Five Point Holdings (NYSE:FPH) LLC has reported a consolidated net income of $14.2 million for the third quarter of 2023 while adding $25.1 million to its cash balance, which now totals $218.3 million. Despite market challenges, including higher interest rates and limited inventory, the company remains optimistic about its future and is focused on repositioning and extending its debt.
Key takeaways from the call:
- The company closed two land sales in Valencia for a total of $60.7 million and anticipates closing a sale of finished home sites by year-end.
- The gross margin on sales was 34.2% and recognized $4.5 million in management services revenue and $700,000 in other revenue.
- Selling, general, and administrative expenses were slightly lower than projected at $11.9 million.
- The company's total liquidity at the end of the quarter was $343.3 million, with $218.3 million in cash and $125 million in available borrowing capacity.
- The company's debt-to-total capitalization ratio was stable at 24.5%, and its net debt-to-capitalization ratio was 17.5%.
- The company is on track to meet its year-end guidance of an additional $50 million to $70 million net income and a cash balance of $250 million to $300 million.
- The company acknowledged the impact of high-interest rates but believes that demand will remain strong due to the housing shortage in California.
During the call, Dan Hedigan, a company representative, discussed the Valencia sale, indicating that it had a lower density and higher price per lot than previous sales. He also provided updates on the Great Park and Valencia projects and mentioned that the San Francisco project is in the early stages of development.
Kim Tobler, another representative, provided information about the senior notes due in 2025, stating that they have a coupon rate of 7.875% and a principal amount of $625 million. She also mentioned that the company is focused on increasing its cash balance and will decide when to refinance the bonds based on the market.
The company also addressed questions about the wide range of fourth-quarter free cash flow guidance, attributing it to timing issues and the potential for sales to slip into the first quarter. They confirmed that if fourth-quarter cash flow is $32 million, $50 million would be pushed to the first quarter. The company also mentioned the renewal of its revolver and confirmed that there is no restriction preventing it from buying back bonds at a discount.
The call concluded with management expressing gratitude and looking forward to the next quarter. The company remains confident in its ability to meet its long-term capital needs.
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