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Item 8. Financial Statements and Supplementary Data

2021-03-10 compared with 2020-03-13 · 501 added, 429 removed, 737 unchanged (56% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Five Point Holdings, LLC and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), capital, and cash flows, for each of the three years in the period ended December 31, 2019, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Five Point Holdings, LLC and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss) income, capital, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

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(In thousands, except shares)

$ 1,990,859 $ 1,889,761

INVESTMENT IN UNCONSOLIDATED ENTITIES

442,850 533,239

PROPERTIES AND EQUIPMENT, NET

32,769 32,312

INTANGIBLE ASSET, NET—RELATED PARTY

71,747 80,350

CASH AND CASH EQUIVALENTS

298,144 346,833

RESTRICTED CASH AND CERTIFICATES OF DEPOSIT

RELATED PARTY ASSETS

103,681 97,561

20,605 22,903

$ 2,961,985 $ 3,004,700

LIABILITIES AND CAPITAL

Notes payable, net

$ 617,581 $ 616,046

Accounts payable and other liabilities

135,331 167,711

Related party liabilities

113,149 127,882

Deferred income tax liability, net

12,578 11,628

Payable pursuant to tax receivable agreement

173,248 172,633

Total liabilities

1,051,887 1,095,900

COMMITMENTS AND CONTINGENT LIABILITIES (Note 13)

REDEEMABLE NONCONTROLLING INTEREST

25,000 25,000

Class A common shares;

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Contributed capital

578,278 571,532

Retained earnings

42,221 42,844

Accumulated other comprehensive loss

( 2,833 ) ( 2,682 )

Total members’ capital

617,666 611,694

Noncontrolling interests

1,267,432 1,272,106

Total capital

1,885,098 1,883,800

$ 2,961,985 $ 3,004,700

See accompanying notes to consolidated financial statements.

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Year Ended December 31,

2020 2019 2018

$ 69,398 $ 140,020 $ 133

Land sales—related party

53,219 923 900

Management services—related party

28,132 39,580 40,976

Operating properties

2,870 3,857 6,981

Total revenues

153,619 184,380 48,990

COSTS AND EXPENSES:

85,753 97,113 ( 165 )

Management services

20,486 28,492 23,962

Operating properties

5,127 5,565 5,077

Selling, general, and administrative

83,504 103,586 98,983

Total costs and expenses

194,870 234,756 127,857

OTHER INCOME:

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Interest income

1,369 7,844 11,767

Gain on settlement of contingent consideration—related party

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Total other income

1,725 72,762 22,268

EQUITY IN EARNINGS (LOSS) FROM UNCONSOLIDATED ENTITIES

INCOME (LOSS) BEFORE INCOME TAX (PROVISION) BENEFIT

INCOME TAX (PROVISION) BENEFIT

42,364 2,327 ( 2,163 )

INCOME (LOSS) BEFORE INCOME TAX PROVISION 2,838 24,713 ( 58,762 )

INCOME TAX PROVISION ( 1,744 ) ( 2,445 ) ( 9,183 )

NET INCOME (LOSS)

1,094 22,268 ( 67,945 )

LESS NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY PER CLASS A SHARE

1,522 13,235 ( 33,231 )

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY $ ( 428 ) $ 9,033 $ ( 34,714 )

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY PER CLASS A SHARE

$ ( 0.01 ) $ 0.13 $ ( 0.53 )

WEIGHTED AVERAGE CLASS A SHARES OUTSTANDING

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY PER CLASS B SHARE

66,722,187 66,261,968 65,002,387

69,000,096 145,491,898 65,002,387

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY PER CLASS B SHARE

Basic and diluted

$ ( 0.00 ) $ 0.00 $ ( 0.00 )

WEIGHTED AVERAGE CLASS B SHARES OUTSTANDING

Basic and diluted

79,233,544 79,221,176 79,859,730

See accompanying notes to consolidated financial statements.

FIVE POINT HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

Year Ended December 31,

2020 2019 2018

NET INCOME (LOSS)

OTHER COMPREHENSIVE INCOME (LOSS):

Net actuarial gain (loss) on defined benefit pension plan

$ 1,094 $ 22,268 $ ( 67,945 )

OTHER COMPREHENSIVE (LOSS) INCOME:

Net actuarial (loss) gain on defined benefit pension plan ( 332 ) 917 ( 1,252 )

Reclassification of actuarial loss on defined benefit pension plan included in net income (loss)

Other comprehensive income (loss) before taxes

Other comprehensive (loss) income before taxes ( 235 ) 1,060 ( 1,162 )

INCOME TAX (PROVISION) BENEFIT RELATED TO OTHER COMPREHENSIVE INCOME (LOSS)

OTHER COMPREHENSIVE INCOME (LOSS)—Net of tax

OTHER COMPREHENSIVE (LOSS) INCOME—Net of tax ( 235 ) 1,060 ( 1,162 )

COMPREHENSIVE INCOME (LOSS)

859 23,328 ( 69,107 )

LESS COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY

1,434 13,633 ( 33,675 )

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY $ ( 575 ) $ 9,695 $ ( 35,432 )

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CAPITAL

(In thousands, except share/unit amounts)

(In thousands, except share amounts)

Shares Class B

Shares Contributed

Earnings Accumulated

Comprehensive

Noncontrolling

Capital Noncontrolling

Interests Total

BALANCE - January 1, 2018 62,314,850 81,463,433 $ 530,015 $ 57,841 $ ( 2,455 ) $ 585,401 $ 1,320,208 $ 1,905,609

Net income (loss)

Adoption of accounting standards — — — 10,684 — 10,684 13,961 24,645

Net loss — — — ( 34,714 ) — ( 34,714 ) ( 33,231 ) ( 67,945 )

Share-based compensation expense — — 11,464 — — 11,464 — 11,464

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Issuance of share-based compensation awards, net of forfeitures 1,619,752 — — — — — — —

Issuance of Class A common shares in initial public offering, net of underwriter's discount and offering costs of $21,294

Issuance of Class A Common Units and related sale of Class B common shares in private placement

Other comprehensive income—net of tax of $0-actuarial gain on pension plan

Other comprehensive loss—net of tax of $ 0 -actuarial gain on pension plan

— — — — ( 718 ) ( 718 ) ( 444 ) ( 1,162 )

Redemption of noncontrolling interest 2,625,481 ( 2,624,697 ) 30,190 — ( 102 ) 30,088 ( 30,088 ) —

Adjustment to liability recognized under tax receivable agreement, net of tax of $ 0

— — ( 18,963 ) — — ( 18,963 ) — ( 18,963 )

Adjustment of noncontrolling interest in the Operating Company — — 8,946 — ( 31 ) 8,915 ( 8,915 ) —

BALANCE - December 31, 2018 66,810,980 78,838,736 $ 556,521 $ 33,811 $ ( 3,306 ) $ 587,026 $ 1,261,491 $ 1,848,517

Adoption of accounting standards

Net Income — — — 9,033 — 9,033 13,235 22,268

Share-based compensation expense — — 13,631 — — 13,631 — 13,631

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Issuance of share-based compensation awards, net of forfeitures 1,894,168 — — — — — — —

Other comprehensive loss—net of tax of $0-actuarial gain on pension plan

Other comprehensive income—net of tax of $ 0 -actuarial gain on pension plan

— — — — 662 662 398 1,060

Contribution from noncontrolling interest and related sale of Class B common shares — 436,498 3 — — 3 5,544 5,547

Redemption of noncontrolling interests 41,702 ( 41,690 ) 460 — ( 2 ) 458 ( 458 ) —

Adjustment to liability recognized under tax receivable agreement, net of tax of $ 0

— — ( 3,124 ) — — ( 3,124 ) — ( 3,124 )

Adjustment of noncontrolling interest in the Operating Company — — 8,140 — ( 36 ) 8,104 ( 8,104 ) —

BALANCE - December 31, 2019 68,788,257 79,233,544 $ 571,532 $ 42,844 $ ( 2,682 ) $ 611,694 $ 1,272,106 $ 1,883,800

Adoption of new accounting standards at unconsolidated entities — — — ( 195 ) — ( 195 ) ( 224 ) ( 419 )

Net (loss) income — — — ( 428 ) — ( 428 ) 1,522 1,094

Share-based compensation expense — — 11,562 — — 11,562 — 11,562

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Issuance of share-based compensation awards, net of forfeitures 364,624 — — — — — — —

Other comprehensive income—net of tax of $0-actuarial gain on pension plan

Contribution from noncontrolling interest and related sale of Class B common shares

Redemption of noncontrolling interests

Other comprehensive loss—net of tax of $ 0 -actuarial gain on pension plan

— — — — ( 147 ) ( 147 ) ( 88 ) ( 235 )

Tax distribution to noncontrolling interest — — — — — — ( 4,568 ) ( 4,568 )

Adjustment to liability recognized under tax receivable agreement—net of tax of $ 0

— — ( 615 ) — — ( 615 ) — ( 615 )

Adjustment of noncontrolling interest in the Operating Company — — 1,320 — ( 4 ) 1,316 ( 1,316 ) —

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Year Ended December 31,

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ 1,094 $ 22,268 $ ( 67,945 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Equity in (earnings) loss from unconsolidated entities

( 42,364 ) ( 2,327 ) 2,163

Return on investment from Gateway Commercial Venture 78,968 — —

Deferred income taxes

950 2,445 9,183

Depreciation and amortization

14,142 20,633 13,260

Noncash adjustment of payable pursuant to tax receivable agreement liability

— — ( 1,928 )

Gain on settlement of contingent consideration—related party

— ( 64,870 ) —

Gain on sale of golf club operating properties

— — ( 6,700 )

Gain on insurance proceeds for damaged property

— — ( 1,566 )

Share-based compensation

11,562 13,631 11,464

Changes in operating assets and liabilities:

( 99,228 ) ( 191,967 ) ( 278,008 )

Related party assets

( 9,969 ) ( 19,446 ) ( 17,787 )

( 69 ) ( 3,924 ) ( 1,073 )

Accounts payable and other liabilities

( 32,304 ) ( 4,174 ) ( 5,714 )

Related party liabilities

( 1,281 ) ( 4,309 ) 1,355

Net cash used in operating activities

( 78,499 ) ( 232,040 ) ( 343,296 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from the maturity of marketable securities

Purchase of marketable securities

Distribution from Gateway Commercial Venture

Return of investment from Gateway Commercial Venture 57,532 1,987 6,450

Contribution to Gateway Commercial Venture

— — ( 8,438 )

Contribution to Valencia Landbank Venture ( 4,166 ) — —

Purchase of indirect Legacy Interest in Great Park Venture—related party

— — ( 1,762 )

Distribution from indirect Legacy Interest in Great Park Venture—related party 1,721 — —

Proceeds from sale of golf club operating properties

Proceeds from insurance on damaged property

Cash from former San Francisco Venture members in relation to Separation Agreement

Purchase of properties and equipment

Net cash provided by (used in) investing activities

( 2,147 ) ( 1,676 ) ( 3,105 )

Net cash provided by investing activities 52,940 311 579

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds of Initial Public Offering of Class A common shares—net of underwriting discounts of $18,402

Proceeds of Class B common share offering

Proceeds from senior notes offering

Proceeds from issuance of Class A Common Units in private placement

Senior notes pre-issuance accrued interest proceeds

Payment of pre-issuance accrued interest on senior notes

— ( 1,941 ) —

Principal payment on settlement note

— — ( 5,000 )

Principal payment on Macerich note

Payment of equity offering costs

— ( 65,130 ) —

Reacquisition of share-based compensation awards for tax-withholding purposes

( 5,521 ) ( 4,099 ) ( 5,131 )

Payment of financing costs

— ( 2,822 ) —

Related party reimbursement obligation

( 13,452 ) ( 290 ) —

Tax distribution to noncontrolling interest ( 4,568 ) — —

Contribution from noncontrolling interest

Proceeds from issuance of redeemable noncontrolling interest

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities ( 23,541 ) 83,206 ( 10,131 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH

( 49,100 ) ( 148,523 ) ( 352,848 )

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period

348,574 497,097 849,945

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH—End of period

$ 299,474 $ 348,574 $ 497,097

SUPPLEMENTAL CASH FLOW INFORMATION (Note 14)

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However, the distributions paid to holders of our Class B common shares are in an amount per share equal to 0.0003 multiplied by the amount paid per Class A common share.

Initial Public Offering

On May 15, 2017, the Holding Company completed an initial public offering (“IPO”) and sold 24,150,000 Class A common shares for gross proceeds of $ 338.1 million .

The Holding Company used the net proceeds of the IPO to purchase 24,150,000 Class A Common Units of the Operating Company.

The aggregate net proceeds to the Company after deducting underwriting discounts and commissions and before offering expenses payable by the Company, was $ 319.7 million .

Concurrent with the IPO, the Company completed a private placement with an affiliate of Lennar Corporation (“Lennar”) in which the Operating Company sold 7,142,857 Class A Common Units of the Operating Company at a price per unit equal to the IPO public offering price per share, and the Holding Company sold an equal number of Class B common shares.

There were no underwriting fees, discounts or commissions, and aggregate proceeds from the private placement were $ 100.0 million .

The Holding Company used the proceeds from the sale of the Class B common shares to purchase 7,142,857 Class B Common Units of the Operating Company.

Reverse Share Split

On March 30, 2017, the board of directors of the Holding Company (the “Board”) approved, and on March 31, 2017 the Company effected, (i) a 1 for 6.33 reverse share split of issued and outstanding Class A and Class B common shares of the Holding Company, (ii) a 1 for 6.33 reverse unit split of issued and outstanding Class A and Class B Common Units of the Operating Company, and (iii) a 1 for 6.33 reverse unit split of the issued and outstanding Class A and Class B Units of the Operating Company’s consolidated subsidiary, The Shipyard Communities, LLC (the “San Francisco Venture”) (the “Reverse Split”).

All share, unit, per share, and per unit amounts in the accompanying consolidated financial statements give effect to the Reverse Split for all periods presented.

The Company presents noncontrolling interests and classifies such interests within capital but separate from the Company’s Class A and Class B members’ capital.

Noncontrolling interests represent equity interests in the Company’s consolidated subsidiaries held by partners in the Operating Company, excluding the Holding Company, and members in The Shipyard Communities, LLC (the “San Francisco Venture”), excluding the Operating Company (see Note 5).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation — The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Principles of consolidation —The accompanying consolidated financial statements include the accounts of the Company and the accounts of all subsidiaries in which the Company has a controlling interest and the accounts of variable interest entities (“VIEs”) in which the Company is deemed to be the primary beneficiary.

Principles of consolidation —The accompanying consolidated financial statements include the accounts of the Company and the accounts of all subsidiaries in which the Company has a controlling financial interest and the accounts of variable interest entities (“VIEs”) in which the Company is deemed to be the primary beneficiary.

Under the voting interest model, controlling financial interest is generally defined as a majority ownership of voting rights.

A VIE is an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support.

The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following

characteristics:

The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics:

(i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance;

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The Company is subject to risks incidental to the ownership, development, and operation of commercial and residential real estate.

These include, among others, the risks normally associated with changes in the general economic climate in the communities in which the Company operates, trends in the real estate industry, availability of land for development, changes in tax laws, interest rate levels, availability of financing, and potential liability under environmental and other laws.

