What changed in this filing

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Item 1. Business

2021-03-10 compared with 2020-03-13 · 99 added, 69 removed, 238 unchanged (41% of the section changed)

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Structure and Formation of Our Company

In 2009, our company was formed as a limited liability company (under the name “Newhall Holding Company, LLC”) to acquire ownership of Newhall Land & Farming.

Our management company was originally formed in 2009 as a joint venture between our Chairman and Chief Executive Officer, Emile Haddad, and Lennar Corporation to manage the properties owned by Newhall Land & Farming and to pursue similar development opportunities.

Our management team was an integral part of the team in charge of developing and implementing land strategies on the west coast for Lennar prior to the formation of our management company.

Key members of our management team have led the acquisition, entitlement, planning and development of all three of our communities since their inception.

Our management team also has long-standing relationships with our principal equityholders, including Lennar.

In May 2016, we completed the formation transactions to combine the management company with ownership of our three California communities.

In the formation transactions, among other things:

we acquired an interest in, and became the managing member of, the San Francisco Venture;

we acquired a 37.5% percentage interest in the Great Park Venture, and we became the administrative member of the Great Park Venture;

we acquired the management company, which has historically managed the development of Great Park Neighborhoods and Valencia (formerly known as Newhall Ranch).

In August 2017, we acquired a 75% interest in the Gateway Commercial Venture, the entity that owns the Five Point Gateway Campus.

In 2009, our company was formed as a limited liability company to acquire ownership of Newhall Land & Farming, which is developing our Valencia community (formerly known as Newhall Ranch).

Emile Haddad, our Chairman and Chief Executive Officer, and members of our management team were an integral part of the formation of our company, and Mr.

Haddad has served on our board of directors since our inception.

Our management company was formed in 2009 as a joint venture between Mr.

Haddad and Lennar to originally manage the development of Valencia, and in 2010 it became the development manager of our Great Park Neighborhoods community.

In May 2016, we completed the formation transactions to combine our company with the management company, and among other things, we acquired an interest in the San Francisco Venture, which is developing our Candlestick and The San Francisco Shipyard communities, and we acquired a 37.5% percentage interest in the Great Park Venture, which is developing Great Park Neighborhoods.

In August 2017, we acquired a 75% interest in the Gateway Commercial Venture, the entity that owns portions of the Five Point Gateway Campus.

The diagram below presents a simplified depiction of our current organizational structure.

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We conduct all of our businesses in or through the operating company, which owns, directly or indirectly, equity interests in, and controls the management of, FPL, the San Francisco Venture and the management company.

Class A units of the operating company that we do not own, are held by affiliates of Lennar, Castlelake, and Emile Haddad, our Chairman and Chief Executive Officer, can be exchanged, on a one-for-one basis, for our Class A common shares.

Based on the closing price of our Class A common shares on February 28, 2020 ($7.49), our market capitalization on a fully exchanged basis was approximately $1.1 billion.

Class A units of the operating company that we do not own are held by affiliates of Lennar, Castlelake, and Mr.

Haddad and can be exchanged on a one-for-one basis, at our option, for either Class A common shares or cash equal to the fair market value of such shares.

Until Class A units of the operating

company are exchanged or redeemed, the capital associated with Class A units of the operating company not held by us is presented within "noncontrolling interests" on our consolidated balance sheet.

Based on the closing price of our Class A common shares on February 28, 2021 ($6.56), our market capitalization on a fully exchanged basis was approximately $971.0 million.

(2) The operating company owns all of the outstanding Class B units of the San Francisco Venture.

The Class A units of the San Francisco Venture, which are owned by affiliates of Lennar and Castlelake, are intended to be substantially economically equivalent to Class A units of the operating company.

As the holder of all outstanding Class B units, the operating company is entitled to receive 99% of available cash from the San Francisco Venture after the holders of Class A units have received distributions equivalent to the distributions, if any, paid on Class A units of the operating company.

The Class A units of the San Francisco Venture, which are owned by affiliates of Lennar and Castlelake, are intended to be economically equivalent to Class A units of the operating company.

As the holder of all outstanding Class B units of the San Francisco Venture, the operating company is entitled to receive 99% of available cash from the San Francisco Venture after the holders of Class A units in the San Francisco Venture have received distributions equivalent to the distributions, if any, paid on Class A units of the operating company.

Class A units of the San Francisco Venture can be exchanged, on a one-for-one basis, for Class A units of the operating company.

