Greetings and welcome to the Five Point Holdings LLC Fourth Quarter and Year-End 2022 Conference Call. As a reminder, this call is being recorded. Today's conference may include forward-looking statements regarding Five Point's business, financial condition, operations, cash flow, strategy and prospects. Forward-looking statements represent Five Point's estimates on the date of this conference call and are not intended to give any assurance as to the 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 included 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. And now, I would like to turn the call over to Mr. Dan Hedigan, Chief Executive Officer.

Thank you, Joe. Good afternoon, everyone, and thank you for joining our call. I have with me today Leo Kij, our Interim Chief Financial Officer; Mike Alvarado, our Chief Legal Officer; and Kim Tobler, our Vice President Treasurer and Tax. Stuart Miller, our Executive Chairman is joining us remotely. I'm pleased to update you today on the progress of the Company through the fourth quarter and for the full year of 2022. I will also update you on our team's focus as we move through the current real estate market down cycle and our strategies for 2023. Next, Leo will give an overview of the company's financial performance and condition. We'll then open the line for questions to our management team. It is notable for the first time we're reporting our earnings within three weeks of the close of our quarter. We are in control of our business. As I wrap up my first year as CEO of Five Point, I'd like to recognize the extraordinary efforts of our team and to say I'm very proud of them. 2022 was a year of organizational transition, operating through the impacts resulting from the Federal Reserve's aggressive increase in interest rates. Through it all, the team has remained focused on our operational priorities. Turning to our financial results, consolidated net income in our fourth quarter was $22.5 million, and our SG&A was $13.1 million, a $4.5 million reduction in SG&A compared to Q4 2021. Consolidated SG&A for the year was $54.6 million a 29% reduction from 2021. We ended the year with cash and cash equivalents of $131.8 million. Two key successes contributed our fourth quarter positive results. The first was our execution on our commercial land sales strategy where the Great Park Venture closed on a very strong sale of approximately…

Thanks, Dan. A summary of our financial results was included in the earnings release issued earlier today in which we reported consolidated net income of $22.5 million for the quarter. We recognized $17 million in revenue that was mostly generated by our Valencia and management company segments. Selling, general and administrative expenses were $13.1 million which represents a reduction of 25.5% compared to the same quarter last year. The decrease reflects our reduction in headcount as previously reported during our first quarter earnings call. Equity and earnings from our unconsolidated entities was $26.2 million and was primarily a result of recognizing our share of the net income generated from the commercial land sale at the Great Park Venture that Dan described earlier. Turning to the balance sheet and liquidity, our net increased inventory for the quarter was $9.6 million. This increase includes accrued capitalized interest on our senior notes of $12.3 million and a decrease of $27.7 million for reimbursement from the Communities Facilities District or CFT for certain public infrastructure costs that have been incurred as part of the development process at our Valencia segment. This is the first CFT reimbursement we have received since we started the current development in Valencia. As a community grows, and the qualifying costs are incurred, we expect to receive more reimbursement. We paid semiannual interest of $24.6 million on our senior notes and we paid $4.1 million including $700,000 of interest against our related party EB-5 reimbursement obligation. Distributions and incentive compensation of $66.9 million was received from our interest in the Great Park Venture and we also received a distribution from our interest in the Gateway Venture of $8.6 million. As recently reported on an 8-K filing, our development management agreement with the Great Park Venture was renewed through 12/31/2024. The…

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

Hi, guys. Good afternoon. How are you, Dan? Good to hear you. Thanks for all the information. Very helpful, especially kind of the cash flow buildup for 2023. I think that's hopefully helpful for people. I know it's more information than you've provided in the past. So appreciate that. I guess before we drill into some of the details on that, just in terms of the builder appetite for land. Clearly, the fourth quarter was a pretty challenging environment and I think last quarter you had kind of signaled maybe you would get some residential lot sales in the quarter and obviously that didn't happen. But it seems like the news flow is getting a little bit better here over the last handful of weeks. Builder sentiment improving, rates continuing to move lower, kind of the normal seasonal uptick is starting to kick in here ahead of the selling season. So I'm curious if you've had any more recent conversations with builders since the New Year? Has there been any indication that the builders are looking to maybe dabble back into the land market after kind of moving into the sidelines in the back half of last year or do you feel like they're still in wait-and-see mode kind of trying to figure out how the selling season unfolds?