These include,

among others, the risks normally associated with changes in the general economic climate in the communities in which the Company operates, trends in the real estate industry, availability of land for development, changes in tax laws, interest rate levels, availability of financing, and potential liability under environmental and other laws.

The Company’s credit risk relates primarily to cash deposits, cash equivalents, contract assets and other miscellaneous financial assets.

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Noncontrolling interests —The Company presents noncontrolling interests and classifies such interests within capital but separate from the Company’s Class A and Class B members’ capital when the criteria for permanent equity classification has been met.

Noncontrolling interests in the Company represent interests held by owners, excluding the Operating Company, of consolidated subsidiaries of the Operating Company, and investors in the Operating Company excluding the Holding Company.

Net income or loss of the Operating Company is allocated to noncontrolling interests based on substantive profit sharing arrangements within the operating agreements, or if it is determined that a substantive profit sharing arrangement does not exist, allocation is based on relative ownership percentage of the Operating Company and the noncontrolling interests.

Revenue recognition —Under ASC 606, Revenue From Contracts With Customers (“ASC 606”), which the Company adopted on January 1, 2018, revenues are recognized when control of the promised goods or services are transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Net income (loss) attributable to the noncontrolling interests on the consolidated statement of operations represents the portion of earnings attributable to the economic interest in the Company’s subsidiaries held by the noncontrolling interests.

The Company allocates income (loss) to noncontrolling interests based on the substantive profit sharing provisions of the applicable subsidiary operating agreements.

Revenue recognition —Under Accounting Standards Codification (“ASC”) Topic 606, Revenue From Contracts With Customers , which the Company adopted on January 1, 2018, revenues are recognized when control of the promised goods or services are transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

At contract inception, the Company assesses the goods and services promised in its contract with its customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or a series of services) that is distinct.

Identified performance obligations are assessed by considering implicit and explicitly stated promises.

Land sales —Revenues from land sales are recognized when the Company satisfies the performance obligation at a point in time when the control of the land passes to its customers.

Land sales and Land sales — related party —Revenues from land sales are recognized when the Company satisfies the performance obligation at a point in time when the control of the land passes to its customers.

The transfer of control typically occurs when title passes at the close of escrow and the customer is able to direct the use of, control and obtain substantially all of the benefits from the land.

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In most contracts, at the time of the land sale, the estimate of profit participation, if any, is constrained, as there are significant factors outside of the Company’s control that will impact whether participation thresholds will be met.

In addition, some residential homesite sale agreements contain a provision requiring the homebuilder to pay a marketing fee per residence sold, as a percentage of the home sale

In addition, some residential homesite sale agreements contain a provision requiring the homebuilder to pay a marketing fee per residence sold, as a percentage of the home sale price.

Such fees are estimated as a variable form of consideration and the amount the Company expects to be entitled to receive from the homebuilder is recognized as revenue at the time of land sale.

Since payment for variable consideration is received in future periods, but the Company has completed its performance obligation, a contract asset is recorded for contingent variable consideration included in the transaction price.

At the end of each reporting period, variable considerations are reassessed to ensure changes in circumstances or constraints are appropriately reflected in the estimated transaction price.

At the end of each reporting period, variable consideration is reassessed to ensure changes in circumstances or constraints are appropriately reflected in the estimated transaction price.

Changes in estimates of variable components of transaction prices could result in cumulative catch-up adjustments to revenue in subsequent periods.

In some cases, the Company may be obligated to perform post-closing development obligations on the sold land and as a result may defer a portion of the transaction price.

Results for reporting periods prior to January 1, 2018 are reported in accordance with historic accounting under ASC Topic 605, Revenue Recognition (“ASC 605”) and other industry specific guidance.

Under ASC 605, revenues from land sales were recognized when a significant down payment was received, the earnings process was complete, title passes, and the collectability of any receivables was reasonably assured.

Revenues from profit participation were recognized when sufficient evidence existed that the homebuilding project had met the participation thresholds and the Company had collected the profit participation payment or was reasonably assured of collection.

The Company deferred revenue on amounts collected in advance of meeting the recognition criteria.

Lastly, marketing fees were recognized upon collection of receipts from the customer.

Management Services —Under ASC 606, revenues from management services are recognized as the customer consumes the benefits of the performance obligation satisfied over time.

Management Services — related party —Revenues from management services are recognized as the customer consumes the benefits of the performance obligation satisfied over time.

The transaction price pertaining to management services revenue may be comprised of fixed and variable components.

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In these circumstances, the Company acts as the principal and recognizes management fee revenues on these reimbursements in the same period that these costs are incurred because the amount to which the Company has the right to invoice corresponds directly with the value consumed by the customer for the Company’s performance to date.

The Company’s management agreements may also contain incentive compensation fee provisions contingent on the performance of customers.

In making estimates of incentive compensation, the Company expects to be entitled to receive in exchange for providing management services, significant assumptions and judgments are made in evaluating the factors that may determine the amount of consideration the Company will ultimately receive.

In doing so, cash flow projections are typically utilized.

These cash flows are significantly affected by estimates and assumptions related to market supply and demand, the local economy, projected pace of sales of homesites, pricing and price appreciation over the estimated selling period, the length of the estimated development and selling periods, remaining development, general and administrative costs, and other factors.

The Company’s management agreements may also contain incentive compensation fee provisions contingent on the financial performance of a customer.

In making estimates of incentive compensation the Company expects to be entitled to receive in exchange for providing management

services, significant assumptions and judgments are made in evaluating the factors that may determine the amount of consideration the Company will ultimately receive.

Cash flow projections are typically utilized in making such estimates.

The Company includes in the transaction price an estimate of incentive compensation only to the extent that a significant reversal of revenue is not probable.

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When changes in estimates and assumptions occur, the estimate of the amount of incentive compensation the Company expects to be entitled to receive and constraints on the estimate may change, resulting in a cumulative catch-up being recorded in the period of the change.

A contract asset is recognized when there is a timing difference between the satisfaction of performance obligations and revenues becoming billable.

Reassessment of the estimated transaction price at the end of each reporting period may increase or decrease contract assets.

Under ASC 605, the Company recorded management services revenues over the period in which the services were performed, fees were determinable, and collectability was reasonably assured.

The Company recorded revenues from annual fees ratably over the contract period using the straight-line method and the Company recognized incentive compensation in the period in which the contingency was resolved and only to the extent other recognition conditions had been met.

Operating properties —Included in operating properties revenues in the consolidated statements of operations are revenues from the Company’s agriculture and energy operations and its golf club operation, The Tournament Players Club at Valencia Golf Course (sold in January 2018).

Agriculture crop and energy revenues are recognized in accordance with ASC 606 at a point in time when control is transferred to the customer.

Under ASC 605, the Company recorded agriculture crop and energy revenues when the Company collected payment or was reasonably assured of collection.

A contract asset is recognized when there is a timing difference between recognition of revenue upon satisfaction of performance obligations and revenues becoming billable.

Operating properties —Included in operating properties revenues in the consolidated statements of operations are revenues from the Company’s agriculture, energy and other miscellaneous operations.

Agriculture crop and energy revenues are recognized at a point in time when control is transferred to the customer.

Agriculture leasing revenue is recognized in accordance with applicable lease accounting guidance.

Impairment of assets —Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that their carrying value may not be recoverable.

Impairment of assets —Long-lived assets, including inventory and the Company’s intangible asset, are reviewed for impairment when events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable.

Impairment indicators for long-lived inventory assets include, but are not limited to, significant increases in horizontal development costs, significant decreases in the pace and pricing of home sales within the Company’s communities and surrounding areas and political and societal events that may negatively affect the local economy.

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The discount rate used in determining each asset’s fair value generally depends on the asset’s projected life and development stage.

Share-based payments — Share-based payments are recognized on a straight-line basis over the service period in the statement of operations based on their measurement date fair values.

Share-based payments — Share-based payments are recognized on a straight-line basis over the service period in the statement of operations based on measurement date fair values.

Forfeitures, if any, are accounted for in the period when they occur.

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Restricted cash and certificates of deposit —Restricted cash and certificates of deposit consist of cash, cash equivalents, and certificates of deposit held as collateral on open letters of credit related to development obligations or because of other legal obligations of the Company that require the restriction.

Marketable securities —During the year ended December 31, 2017, the Company made investments in marketable debt securities.

The Company purchased each investment with the intent and ability to hold the investment until maturity and carried each investment at amortized cost.

The amortized cost of such debt securities were adjusted for amortization of premiums and accretion of discounts, using the effective interest method or a method that approximates the effective interest method.

Amortization and accretion of premiums and discounts are included in selling, general, and administrative costs and expenses in the accompanying consolidated statements of operations.

The Company evaluates securities in unrealized loss positions for evidence of other-than-temporary impairment, considering, among other things, duration and severity of any declines in value, and financial condition of the issuer.

No other-than-temporary impairments were identified during the year ended December 31, 2017 , and the Company held no marketable securities during the years ended December 31, 2019 or 2018.

Properties and equipment —Properties and equipment primarily relate to the Company’s agriculture operating properties’ businesses and are recorded at cost.

Properties and equipment, other than land, are depreciated over their estimated useful lives using the straight-line method.

At the time properties and equipment are disposed of, the asset and related accumulated depreciation, if any, are removed from the accounts, and any resulting gain or

loss is credited or charged to earnings.

Properties and equipment, other than agriculture land, are depreciated over their estimated useful lives using the straight-line method.

At the time properties and equipment are disposed of, the asset and related accumulated depreciation, if any, are removed from the accounts, and any resulting gain or loss is credited or charged to earnings.

The estimated useful life for land improvements and buildings is 10 to 40 years while the estimated useful life for furniture, fixtures, and equipment is two to 15 years.

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The Company’s judgment with regard to its level of influence or control of an entity involves consideration of various factors including the form of its ownership interest, its representation in the entity’s governance, its ability to participate in policy-making decisions, and the rights of other investors to participate in the decision-making process to replace the Company as manager or to liquidate the entity.

Investments accounted for under the equity method of accounting are recorded at cost and adjusted for the Company’s share in the earnings (losses) of the venture and cash contributions and distributions.

Investments accounted for under the equity method of accounting are recorded at cost and adjusted for the Company’s share in the earnings (losses) of the venture, impairments and cash contributions and distributions.

Any difference between the carrying amount of the equity method investment on the Company’s balance sheet and the underlying equity in net assets on the entity’s balance sheet results in a basis difference which is adjusted as the related underlying assets are depreciated, amortized, or sold and the liabilities are settled.

The Company generally allocates income and loss from unconsolidated entities based on the venture’s distribution priorities, which may be different from its stated ownership percentage.

The Company eliminates a portion of intra-entity profits or losses resulting from land sales between the Company and its unconsolidated entities until the assets are sold to a third party.

Cumulative distributions from unconsolidated entities are treated as returns on investment to the extent of the Company's share of cumulative earnings from the investment and included in the Company's consolidated statements of cash flows as cash flow from operating activities.

Cumulative distributions in excess of the Company's share of cumulative earnings are treated as returns of investment and included in the Company's consolidated statements of cash flows as cash flows from investing activities.

The Company evaluates the recoverability of its investment in unconsolidated entities by first reviewing each investment for any indicators of impairment.

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If management concludes that the impairment is “other-than-temporary,” the Company reduces the investment to its estimated fair value.

No other-than-temporary impairments were identified during either the year ended December 31, 2019 , 2018 or 2017 .

During the year ended December 31, 2020, the Company recognized an other-than-temporary impairment charge of $ 26.9 million related to the Company’s investment in Heritage Fields LLC (the “Great Park Venture”) (see Note 4).

No other-than-temporary impairments were identified during the years ended December 31, 2019 or 2018.

Inventories —Inventories primarily include land held for development and sale.

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Horizontal development costs can be further broken down to costs incurred to entitle and permit the land for its intended use;

costs incurred for infrastructure projects, such as schools, utilities, roads, and bridges;

costs incurred for infrastructure projects, such as public schools, utilities, roads, and bridges;

and site costs, such as grading and amenities, to bring the land to a saleable state.

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Costs that cannot be clearly associated with the acquisition, development, and construction of a real estate project and selling expenses are expensed as incurred.

The Company expenses advertising costs as incurred, which were $ 1.7 million , $ 2.0 million and $ 4.3 million during the years ended December 31, 2019 , 2018 and 2017 , respectively.

The Company expenses advertising costs as incurred, which were $ 3.3 million,

$ 1.7 million and $ 2.0 million during the years ended December 31, 2020, 2019 and 2018, respectively.

Certain public infrastructure project costs incurred by the Company are eligible for reimbursement, typically, from the proceeds of Community Facilities District (“CFD”) bond debt, state and federal grants or property tax assessments.

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Under the relative sales value method, each parcel sold in the project under development is allocated costs incurred and estimates of future inventory costs in proportion to the sales price of the sold parcel relative to the estimated overall sales prices of the project.

Since this method requires the Company to estimate the expected sales prices for the entire project, 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.

Intangible Asset —The Company’s intangible asset relates to the contract value of the incentive compensation provisions of the Company’s (see Note 4 and Note 8) development management agreement with Heritage Fields LLC, (the “Great Park Venture”).

The Company records amortization expense over the contract period based on the pattern in which the Company expects to recognize the economic benefits from the incentive compensation.

Receivables —The Company evaluates the carrying value of receivables, which includes receivables from related parties, at each reporting date to determine the need for an allowance for doubtful accounts.

As of both December 31, 2019 and 2018 , the allowance for doubtful accounts was not significant.

Since this method requires the Company to estimate future development costs and the expected sales price 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.

Intangible Asset —The Company records intangible asset amortization expense over the expected contract period based on the pattern in which the Company expects to recognize the economic benefits from the asset.

At December 31, 2020, there was no material allowance for credit loss and at December 31, 2019, the allowance for doubtful accounts was not significant.

See “Recently adopted accounting pronouncements” below relating to the Company’s adoption of Accounting Standards Update (“ASU”) No.

2016-13, Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU No.

Leases —Under ASC Topic 842, Leases , the Company determines at contract inception if an arrangement contains a lease.

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Contingent consideration assumed in a business combination is remeasured at fair value each reporting period until the contingency is resolved and any change in the fair value from either the passage of time or events occurring after the acquisition date, is recorded in results from operations.

Offering Costs —Costs incurred by the Company, totaling $ 2.9 million , that were directly attributable to the IPO were deferred and charged against the gross proceeds of the offering as a reduction of members’ contributed capital.

Income taxes —The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statements and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for the years in which taxes are expected to be paid or recovered.

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Year Ended December 31,

2020 2019 2018

Gain on sale of golf club operating property $ — $ — $ 6,700

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Total miscellaneous other income $ 356 $ 48 $ 8,573

Recently issued accounting pronouncements —In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU No.

The Tournament Players Club at Valencia Golf Course Disposal

In January 2018, The Tournament Players Club at Valencia Golf Course was sold for net cash proceeds of $ 5.7 million and the buyer’s assumption of certain liabilities, including certain club membership related liabilities.

The Company recognized a gain of $ 6.7 million as a result of the sale and such gain is included in miscellaneous other income in the consolidated statement of operations for the year ended December 31, 2018 within the Valencia segment.