Until exchanged or redeemed through the operating company, the capital associated with Class A units of the San Francisco Venture is presented within "noncontrolling interests" on our consolidated balance sheet.

(3) We hold our interest in FPL directly and indirectly through the operating company and the management company.

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We are the administrative member of the Great Park Venture.

Management of the venture is vested in the four voting members, who have a total of five votes.

However, management of the Great Park Venture is vested in the four voting members, who have a total of five votes.

Major decisions generally require the approval of at least 75% of the votes of the voting members.

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Major decisions by the Gateway Commercial Venture generally require unanimous approval by an executive committee composed of two people designated by us and two people designated by another investor.

Some decisions require approval by

all of the members of the Gateway Commercial Venture.

Some decisions require approval by all of the members of the Gateway Commercial Venture.

The Gateway Commercial Venture owns one of the four buildings and approximately 50 acres of commercial land with additional development rights at the Five Point Gateway Campus.

We do not include the Gateway Commercial Venture as a consolidated subsidiary, but rather as an equity method investee, in our consolidated financial statements.

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federal income tax purposes to the extent of our current and accumulated earnings and profits and will be reported on Form 1099, to the extent applicable.

Our Competitive Strengths

We believe the following strengths will provide us with a competitive advantage in implementing our business strategy:

Attractive locations in desirable and supply constrained California coastal markets

Significant scale with favorable zoning and entitlements

Experienced and proven leadership

Expertise in partnering with governmental entities

Significant discretion in timing and amount of land development expenditures

Flexible capital structure with a conservative operating philosophy

Overview of Business Segments

Our four reportable segments are Valencia (formerly Newhall), San Francisco, Great Park and Commercial:

Our Valencia segment includes the community of Valencia being developed in northern Los Angeles County, California, as well as other land historically owned by FPL, including 16,000 acres in Ventura County, California and approximately 500 acres of remnant commercial, residential and open space land in Los Angeles County.

Our San Francisco segment includes the Candlestick and The San Francisco Shipyard communities, located on bayfront property in the City of San Francisco, California, as well as development management services that we provide to an affiliate of Lennar with respect to the Concord community in the San Francisco Bay Area.

In 2020, the development management services agreement with respect to the Concord community was terminated.

Our Great Park segment includes the Great Park Neighborhoods community, located in Orange County, California and development management services provided by the management company for the Great Park Venture.

Our Commercial segment includes the Five Point Gateway Campus, located within the Great Park Neighborhoods and property management services provided by the management company for the Gateway Commercial Venture.

For financial results and operating performance of our reportable segments, review Note 15 of our consolidated financial statements included under Part II, Item 8 of this report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 of this report.

We are primarily engaged in the business of planning and developing our three mixed-use, master-planned communities, and our principal source of revenue is the sale of residential and commercial land sites to homebuilders, commercial developers and commercial buyers.

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We design all aspects of our communities, creating highly desirable places to live, work, shop and enjoy an active lifestyle.

Our designs include a wide range of amenities, such as high quality schools, parks and recreational areas, entertainment venues and walking and biking trails.

Our designs include a wide range of amenities, such as high quality public schools, parks and recreational areas, entertainment venues and walking and biking trails.

Each community is comprised of several villages or neighborhoods, each of which offers a range of housing types, sizes and prices.

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Throughout this process, we continually analyze each community relative to its market to determine which portions to sell, which portions to build and then sell, and which portions to retain as part of our portfolio of commercial and multi-family properties.

We have organized our operations into four reportable segments, three of which are tied to our communities (our Valencia (formerly Newhall), San Francisco and Great Park segments) and one relating to our commercial operations (our Commercial segment).

Our operations relating to these segments are discussed in more detail below in the sections titled “Our Communities” and “Commercial.”

Our Communities

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Valencia is also approximately 45 miles north of the Los Angeles International Airport (LAX) and 21 miles northwest of the Hollywood Burbank (Bob Hope) Airport (BUR) in Burbank.

In 2019, we entered into purchase and sale agreements to sell 781 homesites in the first development area at the community, known as Mission Village.

We closed on 711 of the homesites in the fourth quarter, and the remaining homesites are anticipated to close in the first half of 2020.

Mission Village is approved to include 4,055 homesites, including a mix of single-family detached homes, single-family attached homes, apartments and for rent affordable units, and approximately 1.6 million square feet of commercial development.

In December 2019, we completed our first residential land sales in the first development area at Valencia.

As of December 31, 2020, we had sold or entered into sales contracts for 1,268 homesites.