Alan, that's a real good question. And the answer is that we actually all of the builders that were engaged prior and we call D5 South, we've already had conversations with them this month. A number of them are sharpening pencils and starting underwriting again. We actually have one sale that we were in negotiations last year that actually is still in process, it's kind of kicked over this year that we're still actively trying to wrap up the final pieces of that. But the - what isn't doesn't jump out of these numbers, especially if you think about Great Park in particular. We had 18 sales last week at Great Park. The available inventory at Solis that's all was left in the Great Park. It will be sold out by year end. So all the builders we're talking to are all thinking about their 2024 having a product available in 2024. And as you know, it's not too early to start working on that. So, long answer to your question, but we have four or five builders actively re-underwriting right now. And so we expect to do well there.

Great, and that's really helpful. I mean, I didn't quite - sorry, go ahead --

Alan, I'd just say, the signs are positive. I mean, so I would say the early signs very positive. But obviously, we're going to wait-and-see hopefully next quarter and tell you more, but early signs are positive.

Great. I do have a couple of quick housekeeping questions, I'll just ask quickly, hopefully we can check through them. Number one, I might have missed it. Did you give the cash balance number in Great Park at year end? I think that's the number you've provided in the past?

You mean in the Great Park partnership in the venture?

Yes, after the distributions, how much is remaining?

$149 million.

Yes, $149 million Alan.

And should we think about the cadence of the distributions kind of like the last few years? I think it's been more in the back half of the year or maybe after a lot of land sale. So should we think about that similarly in 2023 if you have a land sale in the back half of this year that should coincide with another distribution?

Alan I don't have to - yes I mean, certainly as we have the year-end land sales, we would anticipate additional distributions. But it is necessarily all tied to that because the partnership is very conservative and made a conscious decision at the end of the year to hold on to additional cash as they see how this year sorts out. So I think we were - are not necessarily tied to land sales as much as we're tied just like everyone else, a little bit of clarity on how the market is moving forward.

Got it, that makes sense. Another question here so you mentioned the plan for San Francisco sounds like looking to move forward with Candlestick there. Just thinking through the cash flow, I'm assuming once you guys get that plan approved or we get to move forward with it, there's going to be some development expenses that need to occur obviously before you book any revenue. Is that contemplated at all on your 2023 expectation for cash flow to have any development expenses there? And if not, what do you expect those expenses to look like once they do begin to kick in?

Well, the first part of your question, we are not expecting any of those expenses in 2023. And you know the - what it's going to take to kind of kick that off obviously, we'll have a lot more clarity as we get closer to that point in time, but getting to the first commercial pad because of Candlesticks relationship to the 101, if you remember, it used to be an active ballpark, people could get off 101 and go there. It's actually compared to a lot of projects not that extraordinary. It's real money. I don't want to mislead you at all. But I - to try to estimate what that would be right this moment, just be a little bit early, but the first pad is very accessible from the 101 Freeway.

Got it, okay. That's helpful. And then final question, I think you said in that cash buildup that you expect about $80 million to $90 million coming in the door in the first half of the year. Can you kind of just break that up a little bit? Is that - are those commercial land sales, is it apartment sales, residential distribution to any additional guidance you can give on that?

Yes, it's a combination and really - I'll start at the bottom, actually we finished. I mean, we are expecting an interim distribution in the first half of the year based on our view of the market. So it's really a combination, it's combination of operating revenue, CFT reimbursements and recoveries, sales that we are currently working on and then obviously the distributions I just mentioned. And so within that basket of opportunities, we see - we have visibility $80 million to $100 million in the first half of the year kind of in that basket and how it finally settles out, I can't tell you right this second. But we're feeling very good about that kind of basket of opportunities.

Perfect, all right. Well, thank you for taking all of my questions here. I appreciate the time and best luck with everything.

Thanks Alan.

Our next question comes from the line of [Ben Johnson with Intact Asset Management]. Please proceed.

Hi thanks for taking my questions today.

Sure. Hi, Ben.

Can you hear me?

Yes, Ben we can. Thank you.

Great, I was just wondering if you could talk a little bit more about the management agreement and what material changes there besides the economic side? And can you talk a little bit about why there's change control added to that? Thanks.

So from the economic side of it, it really is when we did the one year extension last year, we kind of changed the economics from a standpoint of kind of reimbursement cost to kind of just a set monthly management fee. And so that part has remained exactly the same. That's just rollover exactly as it is. And we added basically two years and there's been no change to our preferred return earning in connection with that. So that it's really the big - the one change was really that adding those - actually just adding the time. On your question about the change in control, our partners in that are obviously very senior folks and we have spent a year and I've spent my year working with them and really working on that relationship and they actually really like the management team in place today. And so one of the things that they've kind of said is, hey, we really like how everything is working today and we want to be sure that if you Dan or Mike or Stewart aren't engaged that we have an opportunity to speak into that because we've got a very good operating relationship today - going together. So it's really kind of more around kind of that keyman question. And the change in control is - and that's going to also - it's also a continuity issue for them. They really want continuity because of what we've been able to achieve the past year.