Recently adopted accounting pronouncements —In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-13 which amends the guidance on the impairment of financial instruments, including most debt instruments, trade receivables, contract assets, and loans.

2016-13 adds to U.S.

GAAP an impairment model known as the current expected credit loss model that is based on expected losses rather than incurred losses.

GAAP an impairment model known as the current expected credit loss model, or CECL, that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses for instruments measured at amortized cost, resulting in a net presentation of the amount expected to be collected on the financial asset.

2016-13 is effective for public business entities (excluding entities eligible to be smaller reporting companies), for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For all other entities, ASU No.

2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and early adoption is permitted.

The Company will adopt ASU No.

2016-13 on January 1, 2020 using a modified retrospective approach.

The Company does not expect the adoption of ASU No.

2016-13 to have a material impact on its consolidated financial statements.

Recently adopted accounting pronouncements —In June 2018, the FASB issued ASU No.

2018-07, Compensation—Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting (“ASU No.

2018-07”) which simplifies the accounting of share-based payments granted to nonemployees for goods and services.

Under ASU No.

2018-07, most of the guidance on such payments to nonemployees is aligned with the requirements for share-based payments granted to employees, including the determination of the measurement date.

The Company adopted ASU No.

2018-07 on January 1, 2019 with no material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (“ASU No.

This ASU generally requires that lessees recognize right-of-use ("ROU") assets and lease liabilities on the balance sheet for operating and financing leases and also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases.

The FASB has issued multiple clarifications and updates since ASU No.

2016-02 that include, but are not limited to, the ability to elect practical expedients upon transition.

The Company adopted ASU No.

2016-02 and the related ASUs that formed ASC Topic 842, Leases, on January 1, 2019 using the modified retrospective approach.

Consequently, comparative prior periods presented in financial statements after adoption will continue to be in accordance with historical U.S.

GAAP (Topic 840, Leases) .

Upon transition, the Company elected the package of practical expedients, whereby the Company did not reassess whether existing contracts contain leases, the lease classification of existing leases and initial direct costs associated with those leases.

The impact of adopting the new guidance primarily relates to (i) the recognition of ROU assets and lease liabilities for operating leases, and (ii) the requirement to provide more robust disclosure on the nature of the Company’s leases, cash flow impacts arising from leases and significant assumptions or judgments used by management to determine whether a contract contains a lease as well as a determination of the discount rate for a lease.

The adoption of ASU No.

2016-02 did not have a material impact on the Company's consolidated statement of operations and statement of cash flows.

The cumulative effect of the changes made to the Company’s consolidated January 1, 2019 balance sheet from the adoption of the new lease guidance was as follows (in thousands):

Balance at December 31, 2018

Adjustments due to ASU No.

Balance at January 1, 2019

Related party assets

Accounts payable and other liabilities

Related party liabilities

The Company adopted ASC Topic 606 on January 1, 2018 using the modified retrospective approach with the cumulative effect recorded as an adjustment to opening capital.

Results for reporting periods beginning after January 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under ASC Topic 605 and other industry specific guidance.

The Company and its unconsolidated entities adopted ASU No.

2016-13 on January 1, 2020 using a modified retrospective approach with no material impact on the Company’s consolidated financial statements.

Under the new guidance, the Company performs a credit loss assessment for new financial assets obtained on a pooling basis by financial asset type (e.g., contract assets, trade receivables, investments, etc.) and estimates an allowance of expected credit loss.

Factors considered in the estimation of expected credit loss include, but are not limited to, historical loss experience, third-party default rates on similar financial assets, credit-rating agency ratings and qualitative macroeconomic conditions.

The Company continually monitors its credit loss exposure by evaluating changes in economic conditions or significant events and how that may impact current credit loss estimates.

At December 31, 2020, there was no material allowance for credit loss.

The following tables present the Company’s consolidated revenues disaggregated by revenue source and reporting segment (see Note 15) (in thousands):

Year ended December 31, 2020

San Francisco

Management services

Valencia San Francisco Great Park Commercial Total

Land sales and Land sales—related party

$ 122,617 $ — $ — $ — $ 122,617

Management services—related party

— 835 26,900 397 28,132

Operating properties 994 595 — — 1,589

123,611 1,430 26,900 397 152,338

Operating properties leasing revenues 1,281 — — — 1,281

$ 124,892 $ 1,430 $ 26,900 $ 397 $ 153,619

Year ended December 31, 2019

San Francisco

Management services

Valencia San Francisco Great Park Commercial Total

Land sales and Land sales—related party

$ 140,058 $ 885 $ — $ — $ 140,943

Management services—related party

— 2,385 36,873 322 39,580

Operating properties 1,642 725 — — 2,367

141,700 3,995 36,873 322 182,890

Operating properties leasing revenues 1,490 — — — 1,490

$ 143,190 $ 3,995 $ 36,873 $ 322 $ 184,380

Year ended December 31, 2018

Valencia San Francisco Great Park Commercial Total

Land sales and Land sales—related party

$ 149 $ 884 $ — $ — $ 1,033

Management services—related party

— 4,397 35,090 1,489 40,976

Operating properties 3,878 729 — — 4,607

4,027 6,010 35,090 1,489 46,616

Operating properties leasing revenues 2,374 — — — 2,374

$ 6,401 $ 6,010 $ 35,090 $ 1,489 $ 48,990

Contract balances are recorded on the consolidated balance sheet in either related party assets or other assets for receivables from customers and contract assets (unbilled receivables) depending on whether the customer is a related party.

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The opening and closing balances of the Company’s contract assets for the year ended December 31, 2020 were $ 73.0 million ($ 68.1 million related party, see Note 9) and $ 85.1 million ($ 78.1 million related party, see Note 9), respectively.

The increase of $ 22.4 million between the opening and closing balances of the Company’s contract assets primarily results from an increase of $ 18.6 million as a result of a timing difference between the Company’s recognition of revenue earned for the performance of management services and no contractual payments due from the customer during the period.

The opening (after initial adoption) and closing balances of the Company’s contract assets for the year ended December 31, 2018 were $ 39.0 million ( $ 38.3 million related party) and $ 50.6 million ( $ 49.8 million related party, see Note 9), respectively.

The increase of $ 11.6 million between the opening and closing balances of the Company’s contract assets primarily results from an increase of $ 18.6 million as a result of a timing difference between the Company’s recognition of revenue earned for the performance of management services and contractual payments due from the customer during the period.

Offsetting such increase was the derecognition of $ 7.0 million , representing variable cash consideration related to a land sale from a previous period.

In September 2018, the Company relinquished its rights to the variable consideration in favor of additional entitlements transferred from the buyer that can be used at the Candlestick and The San Francisco Shipyard communities (see Note 9).

transaction price for this purchase and sale agreement did not change as a result of the changes to the consideration components.

The increase of $ 12.1 million between the opening and closing balances of the Company’s contract

assets primarily result from a timing difference between the Company’s recognition of revenue earned for the performance of management services and no contractual payments due from the customer during the period.

The opening and closing balances of the Company’s contract assets for the year ended December 31, 2019 were $ 50.6 million ($ 49.8 million related party) and $ 73.0 million ($ 68.1 million related party, see Note 9), respectively.

The increase of $ 22.4 million between the opening and closing balances of the Company’s contract assets primarily result from a timing difference between the Company’s recognition of revenue earned for the performance of management services and no contractual payments due from the customer during the period.

The opening and closing balances of the Company’s receivables from contracts with customers and contract liabilities for the years ended December 31, 2020 and 2019 were insignificant.

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In making this estimate, management utilizes projected cash flows of the operations of the Great Park Venture.

When changes in the estimate occur, a cumulative catch-up will be recorded in the period and the transaction price allocated to the unsatisfied performance obligation will be adjusted.

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The Operating Company owns 37.5 % of the Great Park Venture’s Percentage Interests as of December 31, 2020.

The Great Park Venture has made distributions to the holders of Legacy Interests in the aggregate amount of $ 355.0 million as of December 31, 2019 .

In January 2020, the Great Park Venture made distributions to the holders of Legacy Interests in the aggregate amount of $ 76.3 million .

The Great Park Venture has made priority distributions to the holders of Legacy Interests in the aggregate amount of $ 431.3 million as of December 31, 2020.

The Great Park Venture is the owner of Great Park Neighborhoods, a mixed-use, master-planned community located in Orange County, California.

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The Company serves as the administrative member but does not control the actions of the executive committee.

At each reporting period, and when events and circumstances dictate, the Company evaluates its equity method investment in the Great Park Venture for impairment.

This evaluation focuses on the recoverability of the carrying value based upon the discounted value of distributions the Company expects to receive from the Great Park Venture.

This evaluation is performed at the investment level and is separate and apart from impairment evaluations on long-lived assets, such as the Company’s consolidated inventory balances, that focus on recoverability with undiscounted cash flows.

The Company evaluates the investment as a whole and does not evaluate the underlying assets of the Great Park Venture for impairment.

If the Great Park Venture records an impairment charge against its assets, the Company will recognize its share of the loss, adjusted for basis differences.

During the years ended December 31, 2020, 2019 and 2018, the Great Park Venture did not recognize any impairment losses on its long-lived assets.

In March 2020, the Company determined that an other-than-temporary impairment existed for the Company’s investment in the Great Park Venture as the estimated fair value of the investment was less than the carrying value.

This was the result of delays to the projected timing of distributions from Great Park Venture to the Company.

In determining that the impairment was other-than-temporary, the Company concluded at the measurement date that it was uncertain if a near term recovery of value that was lost as a result of expected delays to land sales from the impacts of the COVID-19 pandemic would occur.

As a result, the Company recognized a $ 26.9 million impairment charge that is included in equity in earnings from unconsolidated entities on the consolidated statement of operations during the year ended December 31, 2020.

Below are the most significant unobservable inputs used in the Company’s discounted cash flow model to determine the estimated fair value (level 3) of the Company’s investment in the Great Park Venture at the time the other-than-temporary impairment was recognized:

Unobservable inputs Range

Annual home price appreciation 0 % - 7 %

Annual horizontal development cost appreciation 0 % - 3 %

Average annual absorption of homesites (market rate homesites) 900

2020 home price range $ 640,000 - $ 1,300,000

Unlevered discount rate 9 %

The carrying value of the Company’s investment in the Great Park Venture, acquired through a series of acquisitions in May 2016 (the “Formation Transactions”), adjusted for the impairment, is higher than the Company’s underlying share of equity in the carrying value of net assets of the Great Park Venture resulting in a basis difference.

The Company’s earnings or losses from the equity method investment are adjusted by amortization and accretion of the basis differences as the assets (mainly inventory) and liabilities that gave rise to the basis difference are sold, settled or amortized.

During the year ended December 31, 2020, the Great Park Venture recognized $ 2.7 million in land sale revenues to related parties of the Company and $ 22.1 million in land sale revenues to third parties.

During the year ended December 31, 2019, the Great Park Venture recognized $ 133.3 million in land sale revenues to a related party of the Company and $ 137.7 million in land sale revenues to third parties, of which $ 31.0 million relates to homesites sold to a land banking entity whereby a related party of the Company has retained the option to acquire these homesites in the future from the land banking entity.

During the years ended December 31, 2018 and 2017, the Great Park Venture recognized $ 3.9 million and $ 7.7 million , respectively in related party land sale revenues.

The cost of the Company’s investment in the Great Park Venture is higher than the Company’s underlying equity in the carrying value of net assets of the Great Park Venture (basis difference).

The Company’s earnings from the equity method investment are adjusted by amortization and accretion of the basis differences as the assets (mainly inventory) and liabilities that gave rise to the basis difference are sold, settled or amortized.

During the year ended December 31, 2018, the Great Park Venture recognized $ 3.9 million in land sale revenues to related parties and $ 171.8 million in land sale revenues to third parties.

The following table summarizes the statement of operations of the Great Park Venture for the years ended December 31, 2020, 2019 and 2018 (in thousands):

2020 2019 2018

Land sale revenues

$ 24,827 $ 270,970 $ 175,689

Cost of land sales

( 15,304 ) ( 179,836 ) ( 118,115 )

Other costs and expenses

Net income of Great Park Venture

The Company’s share of net income

( 38,929 ) ( 56,248 ) ( 54,506 )

Net (loss) income of Great Park Venture $ ( 29,406 ) $ 34,886 $ 3,068

The Company’s share of net (loss) income $ ( 11,027 ) $ 13,082 $ 1,151

Basis difference amortization

Equity in earnings (loss) from Great Park Venture

( 2,073 ) ( 6,900 ) ( 2,057 )

Other-than-temporary investment impairment ( 26,851 ) — —

Equity in (loss) earnings from Great Park Venture $ ( 39,951 ) $ 6,182 $ ( 906 )

The following table summarizes the balance sheet data of the Great Park Venture and the Company’s investment balance as of December 31, 2020 and 2019 (in thousands):

$ 916,127 $ 870,861

Cash and cash equivalents

128,850 293,002

Receivable and other assets

24,449 32,395

$ 1,069,426 $ 1,196,258

Accounts payable and other liabilities

$ 139,929 $ 159,965

Distribution payable to Legacy Interests

Redeemable Legacy Interests

133,695 133,695

Capital (Percentage Interest)

795,802 826,326

Total liabilities and capital

$ 1,069,426 $ 1,196,258

The Company’s share of capital in Great Park Venture $ 298,426 $ 309,872

Unamortized basis difference

93,039 121,963

The Company’s investment in the Great Park Venture

$ 391,465 $ 431,835

Gateway Commercial Venture

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The Company is the manager of the Gateway Commercial Venture, with responsibility to manage and administer its day-to-day affairs and implement a business plan approved by the executive committee.

The Gateway Commercial Venture owns the Five Point Gateway Campus located in Irvine, California and acquired the Five Point Gateway Campus through debt and capital funding.

The debt obtained by the Gateway Commercial Venture is non-recourse to the Company other than in the case of customary “bad act” exceptions or bankruptcy or insolvency events.

The Company and a related party of the Company separately lease office space at the Five Point Gateway Campus, and during the years ended December 31, 2019 and 2018 , the Gateway Commercial Venture recognized $ 8.3 million and $ 1.1 million in rental revenues from those leasing arrangements.

The following table summarizes the statement of operations of the Gateway Commercial Venture for the years ended December 31, 2019 , 2018 and from August 4, 2017 (the date of our initial investment) to December 31, 2017 (in thousands):

The Five Point Gateway Campus, consisting of approximately 73 acres of commercial land in the Great Park Neighborhoods, 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 August 2020, the Gateway Commercial Venture closed on the sale of two buildings at the Five Point Gateway Campus, comprising a total of approximately 660,000 square feet of research and development space currently leased to one tenant under a triple net lease.

The purchase price was $ 355.0 million, and the purchaser is a real estate investment management company and operator.

The sale of the buildings, which had a carrying value of approximately $ 278.0 million, resulted in a gain of approximately $ 74.8 million, net of transaction costs.

Additionally, the Gateway Commercial Venture made a debt payment of $ 245.0 million to its lender and a distribution of $ 107.0 million to its members, of which approximately $ 80.3 million was distributed to the Company, with net proceeds generated from the sale.

In May 2020, the Gateway Commercial Venture closed on the sale of approximately 11 acres of land and an approximately 189,000 square foot building to City of Hope for a purchase price of $ 108.0 million.