Candlestick and The San Francisco Shipyard

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For additional information about the finding of suitability to transfer process, see “—Regulation—FOST Process.”

The San Francisco Venture previously entered into a project with a joint venture (the “Mall Venture”) between an affiliate of The Macerich Company (“Macerich”) and a venture between Lennar and Castlelake to construct an urban retail outlet shopping district at Candlestick (the “Retail Project”).

Construction of the Retail Project commenced in 2015 with the demolition of the Candlestick Park stadium and other infrastructure work.

In early 2019, however, we and the members of the Mall Venture decided not to proceed with the Retail Project.

Accordingly, on February 13, 2019, transactions related to the termination of the Retail Project were consummated, which resulted in the termination of the obligation of the San Francisco Venture to convey parcels of property on which the Retail Project was intended to be developed by the Mall Venture.

The San Francisco Venture was also released from certain development obligations.

In return, the San Francisco Venture repaid Macerich a $65.1 million obligation related to a promissory note in the same principal amount, plus approximately $5.5 million of accrued interest associated with the promissory note.

The San Francisco Venture also issued an aggregate of 436,498 of its Class A units (while we concurrently issued 436,498 Class B common shares) to affiliates of Lennar and Castlelake.

The San Francisco Venture can now redevelop these parcels for alternative uses.

In October 2019, we received approval from the City of San Francisco on a revised development plan for the first phase of Candlestick that is currently planned to include approximately 750,000 square feet of office space, 1,600 homes, and 300,000 square feet of lifestyle amenities centered around retail and entertainment.

As currently planned, Candlestick ultimately is expected to include approximately 7,000 homes.

Great Park Neighborhoods

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Great Park Neighborhoods is close to Interstate 5, Interstate 405, State Route 133 and John Wayne Airport (SNA) in Orange County.

The first homesites were sold in April 2013 and, as of December 31, 2019 , the Great Park Venture had sold 6,161 homesites (including 709 affordable homesites) and commercial land allowing for development of up to 2 million square feet of commercial (research and development) space.

The first homesites at the Great Park Neighborhoods were sold in April 2013 and, as of December 31, 2020, the Great Park Venture had sold 6,196 homesites (including 709 affordable homesites) and commercial land allowing for development of up to 2 million square feet of commercial (research and development) space.

The Great Park Venture reacquired the development rights to approximately one million square feet that had been previously sold.

For additional information about the commercial land sale, see “—Commercial” below.

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Factors we consider in determining whether or not to proceed with a particular commercial investment include (1) our existing knowledge of the master-planned communities we are currently developing and understanding their respective needs, (2) whether, in our judgment, a particular commercial property or investment will create additional value for our remaining land within the community, in addition to achieving desired investment returns on such property or investment on a stand-alone basis, (3) existing entitlements and our ability to change them, (4) compatibility of the physical site with our proposed uses, and (5) environmental considerations, traffic patterns and access to the site.

In August 2017, the Gateway Commercial Venture, in which we own a 75% interest, acquired the Five Point Gateway Campus, consisting of approximately 73 acres of commercial land in the Great Park Neighborhoods containing four newly constructed buildings, two of which were leased back to the seller, Broadcom Limited (together with its subsidiaries, “Broadcom”).

The Gateway Commercial Venture financed the purchase of the Five Point Gateway Campus with debt that is secured by a first trust deed on the real estate.

The Five Point Gateway Campus includes approximately one million square feet consisting of research and development and office space across the four buildings designed to accommodate thousands of employees.

Broadcom is the largest tenant, leasing approximately 660,000 square feet of research and development space pursuant to a 20-year triple net lease.

We and Lennar have entered into separate 130-month full service gross leases to occupy approximately 135,000 aggregate square feet.

In June 2019, the Gateway Commercial Venture entered into a non-binding letter of intent to sell one of the buildings to City of Hope, which intends to develop and operate a comprehensive cancer care center and build a future micro hospital on the property.

The Five Point Gateway Campus currently includes approximately one million square feet planned for research and development, medical and office space in four buildings, which are designed to accommodate thousands of employees.

In May 2020, the Gateway Commercial Venture closed on the sale of one building including approximately 11 acres of land within the campus to City of Hope, which intends to develop and operate a comprehensive cancer care center and build a future micro hospital.

In August 2020, the Gateway Commercial Venture closed on the sale of two buildings to a real estate management company and operator.

Our corporate headquarters are located in the fourth building, which remains owned by the Gateway Commercial Venture.

In addition to the fourth building, the Gateway Commercial Venture owns approximately 50 acres of commercial land with additional development rights at the campus.

