for payments by us to such investors or their successors in aggregate amounts equal to 85% of the cash savings, if any, in income tax that we realize as a result of (a) increases in tax basis that are attributable to exchanges of Class A units of the operating company for our Class A common shares or cash or certain other taxable acquisitions of equity interests by us, (b) allocations that result from the application of the principles of Section 704(c) of the Code and (c) tax benefits related to imputed interest or guaranteed payments deemed to be paid or incurred by us as a result of the TRA. We expect the TRA payments to be substantial, however, the actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of exchanges of Class A units of the operating company, the price of our Class A common shares at the time of such exchanges, the extent to which such exchanges are taxable and our ability to use the potential tax benefits, which will depend on the amount and timing of our taxable income and the rate at which we pay income tax. As of December 31, 2023, there were no amounts currently payable under the TRA and based on current projections, we do not expect to make any payments for the next several years.

Current wording

We are a party to a tax receivable agreement (“TRA”) with current and former holders of Class A units of the operating company and the holders of Class A units of the San Francisco Venture. The TRA provides for payments by us to such investors or their successors in aggregate amounts equal to 85% of the cash savings, if any, in income tax that we realize as a result of (a) increases in tax basis that are attributable to exchanges of Class A units of the operating company for our Class A common shares or cash or certain other taxable acquisitions of equity interests by us, (b) allocations that result from the application of the principles of Section 704(c) of the Code and (c) tax benefits related to imputed interest or guaranteed payments deemed to be paid or incurred by us as a result of the TRA. We expect the TRA payments to be substantial, however, the actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of exchanges of Class A units of the operating company or Class A units of the San Francisco Venture, the price of our Class A common shares at the time of such exchanges, the extent to which such exchanges are taxable and our ability to use the potential tax benefits, which will depend on the amount and timing of our taxable income and the rate at which we pay income tax. As of December 31, 2024, there were no amounts currently payable under the TRA. However, TRA payments associated with California state taxes may become payable between 2026 and 2028 as a result of the passage in June 2024 of California Senate Bill 167, which, in part, suspends the usage of California net operating loss deductions for tax years 2024 through 2026. The majority of TRA payments, however, are not expected to begin until after 2028.