The sale of this land and building, which had a carrying value of approximately $ 67.5 million, resulted in a gain of approximately $ 37.4 million, net of transaction costs.

Concurrently, the Gateway Commercial Venture made a debt payment of $ 30.0 million to its lender and a distribution of $ 75.0 million to its members, of which approximately $ 56.3 million was distributed to the Company, with net proceeds generated from the sale.

The Company and a related party of the Company separately lease office space in the remaining building owned by the Gateway Commercial Venture at the Five Point Gateway Campus, and during the years ended December 31, 2020, 2019 and 2018, the Gateway Commercial Venture recognized $ 8.4 million, $ 8.3 million and $ 1.1 million, respectively, in rental revenues from those leasing arrangements.

The following table summarizes the statement of operations of the Gateway Commercial Venture for the years ended December 31, 2020, 2019 and 2018 (in thousands):

2020 2019 2018

Rental revenues $ 24,241 $ 34,157 $ 26,580

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Depreciation and amortization ( 9,412 ) ( 15,101 ) ( 11,730 )

Gain on asset sales, net 112,260 — —

Interest expense ( 8,857 ) ( 16,892 ) ( 11,563 )

Net (loss) income of Gateway Commercial Venture

Equity in (loss) earnings from Gateway Commercial Venture

Net income (loss) of Gateway Commercial Venture $ 111,845 $ ( 5,140 ) $ ( 1,676 )

Equity in earnings (loss) from Gateway Commercial Venture $ 83,884 $ ( 3,855 ) $ ( 1,257 )

The following table summarizes the balance sheet data of the Gateway Commercial Venture and the Company’s investment balance as of December 31, 2020 and 2019 (in thousands):

Real estate and related intangible assets, net $ 90,276 $ 451,988

Other assets 14,446 21,410

Total assets $ 104,722 $ 473,398

Notes payable, net $ 29,381 $ 302,344

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The Company’s investment in the Gateway Commercial Venture $ 48,788 $ 101,404

The debt of the Gateway Commercial Venture is non-recourse to the Company other than in the case of customary “bad act” exceptions or bankruptcy or insolvency events.

Valencia Landbank Venture

In December 2020, the Company made a capital contribution of $ 4.2 million to an entity (the “Valencia Landbank Venture”) organized for the purpose of taking assignment from homebuilders land purchase and sale agreements and purchasing residential lots within the Valencia community while concurrently entering into option and development agreements with homebuilders in which the homebuilder retains the option to purchase the land to construct and sell homes.

The Company has a 10 % interest in the Valencia Landbank Venture, and most major decisions require the Company’s approval in addition to the approval of the Valencia Landbank Venture’s other unaffiliated member.

The Company does not have a controlling financial interest in the Valencia Landbank Venture but has the ability to significantly influence the Valencia Landbank Venture’s operating and financial policies and accounts for the Valencia Landbank Venture under the equity method of accounting.

Subsequent to the Company’s investment, the Valencia Landbank Venture took assignment of certain purchase and sale agreements and purchased land from the Company for $ 51.6 million (see Note 9) while concurrently entering into option and development agreements with third party homebuilders.

When the Company sells land to the Valencia Landbank Venture, it eliminates its pro-rata share of the intra-entity profits generated from the sale through earnings (loss) from unconsolidated entities until the land is sold by the Valencia Landbank Venture to third party homebuilders.

During the year ended December 31, 2020, the Company recognized equity in loss of $ 1.6 million from the Valencia Landbank Venture.

NONCONTROLLING INTERESTS

The Operating Company

The Holding Company’s wholly owned subsidiary is the managing general partner of the Operating Company and at December 31, 2020, the Holding Company and its wholly owned subsidiary owned approximately 62.5 % of the outstanding Class A Common Units and 100 % of the outstanding Class B Common Units of the Operating Company.

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After a 12 month holding period, holders of Class A Common Units of the Operating Company may exchange their units for, at the Company’s option, either (i) Class A common shares on a one -for-one basis (subject to adjustment in the event of share splits, distributions of shares, warrants or share rights, specified extraordinary distributions and similar events), or (ii) cash in an amount equal to the market value of such shares at the time of exchange.

Whether such units are acquired by the Company in exchange for Class A common shares or for cash, if the holder also owns Class B common shares, then an equal number of that holder’s Class B common shares will automatically convert into Class A common shares, at a ratio of 0.0003 Class A common shares for each Class B

common share.

In either situation, an equal number of that holder’s Class B common shares will automatically convert into Class A common shares, at a ratio of 0.0003 Class A common shares for each Class B common share.

This exchange right is currently exercisable by all holders of outstanding Class A Common Units of the Operating Company.

With each exchange of Class A Common Units of the Operating Company for Class A common shares, the Holding Company’s percentage ownership interest in the Operating Company and its share of the Operating Company’s cash distributions and profits and losses will increase.

Additionally, other issuances of common shares of the Holding Company or common units of the Operating Company result in changes to the noncontrolling interest percentage.

As a result, such equity transactions result in an adjustment between members’ capital and the noncontrolling interest in the Company’s consolidated balance sheets and statements of capital to account for the changes in the noncontrolling interest ownership percentage as well as any change in total net assets of the Company.

During the years ended December 31, 2020, 2019 and 2018, the Holding Company increased its ownership interest in the Operating Company as a result of net equity transactions related to the Company’s share-based compensation plan and exchanges of Class A Common Units of the Operating Company for Class A common shares.

The terms of the Operating Company's Limited Partnership Agreement (“LPA”) provide for the payment of certain tax distributions to the Operating Company's partners and management partner in an amount equal to the estimated income tax liabilities resulting from taxable income or gain allocated to those parties.

The tax distribution provisions in the LPA were included in the Operating Company's governing documents adopted prior to our initial public offering and were designed to provide funds necessary to pay tax liabilities for income that might be allocated, but not paid, to the partners and the management partner.

The management partner is an entity controlled by the Company’s Chairman and Chief Executive Officer, Emile Haddad.

A tax distribution payment of $ 4.6 million was paid to the management partner in January 2020 as a result of taxable income allocated to it in 2018 and 2019.

The tax distribution made is treated as an advance distribution under the LPA and is taken into account when determining the amounts otherwise distributable to the management partner under the LPA.

In January 2021, the Operating Company made tax distributions to all partners totaling $ 2.9 million, net of amounts distributable to the Holding Company.

The management partner’s share of the distribution was $ 1.4 million.

The San Francisco Venture

The San Francisco Venture, the entity developing the Candlestick and The San Francisco Shipyard communities, has three classes of units—Class A units, Class B units and Class C units.

The Operating Company acquired a controlling interest in the San Francisco Venture in May 2016 by acquiring all of the outstanding Class B units of the San Francisco Venture (the “Formation Transaction”).

All of the outstanding Class A units are owned by affiliates of Lennar and affiliates of Castlelake, LP (“Castlelake”).

The Operating Company acquired a controlling interest in the San Francisco Venture in the May 2016 Formation Transactions by acquiring all of the outstanding Class B units of the San Francisco Venture.

All of the outstanding Class A units are owned by affiliates of Lennar Corporation (“Lennar”) and affiliates of Castlelake, LP (“Castlelake”).

The Class A units of the San Francisco Venture are intended to be substantially economically equivalent to the Class A Common Units of the Operating Company.

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Holders of Class A units of the San Francisco Venture can redeem their units at any time and receive Class A Common Units of the Operating Company on a one -for-one basis (subject to adjustment in the event of share splits, distributions of shares, warrants or share rights, specified extraordinary distributions and similar events).

If a holder requests a redemption of Class A units that would result in the Holding Company’s ownership of the Operating Company falling below 50.1 % , the Holding Company has the option of satisfying the redemption with Class A common shares instead.

If a holder requests a redemption of Class A units of the San Francisco Venture that would result in the Holding Company’s ownership of the Operating Company falling below 50.1 %, the Holding Company has the option of satisfying the redemption with Class A common shares instead.

The Company also has the option, at any time, to acquire outstanding Class A units of the San Francisco Venture in exchange for Class A Common Units of the Operating Company.

The 12 month holding period for any Class A Common Units of the Operating Company issued in exchange for Class A units of the San Francisco Venture is calculated by including the period that such Class A units of the San Francisco Venture were owned.

This exchange right is currently exercisable by substantially all holders of outstanding Class A units of the San Francisco Venture.

Concurrent with the termination of the Retail Project (defined in Note 9), the San Francisco Venture issued 436,498 Class A units (and the Holding Company issued 436,498 of its Class B common shares) to, and received a contribution of $ 5.5 million from, the holders of Class A units of the San Francisco Venture.

On February 13, 2019, the San Francisco Venture issued 25.0 million new Class C units to an affiliate of Lennar in exchange for a contribution of $ 25.0 million to the San Francisco Venture.

Provided that Lennar completes the construction of a certain number of new homes in Candlestick as contemplated under purchase and sale agreements with the Company, the San Francisco Venture is required to redeem the Class C units if and when the Company receives reimbursements from the Mello-Roos communities facilities district formed for the development, in an aggregate amount equal to 50% of any reimbursements up to a maximum amount of $ 25.0 million .

This exchange right is currently exercisable by all holders of outstanding Class A units of the San Francisco Venture.

Redeemable Noncontrolling Interest

In 2019, the San Francisco Venture issued 25.0 million new Class C units to an affiliate of Lennar in exchange for a contribution of $ 25.0 million to the San Francisco Venture.

The San Francisco Venture also maintains the ability to redeem the then outstanding balance of Class C units for cash at any time.

Upon a liquidation of the San Francisco Venture, the holders of Class C Units are entitled to a liquidation preference in an aggregate amount equal to 50% of the cumulative amount of reimbursements received, less the aggregate amount previously paid to redeem Class C units.

Upon a liquidation of the San Francisco Venture, the holders of Class C Units are entitled to a liquidation preference.

The maximum amount payable by the San Francisco Venture pursuant to redemptions or liquidation of the Class C units is $ 25.0 million.

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In connection with the issuance of the Class C units, the San Francisco Venture agreed to spend $ 25.0 million on the development of infrastructure and/or parking facilities at the Company’s Candlestick development.

At December 31, 2019 , $ 25.0 million of Class C units are outstanding and included in redeemable noncontrolling interest on the consolidated balance sheet.

Net income (loss) attributable to the noncontrolling interests on the consolidated statements of operations represents the portion of earnings attributable to the economic interest in the Company held by the noncontrolling interests.

The Company allocates income (loss) to noncontrolling interests based on the substantive profit sharing provisions of the applicable operating agreements.

Additionally, other issuances of common shares of the Holding Company or common units of the Operating Company results in changes to the noncontrolling interest percentage.

During the years ended December 31, 2019 , and 2018, the Holding Company increased its ownership interest in the Operating Company as a result of equity transactions related to the Company’s share-based compensation plan and exchanges of Class A Common Units of the Operating Company for Class A common shares.

At December 31, 2020 and 2019, $ 25.0 million of Class C units were outstanding and included in redeemable noncontrolling interest on the consolidated balance sheets.

CONSOLIDATED VARIABLE INTEREST ENTITY

The Holding Company conducts all of its operations through the Operating Company, a consolidated VIE, and as a result, substantially all of the Company’s assets and liabilities represent the assets and liabilities of the Operating Company, other than items attributed to income taxes and the payable pursuant to a tax receivable agreement (“TRA”), which was $ 172.6 million and $ 169.5 million at December 31, 2019 and 2018 respectively.

Operating Company, other than items attributed to income taxes and the payable pursuant to tax receivable agreement (“TRA”).

The Operating Company has investments in and consolidates the assets and liabilities of the San Francisco Venture, FP LP and Five Point Land, LLC (“FPL”), all of which have also been determined to be VIEs.

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In making that determination, the Company evaluated that the Operating Company has unilateral and unconditional power to make decisions in regards to the activities that significantly impact the economics of the VIE, which are the development of properties, marketing and sale of properties, acquisition of land and other real estate properties and obtaining land ownership or ground lease for the underlying properties to be developed.

The Company is determined to have more-than-insignificant economic benefit from the San Francisco Venture because, excluding Class C units, the Operating Company can prevent or cause the San Francisco Venture from making distributions on its units, and the Operating Company would receive 99 % of any such distributions (assuming no distributions had been paid on the Class A Common Units of the Operating Company).

The Company is determined to have more-than-insignificant economic benefit from the San Francisco Venture because, excluding Class C units, the Operating Company can prevent or cause the San Francisco Venture from making distributions on its units, and the Operating Company would receive 99 % of any such distributions made (assuming no distributions had been paid on the Class A Common Units of the Operating Company).

In addition, the San Francisco Venture is only allowed to make a capital call on the Operating Company and not any other interest holders, which could be a significant financial risk to the Operating Company.

As of December 31, 2019 , the San Francisco Venture had total assets of $ 1,197.1 million , primarily comprised of $ 1,186.2 million of inventories, $2.2 million in related party assets and $ 1.3 million in cash and total liabilities of $ 119.2 million including $ 102.4 million in related party liabilities.

As of December 31, 2018 , the San Francisco Venture had total assets of $ 1,151.4 million , primarily comprised of $ 1,137.0 million of inventories and $ 12.3 million in cash and total liabilities of $ 260.8 million including $ 168.9 million in related party liabilities and $ 65.1 million in notes payable.

As of December 31, 2020, the San Francisco Venture had total combined assets of $ 1.2 billion, primarily comprised of $ 1,223.5 million of inventories and $ 2.8 million in related party assets and total combined liabilities of $ 97.9 million, including $ 89.0 million in related party liabilities.

As of December 31, 2019, the San Francisco Venture had total combined assets of $ 1.2 billion, primarily comprised of $ 1,186.2 million of inventories, $ 2.2 million in related party assets and $ 1.3 million in cash and total combined liabilities of $ 119.2 million, including $ 102.4 million in related party liabilities.

Those assets are owned by, and those liabilities are obligations of, the San Francisco Venture, not the Company.

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The creditors of the San Francisco Venture do not have recourse to the assets of the Operating Company, as the VIE’s primary beneficiary, or of the Holding Company.

The Company and other partners do not generally have an obligation to make capital contributions to the San Francisco Venture.

The Company and the other members do not generally have an obligation to make capital contributions to the San Francisco Venture.

In addition, there are no liquidity arrangements or agreements to fund capital or purchase assets that could require the Company to provide financial support to the San Francisco Venture.

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The Operating Company, or a wholly owned subsidiary of the Operating Company, is the primary beneficiary of FP LP and FPL.

As of December 31, 2019 , FP LP and FPL had combined assets of $ 900.0 million , primarily comprised of $ 703.6 million of inventories, $ 80.4 million of intangibles, $ 72.3 million in related party assets and $ 0.5 million in cash, and total combined liabilities of $ 126.8 million , including $ 117.6 million in accounts payable and other liabilities and $ 9.2 million in related party liabilities.

As of December 31, 2020, FP LP and FPL had combined assets of $ 1.0 billion, primarily comprised of $ 767.3 million of inventories, $ 71.7 million of intangibles, $ 80.0 million in related party assets and total combined liabilities of $ 108.9 million, including $ 99.9 million in accounts payable and other liabilities and $ 9.0 million in related party liabilities.