Other Properties

We own approximately 16,000 acres in Ventura County that are primarily used for agriculture and energy operations.

We also own approximately 500 acres of remnant commercial, residential and open space land in Los Angeles County that is planned to be sold or deeded to third parties over approximately the next five years.

We own approximately 16,000 acres adjacent to our Valencia community in Ventura County that are primarily used for agriculture and energy operations.

We also own approximately 500 acres of remnant commercial, residential and open space land in Los Angeles County that is planned to be sold or deeded to third parties as we develop our Valencia community.

Development Management Services

Through the management company, we receive fees for providing development management services for Great Park Neighborhoods and for providing property management services to the Gateway Commercial Venture.

Additionally, we provide certain (but not all) development management services to other ventures in which Lennar is an investor (management services with respect to the Treasure Island Community and the Concord Community were terminated in 2018 and early 2020, respectively) and to CPHP in connection with their involvement in real estate activities at The San Francisco Shipyard.

We also provided certain development management services to CPHP related to the Retail Project at the Candlestick community until its cessation in early 2019.

Additionally, we previously provided certain (but not all) development management services to other ventures in which Lennar is an investor (management services with respect to the Treasure Island Community and the Concord Community were terminated in 2018 and early 2020, respectively) and to CPHP in connection with their involvement in real estate activities at The San Francisco Shipyard.

We compete with other residential, retail and commercial property developers in the development of properties in the Northern and Southern California markets.

Significant factors that we believe allow us to compete effectively in this business include:

the size and scope of our mixed-use, master-planned communities;

• the size and scope of our mixed-use, master-planned communities located in desirable and supply constrained California coastal markets;

• the recreational and cultural amenities available within our communities;

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• the proximity of our communities to major metropolitan areas;

Our business and results of operations are not materially impacted by seasonality.

• experienced and proven leadership with expertise in partnering with governmental entities;

• significant discretion in timing and amount of land development expenditures;

• flexible capital structure with a conservative operating philosophy.

Our business and results of operations are not materially impacted by seasonality, however, we have historically experienced, and expect to continue to experience, variability in results of operations between comparable periods as a result of the sequencing of the development of our communities.

Entitlement Process

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Development areas within our communities are at various stages of planning and development and, therefore, have received different levels of discretionary entitlements and approvals.

In some cases, development areas have obtained entitlements and approvals allowing homes and commercial buildings to be built and sold, and in other cases development areas require further discretionary entitlements or approvals prior to the commencement of

construction.

In still other cases, our approvals have been challenged by third parties.

For additional information on current legal challenges, see “Item 3.

Legal Proceedings.”

In the past, our approvals have been challenged by third parties.

Environmental Matters

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Projects with significant expected impacts require an Environmental Impact Report (“EIR”) while more limited projects may be approved based on a Mitigated Negative Declaration.

All of our development sites and projects have either been or continue to be investigated, remediated or reviewed (with documented EISs, FOSTs and EIRs, as applicable) in

accordance with the above-described and other applicable environmental laws to determine the suitability of their proposed uses and to protect human health and the environment.

All of our development sites and projects have either been or continue to be investigated, remediated or reviewed (with documented EISs, FOSTs and EIRs, as applicable) in accordance with the above-described and other applicable environmental laws to determine the suitability of their proposed uses and to protect human health and the environment.

New or additional permitting requirements, new interpretations of requirements, changes in our operations or litigation or community objections over the adequacy of conducted reviews and other response and mitigation actions could also trigger the need for either amended or new reviews or actions, which could result in increased costs or delays of, modification of, or denial of rights to conduct, our development programs.

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and (3) Great Park Neighborhoods.

Although we currently have no definitive agreements to

acquire other properties, we may do so in the future.

Although we currently have no definitive agreements to acquire other properties, we may do so in the future.

Our future investment or development activities will not necessarily be limited to any geographic area, product type or to a specified percentage of our assets.

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If we choose to invest in mortgages, we would expect to invest in mortgages secured by real property interests.

The Company does not have a policy that restricts the proportion of our assets that may be invested in a type of mortgage or any single mortgage or type of mortgage loan.

We do not have a policy that restricts the proportion of our assets that may be invested in a type of mortgage or any single mortgage or type of mortgage loan.

Securities of, or Interests in, Persons Primarily Engaged in Real Estate Activities and Other Issuers

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Other than as described above and for short-term securities pending long-term commitment, we do not currently intend to invest in any additional securities such as bonds, preferred shares or common shares.