That makes a lot of sense. Really appreciate all that color. And can you talk a little bit about extra access to liquidity if you guys have a more prolonged slowdown and maybe if rates don't really move and building kind of freezes up for a little bit longer?

Well, obviously, we have the $125 million line that has zero drawn on it. As we kind of project out the market where we're going, we don't have the thoughts that additional liquidity will be needed. And certainly, if the market doesn't recover we will be reducing costs materially. Right now, we've got capital for revenue communities later this year and into 2024, there is some capital, although we're being very careful about it that needs to be spent. If we really believe there wasn't an opportunity to generate revenue, we would stop all of that, which would clearly help liquidity.

Very good. Thank you very much for answering all my questions.

You're welcome. Thanks Ben.

[Operator Instructions] And our next question comes from the line of Robert Heimowitz with Concise Capital. Please proceed.

Hi. I just wanted to start by saying this through it, I started my career in IR at Lennar and I learned so much there and you really have the hardest working in world class treasury and accounting teams. So now on to Dan, can we expect that you guys might build more homes through a fee build program. This was a very successful program when you guys did it. And it would emphasize to your guest builders that there -- that you guys are working with scarce resources that if they don't prioritize, you will.

Robert, help me on what is your last comment? I'm not quite followed. If we don't prioritize they will, what are you thinking there?

Like you guys had a fee build program where you guys were able to recognize good profits on and so you guys could go ahead and do that again if your guest builders don't purchase the land from you.

Okay. All right. Thank you. I understand. That's a good question. It is certainly, I take nothing off the table. And in my career, I have done fee builder extensively use it at a different life to come out of '08, '09. And so it's a model I'm extremely familiar with. We haven't seen the need right now based on the conversations we're having with builders, but it's certainly something that I'm familiar with and it's something that we could definitely move to quite easily that's really where the market moves us.

Okay, great. Next question on the related party tax liability. S&P is including this debt in their calculations. Can you speak to any potential overhang here?

I'm sorry, I think are you referring to the TRA, the Tax Receivable Agreement?

Yes.

Yes. I think -- yes, I'm sorry, we have [indiscernible] can I think can probably address that question by the time, but you want to repeat the question to make sure that we answer it correctly?

Yes. S&P is treating this as debt now on their calculations, they're saying they don't know if you'll recognize the tax savings and you'll still have a liability associated with it. So just like how should we think about this.

Yes Robert, we've actually had conversations with the rating agencies about that and clarified that the TRA is a projected obligation based on our ability to use it. And our expectation today is that those payments would occur after the bonds expire. So it doesn't affect the collect - and our ability to pay the bonds and I want to reiterate the obligation only arises if we benefit from saving taxes. So to-date, the partners, the prior partners have been paying taxes that we would have otherwise paid, but because of the way the calculation is made, we haven't yet benefited. So just if that - did that help you?

Absolutely, I just got one more, which is can we talk about the stages of completion of the various home sites that you own? It seems like a lot of them were slated to close this year, they should all be close to completion or ready to be sold. So if we had how many were completely finished or how many were close to being finished, like work in process, we could kind of know the liquidity of the lots whether they could go to land banks or spec builders should custom builders have dropped out. So that's my last question? Thank you.

So Robert, let me first talk about Great Park. We had D5 South moving right along last year and once again being prudent when the sales weren't materializing, we've got the black top down and we've got all the wet sand and we [stopped that dry]. So we can complete those lots quite easily. So we're kind of in - we're kind of in a good place there and it will be the next place that we - next community we open in Great Park and it's in, as you say, it's in very good shape to move forward - about a lot of additional capital but just to remind everyone all that is self-funded through the partnership. And we've got substantial liquidity to do what we need to do on those, but that's actually in very good shape. And then when you get to Valencia. Valencia we have actually some sites that are - I kind of call them really more of infill sites that were in the early parts of the Mission Village, which is what we kind of call the first area there. They're actually ready to go. They're [mass grading] all of them structures in them and everything is stubbed. And then we have some other areas that we need to go back that are still mass grading streets cut. The storm drains are in but we're going to need to go back in and pay them out and put in wets and dries. But once again, we're - the next areas we go into there, that's kind of where we're at. The mass grading, let's say, streets are gutted. Storm drains are in. So we're in pretty good shape there also, but it will take a little more capital there as we move forward.

Okay. Thank you.

Thank you. Ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the call back to Dan Hedigan for closing remarks.

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. Thanks everyone.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.