As of December 31, 2019, FP LP and FPL had combined assets of $ 900.0 million, primarily comprised of $ 703.6 million of inventories, $ 80.4 million of intangibles, $ 72.3 million in related party assets and $ 0.5 million in cash and total combined liabilities of $ 126.8 million, including $ 117.6 million in accounts payable and other liabilities and $ 9.2 million in related party liabilities.

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Agriculture operating properties and equipment

$ 30,117 $ 30,016

Furniture, fixtures, and other 10,890 9,116

Total properties and equipment

41,007 39,132

Accumulated depreciation

( 8,238 ) ( 6,820 )

Properties and equipment, net

$ 32,769 $ 32,312

Depreciation expense was $ 1.3 million, $ 1.2 million and $ 0.8 million for the years ended December 31, 2020, 2019 and 2018 respectively.

The Tournament Players Club at Valencia Golf Course Disposal

In January 2018, The Tournament Players Club at Valencia Golf Course was sold for net cash proceeds of $ 5.7 million , and the buyer’s assumption of certain liabilities, including certain club membership related liabilities.

The property was operated by the Company as an amenity to the Valencia (formerly Newhall) segment’s fully developed community and the gain on the sale is included in Valencia segment’s results for the year ended December 31, 2018.

INTANGIBLE ASSET, NET—RELATED PARTY

The intangible asset relates to the contract value of the incentive compensation provisions of the A&R DMA with the Great Park Venture.

The intangible asset will be amortized over the contract period based on the pattern in which the economic benefits are expected to be received.

The intangible asset relates to the contract value of the incentive compensation provisions of the A&R DMA with the Great Park Venture acquired in the Formation Transactions (see Note 9).

The intangible asset will be amortized over the expected contract period based on the pattern in which the economic benefits are expected to be received.

The carrying amount and accumulated amortization of the intangible asset as of December 31, 2020 and 2019 were as follows (in thousands):

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Net book value $ 71,747 $ 80,350

Intangible asset amortization expense, as a result of revenue recognition attributable to incentive compensation, was $ 15.6 million and $ 12.5 million for the years ended December 31, 2019 , and 2018 , respectively.

No amortization expense was recorded for the year ended December 31, 2017, as the Company did not recognize

any economic benefits from incentive compensation.

Amortization expense is included in the cost of management services in the accompanying consolidated statements of operations.

Intangible asset amortization expense, as a result of revenue recognition attributable to incentive compensation, was $ 8.6 million, $ 15.6 million and $ 12.5 million for the years ended December 31, 2020, 2019 and 2018 respectively.

Amortization expense is included in the cost of management services in the accompanying consolidated statements of operations and is included in the Great Park segment.

RELATED PARTY TRANSACTIONS

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Contract assets (see Note 3)

Operating lease right-of-use asset (see Note 2 and Note 12)

$ 78,055 $ 68,133

Operating lease right-of-use asset (see Note 12) 20,919 23,047

$ 103,681 $ 97,561

Related Party Liabilities:

Reimbursement obligation

Contingent consideration—Mall Venture project property

$ 88,951 $ 102,403

Payable to holders of Management Company’s Class B interests

Operating lease liability (see Note 2 and Note 12)

Operating lease liability (see Note 12) 15,176 16,282

$ 113,149 $ 127,882

Development Management Agreement with the Great Park Venture (Incentive Compensation Contract Asset)

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The base fee consists of a fixed annual fee and a variable fee equal to general and administrative costs incurred by the Management Company on behalf of the Great Park Venture.

Incentive compensation is characterized as “Legacy Incentive Compensation” and “Non-Legacy Incentive Compensation.” The Legacy Incentive Compensation consists of the following:

(i) $ 15.2 million , which was received by the Management Company on May 2, 2016;

(ii) $ 43.1 million received by the Management Company on January 3, 2017;

and (iii) a maximum of $ 9.0 million of incentive compensation payments attributed to contingent payments made under a cash flow participation agreement the Great Park Venture is a party to.

Generally, the Non-Legacy Incentive Compensation is 9 % of distributions made by the Great Park Venture, as defined in the A&R DMA, excluding the distributions to the holders of Legacy Interests of $ 565.0 million (see Note 4).

For the years ended December 31, 2019 , 2018 and 2017 , the Company recognized revenue from management services of $ 36.9 million , $ 35.1 million and $ 16.2 million , respectively, related to all management fees under the A&R DMA and such revenues are included in management services—related party in the accompanying consolidated statements of operations.

At December 31, 2019 and 2018 , included in contract assets in the table above is $ 66.1 million and $ 47.7 million , respectively, attributed to Legacy and Non-Legacy Incentive Compensation.

Incentive compensation is characterized as “Legacy Incentive Compensation” and “Non-Legacy Incentive Compensation.” The remaining Legacy Incentive Compensation consists of a maximum of $ 9.0 million of incentive compensation payments attributed to contingent payments made under a cash flow participation agreement the Great Park Venture is a party to.

Holders of the Management Company’s Class B interests are entitled to receive all distributions from the Management Company that are attributable to any Legacy Incentive Compensation received by the Management Company.

Non-Legacy Incentive Compensation is 9 % of distributions made by the Great Park Venture to holders of Percentage Interests of the Great Park Venture (see Note 4).

For the years ended December 31, 2020, 2019 and 2018, the Company recognized revenue from management services of $ 26.9 million, $ 36.9 million and $ 35.1 million, respectively, related to all management fees under the A&R DMA, and such revenues are included in management services—related party in the accompanying consolidated statements of operations and are included in the Great Park segment.

At December 31, 2020 and 2019, included in contract assets in the table above is $ 74.8 million and $ 66.1 million, respectively, attributed to Legacy and Non-Legacy Incentive Compensation revenue recognized but not yet due (see Note 3).

At December 31, 2020 and 2019, the Company had a receivable from the Great Park Venture of $ 3.1 million and $ 3.6 million, respectively, related to cost reimbursements under the A&R DMA.

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The Company leases corporate office space at the Five Point Gateway Campus.

Upon adoption of ASC Topic 842, Leases (see Note 2 and Note 12) , the Company recognized an operating lease right-of-use asset and operating lease liability pertaining to this related party lease.

Existing prepaid rent of $ 6.0 million was reclassified to be included in the measurement of the operating lease right-of-use asset on January 1, 2019.

Upon adoption of ASC Topic 842, Leases on January 1, 2019 , the Company recognized an operating lease right-of-use asset and operating lease liability pertaining to this related party lease (See note 12).

Indirect Legacy Interest in Great Park Venture

In June 2018, the Company purchased an indirect interest in rights to certain Legacy Interests in the Great Park Venture through an equity method investment that were held by the Company’s CEO, Emile Haddad.

At both December 31, 2019 and 2018 , the carrying value of the purchased interests was $ 1.8 million and is included in other related party assets in the table above.

At December 31, 2020 and 2019, the carrying value of the purchased interests was $ 0.1 million and $ 1.8 million, respectively, and is included in other related party assets in the table above.

Retail Project and Contingent Consideration to Class A Members of the San Francisco Venture

Prior to the Company’s acquisition of The San Francisco Venture, The San Francisco Venture completed a separation transaction (the “Separation Transaction”) pursuant to an Amended and Restated Separation and Distribution Agreement (“Separation Agreement”) in which the equity interests in a subsidiary of the San Francisco Venture known as CPHP Development, LLC (“CPHP”) were distributed directly to the members of the San Francisco Venture:

Prior to the Company’s acquisition of the San Francisco Venture, the San Francisco Venture completed a separation transaction (the “Separation Transaction”) pursuant to an Amended and Restated Separation and Distribution Agreement (“Separation Agreement”) in which the equity interests in a subsidiary of the San Francisco Venture known as CPHP Development, LLC (“CPHP”) were distributed directly to the Class A members of the San Francisco Venture:

(i) an affiliate of Lennar and (ii) an affiliate of Castlelake.

The principal terms of the Separation Agreement, as it relates to the Retail Project (defined below) included the following:

• Once a final subdivision map was recorded, title to a parking structure parcel at Candlestick (“CP Parking Parcel”) was to be conveyed to CPHP, and CPHP was to assume the obligation to construct the parking structure and certain other improvements at Candlestick;

• CPHP was transferred the membership interest in Candlestick Retail Member, LLC, (“Mall Venture Member”), the entity that had entered into a joint venture (“Mall Venture”) with CAM Candlestick LLC (the “Macerich Member”) to build a fashion outlet retail shopping center (“Retail Project”) above and adjacent to the parking structure that CPHP was to construct on the CP Parking Parcel;

• Once a final subdivision map was recorded, the San Francisco Venture was to convey to the Mall Venture the property on which the Retail Project was to be built (the “Retail Project Property”).

Under the terms of the Separation Agreement, the San Francisco Venture retained the obligation to subdivide and convey the Retail Project Property to the Mall Venture and the CP Parking Parcel to CPHP.

The obligation to convey the parcels represented additional consideration to the former owners of the San Francisco Venture and was recognized as contingent consideration.

In early 2019, after discussions between the Company, CPHP and the Macerich Member, the parties determined not to proceed with the Retail Project.

As a result of terminating the Retail Project and agreements related thereto, the obligation of the San Francisco Venture to convey the CP Parking Parcel and the Retail Project Property was terminated, and the San Francisco Venture was also released from certain development obligations, which resulted in a gain of $ 64.9 million for the year ended December 31, 2019 .

In early 2019, the Company and the members of a joint venture, formed between affiliates of The Macerich Company, Lennar and Castlelake (“Mall Venture”), that intended to construct a retail outlet shopping district at Candlestick (“Retail Project”) decided not to proceed with the project.

As part of the termination of the Retail Project, the San Francisco Venture was released from its obligation to convey parcels of property (the “Retail Project Property”) on which the Retail Project was intended to be developed and from certain development obligations.

As a result of terminating the project and agreements related thereto, the San Francisco Venture recognized a gain of $ 64.9 million for the year ended December 31, 2019, representing the settlement of the contingent consideration pertaining to the development obligations and relief from the conveyance of these parcels.

Concurrent with the termination of the Retail Project, the San Francisco Venture issued 436,498 Class A units (and the Holding Company issued 436,498 of its Class B common shares) to, and received a contribution of $ 5.5 million from, the holders of Class A units of the San Francisco Venture.

Reimbursement Obligation

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At December 31, 2020 and 2019, the balance of the reimbursement obligation to CPHP or its subsidiaries was $ 89.0 million and $ 102.4 million, respectively.

Interest is paid monthly and totaled $ 4.2 million for each of the years ended December 31, 2019 , 2018 and 2017.

All of the incurred interest for the years ended December 31, 2019 , 2018 and 2017 was capitalized into inventories as interest on development and construction costs.

Interest paid monthly totaled $ 4.1 million, $ 4.2 million and $ 4.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

All of the incurred interest for the years ended December 31, 2020, 2019 and 2018 was capitalized into inventories.

The weighted average interest rate as of December 31, 2020 was 4.4 %.

Subject to certain extension, principal payments of $ 95.0 million , $ 4.2 million and $ 3.2 million are expected to be due in 2020, 2021 and 2022, respectively.

Payables to Holders of Management Company’s Class B Interests

The Management Company made a $ 43.1 million payment to the holders of Class B interests of the Management Company in January 2017 in connection with the Management Company’s January 2017 collection of Legacy Incentive Compensation in the same amount.

No payments were made during the years ended December 31, 2019 and 2018.

In April 2020, the San Francisco Venture agreed with a subsidiary of CPHP to defer, until April 2025, $ 12.6 million in reimbursement obligations that were due.

The deferred amount will accrue interest at a rate of 6 % per year and can be prepaid at any time without any premium or penalty.

Additionally, throughout 2020, the Company was notified by CPHP or its affiliates that certain reimbursements that were previously expected to be paid in 2020 had been deferred to subsequent years.

These deferred amounts continue to incur interest at the original interest rate.

Principal payments of $ 35.5 million, $ 40.2 million, $ 0.6 million and $ 12.6 million are expected to be paid in 2021, 2022, 2023 and 2025, respectively, however, additional deferral notices may further extend the expected payment dates.

San Francisco Bay Area Development Management Agreements

The Company has entered into development management agreements with affiliates of Lennar and Castlelake in which the Company will provide certain development management services to various real estate development projects located in the San Francisco Bay area.

The agreements generally consist of a fixed management fee and in some cases a variable fee equal to general and administrative costs incurred by the Company.

In most cases the management agreements terminate upon project development milestones.

The Company previously entered into development management agreements with affiliates of Lennar and Castlelake in which the Company provided certain development management services to various real estate development projects located in the San Francisco Bay Area.

For the years ended December 31, 2020, 2019 and 2018, the Company recognized revenue from these management services of $ 0.8 million, $ 2.4 million and $ 4.4 million, respectively.

Revenues related to management fees under the San Francisco Bay Area development management agreements are included in management services—related party in the accompanying consolidated statements of operations.

As of December 31, 2020, all development management agreements had been terminated.

Gateway Commercial Venture Property Management Agreement

The Company has entered into a property management agreement with Gateway Commercial Venture in which the Company will provide certain property management services to the Five Point Gateway Campus.

The agreement consists of a base management fee, calculated as the greater of a determined fixed value or percentage of gross rent, plus additional fees, when applicable, pertaining to management of tenant improvements and securing tenants.

For the years ended December 31, 2020, 2019, and 2018, the Company recognized revenue from these management services of $ 0.4 million, $ 0.3 million and $ 1.5 million, respectively, which is included in management services—related party in the accompanying consolidated statement of operations.

Valencia Purchase and Sale Agreements

The Company entered into a purchase and sale agreement with a land banking entity during the year ended December 31, 2019 for the sale of 711 homesites on approximately 59 acres.

In 2020, the Company sold 210 homesites on approximately 26 acres to the Valencia Landbank Venture (see Note 4).

Initial gross proceeds were $ 51.6 million, representing the base purchase price.

The Company also recognized $ 1.6 million in the transaction price as an estimate of the amount of variable consideration from marketing fees that the Company expects to be entitled to receive.

The Valencia Landbank Venture has entered into option and development agreements with homebuilders in which the homebuilders will purchase lots from the Valencia Landbank Venture and construct and sell homes to the homebuying public.

In 2019, the Company entered into a purchase and sale agreement with an unaffiliated land banking entity for the sale of 711 homesites on approximately 59 acres.

Initial gross proceeds were $ 135.2 million, representing the base purchase price, and the Company also recognized $ 4.7 million in the transaction price as an estimate of the amount of variable consideration from marketing fees that the Company expects to be entitled to receive.

A related party of the Company has retained the option to acquire these homesites in the future from the land banking entity.

Candlestick Purchase and Sale Agreements

The San Francisco Venture has entered into purchase and sale agreements with an affiliate of Lennar and Castlelake to sell homesites at Candlestick including one agreement for 3.6 acres of land where up to 390 for-sale homesites are planned to be built and one agreement for land that includes additional airspace parcels above the planned Retail Project where multi-family homesites were planned to be built.

The Company was required to complete certain conditions prior to the close of escrow of the sale of the airspace parcels above the planned Retail Project, including recording the subdivision of the land and airspace parcels into separate legal parcels.

The San Francisco Venture closed escrow on the for-sale homesites in January 2017 resulting in gross proceeds of $ 91.4 million .

In connection with the termination of the Retail Project in early 2019 described above, the purchase and sale agreement for the planned multi-family homesites was terminated.