Human Capital

We are innovators and collaborators in the evolution of cities in coastal California, and our associates are the force behind the success of our communities.

We maintain a relatively flat organizational structure, which encourages our associates to contribute and to grow their roles within the company without the limitations imposed by a rigid hierarchy.

We believe in cultivating a work environment that fosters inclusion, diversity of thought, professional development and opportunities to grow and share innovative ideas across all our community elements.

Our associates are expected to exhibit and promote honest, ethical and respectful conduct in the workplace.

All of our associates must adhere to a code of business conduct and ethics that sets standards for appropriate behavior and participate in required training on preventing and identifying harassment and discrimination.

We believe that diversity within our employee base helps us to incorporate a wide range of perspectives into the development of our communities.

We feel that the many cultures that live in our communities reflect the diverse mix of our associates.

At December 31, 2020, females constituted approximately 46% of our workforce, and ethnic and racial minorities constituted approximately 43% of our workforce.

We conduct an annual internship program as a means to developing a pipeline of young professional talent, gaining insight into new and emerging trends, fostering mentorship skills among our existing associates and reducing recruitment expenses.

We have designed our compensation and benefits programs to attract, retain and engage talented individuals.

Our compensation programs are aligned with key company-wide and individual objectives, which are evaluated on an annual basis.

Our associates are eligible for medical, dental and vision insurance, a 401(k) plan with matching contributions, health savings and flexible spending accounts, paid time off, life and disability insurance, various wellness programs, paid parental leave and employee assistance programs.

The compensation committee of our board of directors annually reviews the terms of our benefits programs made available to our associates.

We are dedicated to supporting and engaging with our communities through charitable donations, community outreach programs and the development of public schools, parks and other amenities.

In addition to charitable initiatives of the company, we encourage and provide the flexibility to allow our associates to pursue outside interests and to make a difference in their local communities.

In response to the COVID-19 pandemic, we took immediate steps to protect the health and well-being of our associates, sub-contractors and trade partners.

Beginning in March 2020, all of our associates started working remotely with access to necessary systems and resources to ensure business continuity.

Substantially all of our associates continue to work remotely, and we have utilized various technological resources to expand the use of virtual interactions, including weekly company-wide meetings, which we use to keep the team informed of the company’s plans regarding the evolving nature of the work environment.

We implemented a new COVID-19 Prevention Program, which sets forth COVID-19-related safety protocols and procedures, and we created worksite-specific operational plans for the limited number of locations at which associates have returned to work on site.

The COVID-19 Prevention Program and worksite plans incorporate numerous safety protocols, including social distancing, mask wearing, cleaning procedures, daily health checks, and contact tracing and notification procedures.

In addition, we provide paid time off for associates directly impacted by COVID-19.

At December 31, 2020, we had approximately 160 employees.

Information about our Executive Officers

The following individuals are our executive officers:

Name Age Position

Emile Haddad 62 Chairman, President and Chief Executive Officer

Higgins 53 Chief Financial Officer and Vice President

Michael Alvarado 55 Chief Legal Officer, Vice President and Secretary

Lynn Jochim 57 Chief Operating Officer

Greg McWilliams 69 Chief Policy Officer

Emile Haddad .

Haddad has been our President and Chief Executive Officer and Chairman of our board of directors since May 2016.

Haddad has been a member of our board since 2009.

From 2009 until May 2016, Mr.

Haddad was President and Chief Executive Officer of the management company, which he co-founded.

Higgins is our Chief Financial Officer and Vice President and has been since May 2016.

From September 2015 to May 2016, Mr.

Higgins was Chief Financial Officer of the management company.

Michael Alvarado .

Alvarado has been our Chief Legal Officer, Vice President and Secretary since May 2016.

From 2011 until May 2016, Mr.

Alvarado served as General Counsel for the management company.

Lynn Jochim .

Jochim was named our Co-Chief Operating Officer in March 2018 and became our sole Chief Operating Officer in March 2020.

From May 2016 until her appointment as Co-Chief Operating Officer, Ms.

Jochim served as our Executive Vice President.

From 2009 until May 2016, Ms.

Jochim worked for the management company, being principally responsible for Great Park Neighborhoods.

Greg McWilliams .

McWilliams was named our Chief Policy Officer in March 2018.

From May 2016 until his appointment as Chief Policy Officer, Mr.

McWilliams served as our Regional President-Southern California.

From 2004 until May 2016, Mr.

McWilliams was President of Newhall Land & Farming.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business