Entitlement Transfer Agreement

In December 2016, the San Francisco Venture entered into an agreement with an affiliate of Lennar and Castlelake pursuant to which an affiliate of Lennar and Castlelake agreed to transfer to the San Francisco Venture entitlements for the right to construct (1) at least 172 homesites (or, if greater, the number of entitled homesites that are not developed or to be developed by or on behalf of the Successor to the Redevelopment Agency of the City and County of San Francisco (the “San Francisco Agency”) or by residential developers on the land transferred to CPHP) and (2) at least 70,000 square feet of retail space (or, if greater, the amount of entitled retail space that is not developed or to be developed by or on behalf of the San Francisco Agency or by commercial developers on the land transferred to CPHP) for use in the development of other portions of Candlestick and The San Francisco Shipyard.

The Company successfully received the necessary government approvals to effectuate the transfer of the entitlements in 2018, relinquished its rights to certain variable consideration related to Candlestick purchase and sale agreements, and received the additional entitlements (see Note 3).

A related party of the Company retained the option to acquire these homesites in the future from the unaffiliated land banking entity.

NOTES PAYABLE, NET

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7.875 % Senior Notes due 2025

Macerich Note

$ 625,000 $ 625,000

Unamortized debt issuance costs and discount

( 7,419 ) ( 8,954 )

$ 617,581 $ 616,046

In November 2017, the Operating Company and Five Point Capital Corp., a directly wholly owned subsidiary of the Operating Company (the “Co-Issuer” and, together with the Operating Company, the “Issuers”), offered, sold and issued $ 500.0 million aggregate principal amount of 7.875 % unsecured senior notes due November 15, 2025 at 100 % of par (the “Original Notes”).

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All interest incurred was capitalized to inventories for all three years.

The Senior Notes are redeemable at the option of the Issuers, in whole or in part, at any time, and from time to time, on or after November 15, 2020, at a declining call premium as set forth in the indenture governing the Senior Notes, plus accrued and unpaid interest.

In addition, at any time prior to November 15, 2020, the issuers may redeem some or all of the Senior Notes at a price equal to 100 % of the aggregate principal amount of the Senior Notes redeemed, plus a “make-whole” premium, plus accrued and unpaid interest.

Lastly, prior to November 15, 2020, the Issuers may redeem up to 35 % of the aggregate principal amount of the Senior Notes with an amount equal to the net cash proceeds from certain new equity offerings, at a redemption price equal to 107.875 % of the aggregate principal amount thereof, plus accrued and unpaid interest.

The Senior Notes are guaranteed jointly and severally, by certain direct and indirect subsidiaries of the Operating Company (the “Guarantors”, other than the Co-Issuer), however the Operating Company’s non-guarantor subsidiaries represent substantially all of the operations and total assets of the Issuers.

The Senior Notes are senior in right of payment to all of the Issuers’ and Guarantors’ subordinated indebtedness, equal in right of payment with all of the Issuers’ and the Guarantors’ senior indebtedness, without giving effect to collateral arrangements in the case of secured indebtedness, and effectively subordinated to any of the Issuers’ and the Guarantors’ secured indebtedness, to the extent of the value of the assets securing such indebtedness.

Macerich Note

On November 13, 2014, in connection with entering into the Mall Venture and Mall DAA, a wholly-owned subsidiary of the San Francisco Venture issued a promissory note (the “Macerich Note”) to an affiliate of the Macerich Member in the amount of $ 65.1 million , bearing interest at 360-day LIBOR plus 2.0 % ( 5.01 % at December 31, 2018).

It was anticipated that upon completion of certain conditions, including the conveyance of the Retail Project Property to the Mall Venture, the Macerich Member, in several steps, would cause the Macerich Note to be distributed to the Company, resulting in the extinguishment of the Macerich Note.

However, in early 2019, in connection with the termination of the Retail Project (see Note 9), the Company repaid the $ 65.1 million Macerich Note and settled outstanding accrued interest thereon of approximately $ 11.1 million .

Concurrently, the San Francisco Venture received a contribution of approximately $ 5.5 million from the members of CPHP (affiliates of Lennar and Castlelake).

The Senior Notes are guaranteed jointly and severally, by certain direct and indirect subsidiaries of the Operating Company and are redeemable at the option of the Issuers, in whole or in part, at a declining call premium as set forth in the indenture governing the Senior Notes, plus accrued and unpaid interest.

Revolving Credit Facility

In May 2019, the Operating Company entered into the second amendment to its revolving credit facility (the “Revolving Credit Facility”) which, among other things, extended the maturity date of the Revolving Credit Facility from April 2020 to April 2022, with one option to extend the maturity date by an additional year, subject to the satisfaction of certain conditions including the approval of the administrative agent and lenders.

The aggregate commitment remains at $ 125.0 million , with an accordion feature that allows the Operating Company to request to increase the maximum aggregate amount by up to $ 50.0 million to $ 175.0 million , subject to certain conditions, including receipt of commitments.

Any borrowings continue to bear interest at LIBOR plus a margin ranging 1.75 % to 2.00 % based on the Company’s leverage ratio.

The Operating Company has a $ 125.0 million revolving credit facility with a maturity date in April 2022, with one option to extend the maturity date by an additional year, subject to the satisfaction of certain conditions including the approval of the administrative agent and lenders.

The aggregate commitment is $ 125.0 million, with an accordion feature that allows the Operating Company to request to increase the maximum aggregate amount by up to $ 50.0 million to $ 175.0 million, subject to certain conditions, including receipt of commitments.

Any borrowings bear interest at LIBOR plus a margin ranging from 1.75 % to 2.00 % based on the Company’s leverage ratio.

In the event LIBOR is unavailable, the revolving credit facility provides for a replacement rate to be selected.

As of December 31, 2020, no funds have been drawn on the revolving credit facility, however letters of credit of $ 0.3 million are issued and outstanding under the revolving credit facility as of December 31, 2020, thus reducing the available capacity by the outstanding letters of credit amount.

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The Company expects that basis adjustments resulting from these transactions, if they occur, are likely to reduce the amount of income tax the Company would otherwise be required to pay in the future.

(b) Allocations that result from the application of the principles of Section 704(c) of the Code.

(b) Allocations that result from the application of the principles of Section 704(c) of the Internal Revenue Code of 1986, as amended (the “Code”).

Section 704(c) of the Code, and the U.S.

allocated among the members of the Operating Company to take into account the difference between the fair market value and the adjusted tax basis of such assets on May 2, 2016.

Treasury regulations promulgated thereunder, require that items of income, gain, loss and deduction that are attributable to the Operating Company’s directly and indirectly held property, including property contributed to the Operating Company pursuant to the Formation Transactions and the property held by the Operating Company prior to the Formation Transactions, must be allocated among the members of the Operating Company to take into account the difference between the fair market value and the adjusted tax basis of such assets on May 2, 2016.

As a result, the Operating Company will be required to make certain special allocations of its items of income, gain, loss and deduction that are attributable to such assets.

These allocations, like the increases in tax basis described above, are likely to reduce the amount of income tax the Company would otherwise be required to pay in the future.

The Company expects these allocations, like the increases in tax basis described above, are likely to reduce the amount of income tax the Company would otherwise be required to pay in the future.

(c) Tax benefits related to imputed interest or guaranteed payments deemed to be paid or incurred by the Company as a result of the TRA.

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The Company may record additional TRA liabilities related to properties not currently held at fair value when those properties are recognized or realized at fair value.

Furthermore, the Company may record additional liabilities under the TRA if and when TRA Parties exchange Class A Common Units of the Operating Company for the Company’s Class A common shares or other equity transactions that impact the Holding Company’s ownership in the Operating Company.

During the year ended December 31, 2017, the Company adjusted its recorded TRA liability as a result of equity transactions during the period, including the IPO and private placement.

Changes in the Company’s estimates of the utilization of its deferred tax attributes and tax rates in effect may also result in subsequent changes to the amount of TRA liabilities recorded.

At the end of the 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, which reduced the federal corporate tax rate from 35% to 21%.

As a result of this reduction, the value of the benefit that the Company will receive from tax attributes and tax items that are the subject of the TRA was reduced and, as a result, the TRA liability was also reduced.

During the year ended December 31, 2019 , the Company adjusted its recorded TRA liability as a result of exchanges of Class A Common Units of the Operating Company for the Company’s Class A common shares as well as certain other equity transactions associated with share-based compensation.

As a result of these changes, the value of the benefit that the Company will receive from tax attributes and tax items that are the subject of the TRA increased and, as a result, the TRA liability was increased.

The term of the TRA will continue until all such tax benefits under the agreement have been utilized or expired, unless the Company exercises its right to terminate the TRA for an amount based on an agreed value of payments remaining to be made under the agreement.

The term of the TRA will continue until all such tax benefits under the agreement have been utilized or expired, unless the Company exercises its right, subject to certain conditions of the agreement, to terminate the TRA for an amount based on an agreed value of payments remaining to be made under the agreement.

No TRA payments were made during the years ended December 31, 2020, 2019 and 2018.

The Company adopted ASU No.

2016-02 (see Note 2) effective on January 1, 2019 on a modified retrospective basis.

Consequently, comparative prior periods presented in financial statements after adoption will continue to be in accordance with historical U.S.

The Company adopted ASC Topic 842, Leases , on January 1, 2019 on a modified retrospective basis.

Periods presented prior to adoption are in accordance with historical U.S.

GAAP (Topic 840, Leases ).

The Company’s lessee arrangements consist of agreements to lease certain office facilities and equipment and the Company’s lessor arrangements consists of leases of portions of its land to third parties for agriculture or other miscellaneous uses.

The Company’s significant agricultural land lease agreements are short-term in nature.

The Company’s lessee arrangements consist of agreements to lease certain office facilities and equipment and the Company’s lessor arrangements consist of leases of portions of land to third parties for agriculture or other miscellaneous uses.

The Company’s agricultural land lease agreements are generally short-term in nature.

As of December 31, 2020, all leasing arrangements are classified as operating leases and do not contain residual value guarantees or material restrictions.

The components of lease costs were as follows for the year ended December 31, 2019 (in thousands):

The Company’s office leases have remaining lease terms of approximately three years to eight years and include one or more extension options to renew, some of which include options to extend the leases for up to ten years .

The Company only includes renewal options in the lease term when it is reasonably certain that it will exercise such options.

The components of lease costs were as follows for the years ended December 31, 2020 and 2019 (in thousands):

Operating lease cost $ 2,146 $ 2,498

1 unchanged sentence

Short-term lease cost 551 527

Supplemental balance sheet information related to leases as of December 31, 2019 were as follows (in thousands, except lease term in years and discount rate):

Operating lease right-of-use assets ($23,047 related party)

Operating lease liabilities ($16,282 related party)

Rent expense (ASC 840) for the year ended December 31, 2018 was $ 2.7 million.

Supplemental balance sheet information related to leases as of December 31, 2020 and 2019 were as follows (in thousands, except lease term in years and discount rate):

Operating lease right-of-use assets ($ 20,919 and $ 23,047 related party, respectively)

$ 28,276 $ 32,579

Operating lease liabilities ($ 15,176 and $ 16,282 related party, respectively)

$ 23,831 $ 27,206

Weighted average remaining lease term (operating lease) 6.2 7.1

Weighted average discount rate (operating lease) 5.9 % 5.9 %

Operating lease right-of-use assets are included in other assets or related party assets and operating lease liabilities are included in accounts payable and other liabilities or related party liabilities on the consolidated balance sheet.

The Company’s office leases have remaining lease terms of four years to nine years and include one or more extension options to renew, some of which include options to extend the leases for up to ten years .

The table below reconciles the undiscounted cash flows to the operating lease liabilities recorded on the consolidated balance sheet as of December 31, 2019 (in thousands):

Years Ending December 31,

The table below reconciles the undiscounted cash flows to operating lease liabilities recorded on the consolidated balance sheet as of December 31, 2020 (in thousands):

Years Ending December 31, Rental

Thereafter 8,096

Total lease payments $ 29,085

Discount $ 5,254

Total operating lease liabilities $ 23,831

As of December 31, 2018 , minimum lease payments to be made under operating leases with initial terms in excess of one year under noncancelable leases are as follows (in accordance with the prior period presentation of ASC 840) (in thousands):

Years Ending December 31,

Rent expense (ASC 840) for the years ended December 31, 2018 and 2017 was $ 2.7 million and $ 2.7 million , respectively.

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

Valencia Project Approval Settlement

In September 2017, the Company reached a settlement with key national and state environmental and Native American organizations that were petitioners (the “Settling Petitioners”) in various legal challenges to Valencia’s regulatory approvals and permits (see Legal Proceedings below).

As of December 31, 2019 , the Company has recorded a liability, included in accounts payable and other liabilities in the accompanying consolidated balance sheets, of $ 17.7 million associated with certain obligations of the project approval settlement.

The Holding Company has provided a guaranty to the Settling Petitioners for monetary payments due from the Company as required under the settlement.

As of December 31, 2019 , the remaining estimated maximum potential amount of monetary payments subject to the guaranty was $ 24.1 million with the final payment due in 2026.

The Company did not reach a settlement with two local environmental organizations that have pending challenges to certain Valencia project approvals.

As of December 31,

2020, the remaining estimated maximum potential amount of monetary payments subject to the guaranty was $ 20.8 million with the final payment due in 2026.

The Company did not reach a settlement with two local environmental organizations that had pending challenges to certain Valencia project approvals.

See “Legal Proceedings” below.

4 unchanged sentences

The annual minimum payments for years 2021 to 2025 are $ 1.3 million, $ 1.4 million, $ 1.4 million, $ 1.4 million and $ 1.5 million, respectively.

At December 31, 2019 , the aggregate annual minimum payments remaining under the initial term total $ 35.1 million .

At December 31, 2020, the aggregate of all annual minimum payments remaining under the initial term total $ 33.8 million.

Valencia Infrastructure Project

In January 2012, the Company entered into an agreement with Los Angeles County, in which the Company will finance up to a maximum of $ 45.8 million for the construction costs of an interchange project that Los Angeles County is managing.

In January 2012, the Company entered into an agreement with Los Angeles County, in which the Company would finance up to a maximum of $ 45.8 million for the construction costs of an interchange project that Los Angeles County is managing.

The interchange project is a critical infrastructure project that will benefit Valencia.

As of December 31, 2020, the Company has made aggregate payments of $ 37.0 million and the interchange project was completed in 2019.

There is also a provision for the Company to pay Los Angeles County interest on defined unreimbursed construction costs incurred prior to the reimbursement payment.

Upon the final payment, Los Angeles County will credit the Company, in the form of bridge and thoroughfare construction fee district fee credits, an amount equal to the Company’s actual payments, exclusive of any interest payments.

These credits are eligible for application against future bridge and thoroughfare fees the Company may incur.

At December 31, 2019 and 2018 , the Company had $ 8.9 million and $ 7.6 million , respectively, included in accounts payable and other liabilities in the accompanying consolidated balance sheets, representing unreimbursed construction costs payable to Los Angeles County.

At both December 31, 2020 and 2019, the Company had $ 8.9 million included in accounts payable and other liabilities in the accompanying consolidated balance sheets, representing unreimbursed construction costs payable to Los Angeles County.

The Company expects to make the final payment of $ 8.9 million in 2021.

Agreement Regarding Mall Venture

On May 2, 2016, the Company entered into an agreement with CPHP pursuant to which, upon completion of the Retail Project, CPHP was to contribute all of its interests in the Mall Venture Member to the Operating Company in exchange for 2,917,827 Class A Common Units of the Operating Company.

Additionally, CPHP was to purchase an equal amount of Class B common shares from the Holding Company at a price of $ 0.00633 per share.

If the Company or CPHP failed to achieve certain milestones, including the conveyance to the Mall Venture of the

Retail Project Property on or prior to December 31, 2017, subject to certain extensions, Macerich would have the right to terminate the joint venture, require the Company to repay the $ 65.1 million Macerich Note (see Note 10) and to pay certain termination fees (50% of such termination fees would be funded by CPHP).

In such case, the Company would no longer be obligated to transfer the Retail Project Property to the Retail Project or the CP Parking Parcel to CPHP and instead would be obligated to issue 436,498 Class A Common Units of the Operating Company to CPHP or its designees and CPHP or its designees will purchase an equal amount of Class B common shares from the Holding Company at a price of $ 0.00633 per share.

The Retail Project Property had not been conveyed to the Mall Venture and in early 2019, the Retail Project was terminated (see Note 9).

The Company repaid the Macerich Note, plus termination fees and issued affiliates of Lennar and Castlelake 436,498 Class A units of the San Francisco Venture that are redeemable for Class A Common Units of the Operating Company and sold to Lennar and Castlelake an equal number of Class B common shares at a price of $ 0.00633 per share.

The Company is now redeveloping these parcels for alternative uses.

Candlestick Development Agreement

On May 2, 2016, the Company entered into a development agreement with CPHP whereby among other things, CPHP agreed to be responsible for all design and construction costs associated with the parking structure to be built on the CP Parking Parcel, up to $ 240.0 million , and the Company agreed to reimburse CPHP for design and construction costs in excess of $ 240.0 million .

In early 2019, the development agreement was terminated by the Company and CPHP concurrent with the termination of the Retail Project (see Note 9).

Performance and Completion Bonding Agreements

5 unchanged sentences

The San Francisco Agency can also earn a return of certain profits generated from the development and sale of Candlestick and The San Francisco Shipyard if certain thresholds are met.

As of December 31, 2019 the thresholds had not been met.

At December 31, 2019 , the San Francisco Venture had outstanding guarantees benefiting the San Francisco Agency for infrastructure and construction of certain park and open space obligations with aggregate maximum obligations of $ 197.8 million .

At December 31, 2020 and 2019, the San Francisco Venture had outstanding guarantees benefiting the San Francisco Agency for infrastructure and construction of certain park and open space obligations with aggregate maximum obligations of $ 198.3 million and $ 197.8 million, respectively.

Letters of Credit

At each December 31, 2019 and 2018, the Company had outstanding letters of credit totaling $ 2.4 million .

At December 31, 2020 and 2019, the Company had outstanding letters of credit totaling $ 1.3 million and $ 2.4 million, respectively.

These letters of credit were issued to secure various development and financial obligations.

At each December 31, 2019 and 2018, the Company had restricted cash and certificates of deposit of $ 1.4 million pledged as collateral under certain of the letters of credit agreements.

At December 31, 2020 and 2019, the Company had restricted cash and certificates of deposit of $ 1.0 million and $ 1.4 million, respectively, pledged as collateral under certain of the letters of credit agreements.

Legal Proceedings

3 unchanged sentences

The petition challenged Los Angeles County’s July 2017 approvals of the Mission Village and Landmark Village environmental analyses and the two projects based on claims arising under the California Environmental Quality Act and the California Water Code.

The Court held a hearing on the merits of the petition in September 2018.

The Superior Court held a hearing on the merits of the petition in September 2018.

In December 2018, the Superior Court issued its written decision denying the Non-Settling Petitioners’ petition for writ of mandate.

Thereafter, in January 2019, the Superior Court entered judgment on the petition for writ of mandate in favor of the County and the Company.

Thereafter, in January 2019, the Superior Court entered judgment on the petition for writ of mandate in favor of Los Angeles County and the Company.

In March 2019, the Non-Settling Petitioners filed an appeal of the Superior Court’s ruling.

The Company cannot predict the outcome of the appeal at this time.

In April 2020, the Court of Appeal issued a ruling affirming the Superior Court’s judgment in favor of the Company and Los Angeles County.

In July 2020, the California Supreme Court issued an order denying the Non-Settling Petitioners’ petition to review the Court of Appeal’s decision.

The judgment in favor of Los Angeles County and the Company is now final with no further right to appeal.

Hunters Point Litigation

17 unchanged sentences

Supplemental cash flow information for the years ended December 31, 2020, 2019 and 2018 is as follows (in thousands):

2020 2019 2018

SUPPLEMENTAL CASH FLOW INFORMATION:

2 unchanged sentences

Liabilities assumed by buyer in connection with sale of golf course operating property

$ — $ — $ 7,795

Class A common shares issued for redemption of noncontrolling interests

$ — $ 458 $ 30,088

Purchase of properties and equipment in accounts payable and other liabilities

$ 103 $ 381 $ —

Recognition of TRA liability $ 615 $ 3,124 $ 18,963

Supplemental cash flow information related to leases for the year ended December 31, 2019 is as follows (in thousands):

Supplemental cash flow information related to leases for the year ended December 31, 2020 and 2019 is as follows (in thousands):

Cash paid for amounts included in the measurement of operating lease liabilities $ 4,831 $ 6,306

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows for the years ended December 31, 2019 , 2018 and 2017 is as follows (in thousands):

2020 2019 2018

Cash and cash equivalents

$ 298,144 $ 346,833 $ 495,694

Restricted cash and certificates of deposit 1,330 1,741 1,403

3 unchanged sentences

The Company’s reportable segments consist of:

• Valencia (formerly Newhall)—includes the community of Valencia (formerly known as Newhall Ranch) planned for development in northern Los Angeles County, California.

The Valencia segment derives revenues from the sale of residential and commercial land sites to homebuilders, commercial developers and commercial buyers in addition to ancillary operations of operating properties.

• Valencia (formerly Newhall)—includes the community of Valencia (formerly known as Newhall Ranch) being developed in northern Los Angeles County, California.

The Valencia segment derives revenues from the sale of residential and commercial land sites to homebuilders, commercial developers and commercial buyers.

The Company’s investment in the Valencia Landbank Venture is also reported in the Valencia segment.

• San Francisco—includes the Candlestick and The San Francisco Shipyard communities located on bayfront property in the City of San Francisco, California.

The San Francisco segment derives revenues from the sale of residential and commercial land sites to homebuilders, commercial developers and commercial buyers in addition to management services provided to affiliates of a related party.

The San Francisco segment derives revenues from the sale of residential and commercial land sites to homebuilders, commercial developers and commercial buyers.

• Great Park—includes Great Park Neighborhoods being developed adjacent to and around the Orange County Great Park, a metropolitan park under construction in Orange County, California.

This segment also

includes management services provided by the Management Company to the Great Park Venture, the owner of the Great Park Neighborhoods.

This segment also includes management services provided by the Management Company to the Great Park Venture, the owner of the Great Park Neighborhoods.

As of December 31, 2020, the Company had a 37.5 % Percentage Interest in the Great Park Venture and accounted for the investment under the equity method.

1 unchanged sentence

The Great Park segment derives revenues from the sale of residential and commercial land sites to homebuilders, commercial developers and commercial buyers, and management services provided by the Company to the Great Park Venture.

• Commercial—includes Five Point Gateway Campus, an office and research and development campus within the Great Park Neighborhoods, consisting of four newly constructed buildings.

Two of the four buildings are leased to one tenant under a 20 -year triple net lease which commenced in August 2017.

The Company and a subsidiary of Lennar have entered into separate 130 -month full service gross leases to occupy a portion of the other two buildings.

This segment also includes property management services provided by the Management Company to the Gateway Commercial Venture, the entity that owns the Five Point Gateway Campus.

• Commercial—includes Five Point Gateway Campus, an office and research and development campus within the Great Park Neighborhoods, consisting of four buildings and surrounding land that the Gateway Commercial Venture acquired in 2017.

In 2020, the Gateway Commercial Venture sold three of the buildings and approximately 11 acres of land within the campus.

The Company and a subsidiary of Lennar lease portions of the fourth building that remains under the ownership of the Gateway Commercial Venture.

The Gateway Commercial Venture also owns approximately 50 acres of commercial land with additional development rights at the campus.

This segment also includes property management services provided by the Management Company to the Gateway Commercial Venture.

As of December 31, 2020, the Company had a 75 % interest in the Gateway Commercial Venture and accounted for the investment under the equity method.

3 unchanged sentences

(in thousands)

San Francisco

Total reportable segments

Removal of Great Park Venture (1)

Removal of Gateway Commercial Venture (1)

Add investment in Great Park Venture

Add investment in Gateway Commercial Venture

Other eliminations (2)

Corporate and unallocated (3)

Total Consolidated

Valencia San Francisco Great Park Commercial Total reportable segments Removal of Great Park Venture (1) Removal of Gateway Commercial Venture (1) Add investment in Great Park Venture Add investment in Gateway Commercial Venture Other eliminations (2) Corporate and unallocated (3) Total Consolidated

Revenues $ 124,892 $ 1,430 $ 51,727 $ 24,638 $ 202,687 $ ( 24,827 ) $ ( 24,241 ) $ — $ — $ — $ — $ 153,619

Depreciation and amortization 123 247 8,603 9,412 18,385 — ( 9,412 ) — — — 915 9,888

8 unchanged sentences

(in thousands)

San Francisco

Total reportable segments

Removal of Great Park Venture (1)

Removal of Gateway Commercial Venture (1)

Add investment in Great Park Venture

Add investment in Gateway Commercial Venture

Other eliminations (2)

Corporate and unallocated (3)

Total Consolidated

Revenues $ 143,190 $ 3,995 $ 307,843 $ 34,479 $ 489,507 $ ( 270,970 ) $ ( 34,157 ) $ — $ — $ — $ — $ 184,380

Depreciation and amortization 286 215 15,567 15,100 31,168 — ( 15,100 ) — — — 740 16,808

8 unchanged sentences

(in thousands)

San Francisco

Total reportable segments

Removal of Great Park Venture (1)

Removal of Gateway Commercial Venture (1)

Add investment in Great Park Venture

Add investment in Gateway Commercial Venture

Other eliminations (2)

Corporate and unallocated (3)

Total Consolidated

Revenues $ 6,401 $ 6,010 $ 210,779 $ 28,069 $ 251,259 $ ( 175,689 ) $ ( 26,580 ) $ — $ — $ — $ — $ 48,990

Depreciation and amortization 271 287 12,456 11,730 24,744 — ( 11,730 ) — — — 210 13,224

9 unchanged sentences

(3) Corporate and unallocated activity is primarily comprised of corporate general, and administrative expenses and income taxes.

Corporate and unallocated assets consist of cash and cash equivalents, receivables, ROU assets, prepaid expenses and deferred equity and financing costs.

(4) Expenditures for long-lived inventory assets are net of cost reimbursements and include noncash project accruals and capitalized interest.

For the year ended December 31, 2019, Great Park Venture’s expenditures include $ 127.0 million in inventory cost reimbursements.

A land banking entity represented one of the Company’s major customers during the year ended December 31, 2019 and accounted for approximately $ 139.9 million or 76 % , respectively, of total consolidated revenues.

The $ 139.9 million relates to revenues generated from homesites sold in Valencia.

A related party of the Company has retained the option to acquire these homesites in the future from the land banking entity.

Lennar and several of its affiliates represented one of the Company’s major customers for the year ended December 31, 2017 and accounted for approximately $ 93.4 million or 67 % , respectively, of total consolidated revenues.

These revenues represented land sales and management services revenues, and were reported in the Valencia and San Francisco segments.

The Great Park Venture represented another of the Company’s major customers for the years ended December 31, 2019 , 2018 and 2017 , and accounted for approximately $ 36.9 million or 20 % , $ 35.1 million or 72 % , and $ 16.2 million or 12 % , respectively, of total consolidated revenues.

Corporate and unallocated assets consist of cash and cash equivalents, receivables, ROU assets, prepaid expenses and deferred financing costs.

(4) Expenditures for long-lived assets are net of inventory cost reimbursements and include noncash project accruals and capitalized interest.

For the year ended December 31, 2020 and 2019, Great Park Venture’s net expenditures include $ 9.3 million and $ 127.0 million, respectively, in inventory cost reimbursements received.

The Valencia Landbank Venture represented one of the Company’s major customers during the year ended December 31, 2020, accounting for approximately $ 53.2 million, or 35 %, of total consolidated revenues.

A third party home builder represented another major customer of the Company during the year ended December 31, 2020, accounting for approximately $ 59.1 million, or 38 %, of total consolidated revenues.

Revenues generated from both customers were from the sale of homesites in Valencia.

An unaffiliated land banking entity that acquired homesites in Valencia in 2019 represented one of the Company’s major customers during the year ended December 31, 2019 and accounted for approximately $ 139.9 million, or 76 %, of total consolidated revenues.

A related party of the Company retained the option to acquire these homesites in the future from the unaffiliated land banking entity.

The Great Park Venture represented another of the Company’s major customers for the years ended December 31, 2020, 2019 and 2018, and accounted for approximately $ 26.9 million, or 18 %, $ 36.9 million, or 20 %, and $ 35.1 million, or 72 %, of total consolidated revenues, respectively.

These revenues represented management services revenues and were reported in the Great Park segment.

SHARE-BASED COMPENSATION

In April 2019, the Company’s Board of Directors (the “Board”) approved the Five Point Holdings, LLC Amended and Restated 2016 Incentive Award Plan (the “Incentive Award Plan”), which amends and restates the

Five Point Holdings, LLC 2016 Incentive Award Plan (the “Prior Plan”) in its entirety.

The plan became effective on June 6, 2019, the date the Five Point Holdings, LLC Amended and Restated 2016 Incentive Award Plan was approved by shareholders at the 2019 Annual Meeting of Shareholders.

The Incentive Award Plan provides for the grant of share options, restricted shares, restricted share units, performance awards (which include, but are not limited to, cash bonuses), distribution equivalent awards, deferred share awards, share payment awards, share appreciation rights, other incentive awards (which include, but are not limited to, LTIP Unit awards (as defined in the Incentive Award Plan) and performance share awards.

Employees and consultants of the Company and its subsidiaries and affiliates, as well as non-employee members of the Board, are eligible to receive awards under the Incentive Awards Plan.

The Incentive Award Plan increased the aggregate number of common shares available for issuance under the Prior Plan by 3,209,326 shares to a total authorized issuance of up to 11,710,148 Class A common shares of the Holding Company.

The Company has an incentive award plan that provides for the grant of share options, restricted shares, restricted share units, performance awards (which include, but are not limited to, cash bonuses), distribution equivalent awards, deferred share awards, share payment awards, share appreciation rights, other incentive awards (which include, but are not limited to, LTIP Unit awards (as defined in the incentive award plan) and performance share awards.

Employees and consultants of the Company and its subsidiaries and affiliates, as well as non-employee members of the Company’s Board of Directors, are eligible to receive awards under the incentive award plan.

The incentive award plan authorizes the issuance of up to 11,710,148 Class A common shares of the Holding Company.

As of December 31, 2020, there were 4,689,214 remaining Class A common shares available for future issuance under the incentive award plan.

4 unchanged sentences

The Company estimates the fair value of restricted share awards with a service condition based on the closing market price of the Company’s Class A common shares on the award’s grant date.

Prior to the Company’s IPO, the Company measured the fair value of RSUs and restricted share awards based on the estimated fair value of the Company’s underlying Class A common shares determined using a discounted cash flow analysis.

Prior to the Company’s shares being publicly traded, the Company measured the fair value of RSUs and restricted share awards based on the estimated fair value of the Company’s underlying Class A common shares determined using a discounted cash flow analysis.

The inputs utilized in the Company’s estimate were selected by the Company based on information available to the Company, including relevant information obtained after the measurement date, as to the assumptions that market participants would make at the measurement date.

4 unchanged sentences

Share-Based Awards

(in thousands)

(in thousands) Weighted-

Average Grant

1 unchanged sentence

Nonvested at January 1, 2018 1,085 $ 18.57

1,724 $ 14.81

( 105 ) $ 14.83

( 811 ) $ 18.76

Nonvested at December 31, 2018 1,893 $ 15.27

( 4 ) $ 14.83

( 777 ) $ 14.62

Nonvested at December 31, 2019 3,011 $ 9.02

( 313 ) $ 6.93

( 1,100 ) $ 12.51

Nonvested at December 31, 2020 2,275 $ 7.35

3 unchanged sentences

The estimated fair value at vesting of share-based awards that vested during the years ended December 31, 2020, 2019 and 2018 was $ 8.7 million, $ 5.9 million, and $ 11.8 million, respectively.

In January 2020, the Company granted 0.7 million restricted share awards with a service condition to employees and non-employee directors.

EMPLOYEE BENEFIT PLANS

6 unchanged sentences

Benefits paid ( 2,089 ) ( 789 )

Actuarial loss (gain)

Actuarial loss 1,788 1,654

Projected benefit obligation—end of year $ 22,372 $ 22,017

1 unchanged sentence

Fair value of plan assets—beginning of year $ 19,683 $ 16,895

Actual gain (loss) on plan assets

Actual gain on plan assets 2,565 3,577

Employer contributions 347 —

6 unchanged sentences

The components of net periodic benefit and other amounts recognized in accumulated other comprehensive loss for the years ended December 31, 2020, 2019 and 2018, are as follows (in thousands):

2020 2019 2018

Net periodic benefit:

4 unchanged sentences

Adjustment to accumulated other comprehensive loss:

Net actuarial (gain) loss

Net actuarial loss (gain) 332 ( 917 ) 1,252

Amortization of net actuarial loss ( 97 ) ( 143 ) ( 90 )

1 unchanged sentence

Total recognized in net periodic benefit and accumulated other comprehensive loss

$ ( 121 ) $ ( 1,095 ) $ 855

The weighted-average assumptions used to determine benefit obligations as of December 31, 2020 and 2019 were as follows:

Discount rate 2.35 % 3.15 %

Rate of compensation increase

Rate of compensation increase N/A N/A

The weighted-average assumptions used to determine net periodic expense for the years ended December 31, 2020, 2019 and 2018, were as follows:

2020 2019 2018

Discount rate 3.15 % 4.20 % 3.55 %

Rate of compensation increase

Rate of compensation increase N/A N/A N/A

Expected long-term return on plan assets 5.96 % 6.17 % 6.23 %

8 unchanged sentences

The NAV per unit is the result of accumulated values of the underlying investments held by the fund, which are valued daily.

NAV is utilized by the Company as a practical expedient as of the consolidated balance sheet date.

No adjustments were made to the NAV of the funds.

NAV is utilized by the Company to determine fair value of the plan assets as a practical expedient as of the consolidated balance sheet date.

Plan assets for which fair value is measured using NAV shall not be categorized within the fair value hierarchy.

The Retirement Plan’s assets may be redeemed at the NAV per unit with no restrictions.

3 unchanged sentences

Equity funds:

$ 5,767 $ 7,259

International

1 unchanged sentence

bonds and short term

Total $ 20,507 $ 19,683

The Company’s funding policy is to contribute amounts sufficient to meet minimum requirements but not more than the maximum tax-deductible amount.

The Company expects to contribute $ 0.6 million to the Retirement Plan in 2020 and expects future benefit payments to be paid as follows (in thousands):

The Company does not expect to have a minimum required contribution in 2021 and expects future benefit payments to be paid as follows (in thousands):

2026-2030 8,388

Employee Savings Plan —The Company has an employee savings plan under Section 401(k) of the Internal Revenue Code, which is available to all eligible associates.

6 unchanged sentences

The Holding Company is responsible for income taxes on its allocable share of the Operating Company’s income or gain.

The (expense) benefit for income taxes for the years ended December 31, 2019 , 2018 and 2017 was as follows (in thousands):

Deferred income tax (expense) benefit:

Total deferred income tax (expense) benefit

Decrease (increase) in valuation allowance

The expense for income taxes for the years ended December 31, 2020, 2019 and 2018 was as follows (in thousands):

2020 2019 2018

Current income tax expense:

$ ( 24 ) $ — $ —

Total current income tax (expense) ( 794 ) — —

Deferred income tax benefit (expense):

$ ( 379 ) $ ( 3,750 ) $ 5,066

530 ( 1,732 ) 2,340

Total deferred income tax benefit (expense) 151 ( 5,482 ) 7,406

(Increase) decrease in valuation allowance ( 1,101 ) 3,062 ( 16,585 )

Expiration of unused loss carryforwards — ( 25 ) ( 4 )

(Expense) benefit for income taxes

Limitations on the utilization of net operating losses included in the Tax Act caused the Holding Company to increase its valuation allowance giving rise to a $ 2.4 million and $ 9.2 million federal tax provision, respectively and no state income tax provision for the years ended December 31, 2019 and 2018.

Due to the Holding Company generating federal and state tax losses, the Holding Company had no current federal or state income tax provision for the year ended December 31, 2017 .

Expense for income taxes $ ( 1,744 ) $ ( 2,445 ) $ ( 9,183 )

Limitations on the utilization of net operating losses included in The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) caused the Holding Company to increase its deferred tax liability, net of valuation allowance, giving rise to a $ 1.0 million, $ 2.4 million and $ 9.2 million federal tax provision, respectively, for the years ended December 31, 2020, 2019 and 2018 and a state tax provision of $ 0.8 million for the year ended December 31, 2020.

The 2020 current state tax provision is a result of California Assembly Bill 85 (“AB-85”), which suspends the use of net operating losses (“NOLs”) in tax years 2020 through 2022.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

3 unchanged sentences

Tax receivable agreement 48,481 48,309

Other 1,715 1,258

Valuation allowance ( 18,160 ) ( 20,107 )

11 unchanged sentences

The amount of the valuation allowance recorded against the deferred tax asset could be adjusted if there are changes to the positive and negative factors discussed above.

During the year ended December 31, 2017, the valuation allowance decreased by $ 29.8 million and $ 5.3 million as a result of operating income and a decrease in deferred taxes attributable to federal tax rate reductions enacted as part of the Tax Act, respectively.

Also during 2017, the valuation allowance increased by $ 27.3 million as a result of deferred taxes established through adjustments to contributed capital principally associated with increases in the payable pursuant to the tax receivable agreement.

The net decrease in the valuation allowance for the year ended December 31, 2017 was $ 7.8 million .

During the year ended December 31, 2018, the valuation allowance increased by $ 16.6 million as a result of operating losses.

Also during 2018, the valuation allowance decreased by $ 1.3 million as a result of deferred taxes established through adjustments to contributed capital principally associated with increases in the payable pursuant to the tax receivable agreement.

The net increase in the valuation

allowance for the year ended December 31, 2018 was $ 15.3 million .

During the year ended December 31, 2019 , the valuation allowance decreased by $ 3.1 million mainly due to operating income in the current year.

The net increase in the valuation allowance for the year ended December 31, 2018 was $ 15.3 million.

During the year ended December 31, 2019 and 2020, the valuation allowance decreased by $ 3.1 million and $ 1.9 million, respectively, primarily due to operating income in both years.

With the enactment of the Tax Act, the corporate federal income tax rate dropped from 35% to a flat 21% rate effective January 1, 2018.

11 unchanged sentences

The change to the net operating loss utilization limitation requires additional valuation allowance to account for the limitation.

At December 31, 2019 , the Holding Company had federal tax effected net operating loss (“NOL”) carryforwards totaling $ 88.6 million , and state tax effected NOL carryforwards, net of federal income tax benefit, totaling $ 27.0 million .

At December 31, 2020, the Holding Company had federal tax effected NOL carryforwards totaling $ 90.0 million, and state tax effected NOL carryforwards, net of federal income tax benefit, totaling $ 28.0 million.

Federal NOLs incurred prior to 2018 and California NOLs may be carried forward up to 21 years to offset future taxable income and begin to expire in 2030.

The additional year to utilize California NOLs is a result of bill AB-85, which suspended (and extended the carry forward period of) NOLs for tax years 2020 through 2022.

Federal NOLs incurred in 2018 and forward do not expire.

7 unchanged sentences

A reconciliation of the statutory rate and the effective tax rate for 2020, 2019 and 2018 is as follows:

2020 2019 2018

Statutory rate 21.00 % 21.00 % 21.00 %

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For the year ended December 31, 2020, the Company recorded income tax expense of $ 1.7 million on a pre-tax income of $ 2.8 million.

For the year ended December 31, 2019, the Company recorded tax expense of $ 2.4 million on a pre-tax income of $ 24.7 million.

For the year ended December 31, 2018, the Company recorded tax expense of $ 9.2 million on a pre-tax loss of 58.8 million.

For the year ended December 31, 2017, the Company recorded no benefit for income taxes (after application of a $ 35.1 million decrease in the Company’s valuation allowance).

The effective tax rates for the years ended December 31, 2019 , 2018 and 2017 , differ from the 21% and 35% federal statutory and applicable state statutory tax rates primarily due to the Company’s valuation allowance on its book losses and to the pre-tax portion of income and losses that are passed through to the other partners of the Operating Company and the San Francisco Venture and from the change in the statutory federal tax rate in 2017.

The effective tax rates for the years ended December 31, 2020, 2019 and 2018, differ from the 21% federal statutory and applicable state statutory tax rates primarily due to the Company’s valuation allowance and to the pre-tax portion of income and losses that are passed through to the other partners of the Operating Company and the San Francisco Venture and from the change in the statutory federal tax rate in 2017.

The Holding Company files income tax returns in the U.S.

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FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS AND DISCLOSURES

At each reporting period, the Company evaluates the fair value of its financial instruments.

Other than notes payable, net, the carrying amount of the Company’s financial instruments, which includes cash and cash equivalents, restricted cash and certificates of deposit, certain related party assets and liabilities, and accounts payable and other liabilities, approximated the Company’s estimates of fair value at both December 31, 2019 and 2018 .

At each reporting period, the Company evaluates the fair value of its financial instruments compared to carrying values.

Other than the Company’s notes payable, net, the carrying amount of the Company’s financial instruments, which includes cash and cash equivalents, restricted cash and certificates of deposit, certain related party assets and liabilities, and accounts payable and other liabilities, approximated the Company’s estimates of fair value at both December 31, 2020 and 2019.

The fair value of the Company’s notes payable, net, are estimated based on quoted market prices or discounting the expected cash flows based on rates available to the Company (level 2).

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At December 31, 2019, the estimated fair value of notes payable, net was $ 631.1 million compared to a carrying value of $ 616.0 million.

During the years ended December 31, 2019 , 2018 and 2017, the Company had no assets that were measured at fair value on a nonrecurring basis.

Contingent consideration is carried at fair value and is remeasured on a recurring basis.

At December 31, 2018, the fair value of the contingent consideration was $ 64.9 million (level 3) and the contingent consideration was derecognized in the first quarter of 2019 (see Note 9).

During the years ended December 31, 2020, 2019 and 2018, the Company had no assets that were measured at fair value on a nonrecurring basis, other than a valuation adjustment to the Company's investment in the Great Park Venture during 2020 (see Note 4).

EARNINGS PER SHARE

The Company uses the two-class method in its computation of earnings per share.

Pursuant to the terms of the Five Point Holdings, LLC Agreement, the Class A common shares and the Class B common shares are entitled to receive distributions at different rates, with each Class B common share receiving 0.03 % of the distributions paid on each Class A common share.

The Company’s Class A common shares and the Class B common shares are entitled to receive distributions at different rates, with each Class B common share receiving 0.03 % of the distributions paid on each Class A common share.

Under the two-class method, the Company’s net income available to common shareholders is allocated between the two classes of common shares on a fully-distributed basis and reflects residual net income after amounts attributed to noncontrolling interests.

In the event of a net loss, the Company determined that both classes of common shares share in the Company’s losses, and they share in the losses using the same mechanism as the distributions.

In the event of a net loss, the Company determined that both classes share in the Company’s losses, and they share in the losses using the same mechanism as the distributions.

The Company also has restricted share awards and performance restricted share awards (see Note 16) that have a right to non-forfeitable dividends while unvested and are contemplated as participating when the Company is in a net income position.

These awards participate in distributions on a basis equivalent to other Class A common shares but do not participate in losses.

For the years ended December 31, 2019 , 2018 and 2017, the Company operated in a net income, net loss, and net income position, respectively.

No distributions were declared for either periods, as such, net incomes and losses attributable to the parent were allocated to the Class A common shares and Class B common shares at an amount per Class B common share equal to 0.03 % multiplied by the amount per Class A common share.

Basic income or loss per Class A common share is determined by dividing net income or loss allocated to Class A Common shareholders by the weighted average number of Class A common shares outstanding for the period.

Basic income or loss per Class B common share is determined by dividing net income or loss allocated to the Class B common shares by the weighted average number of Class B common shares outstanding during the period.

Diluted income or loss per share calculations for both Class A common shares and Class B common shares contemplate adjustments to the numerator and the denominator under the if-converted method for the convertible Class B common shares, the exchangeable Class A units of the San Francisco Venture and the exchangeable Class A Common Units of the Operating Company.

No distributions to common shares were declared for the years ended December 31, 2020, 2019 and 2018.

Diluted income (loss) per share calculations for both Class A common shares and Class B common shares contemplate adjustments to the numerator and the denominator under the if-converted method for Class B common shares, the exchangeable Class A units of the San Francisco Venture and the exchangeable Class A Common Units of the Operating Company.

The Company uses the treasury stock method or the two-class method when evaluating dilution for RSUs, restricted shares, and performance restricted shares.

The more dilutive of the two methods is included in the calculation for diluted income or loss per share.

The more dilutive of the two methods is included in the calculation for diluted income (loss) per share.

The following table summarizes the basic and diluted earnings per share calculations for the years ended December 31, 2020, 2019 and 2018 (in thousands, except shares and per share amounts):

Net income (loss) attributable to the Company

Adjustments to net income (loss) attributable to the Company

Net income (loss) attributable to common shareholders

2020 2019 2018

Net (loss) income attributable to the Company $ ( 428 ) $ 9,033 $ ( 34,714 )

Adjustments to net (loss) income 20 50 221

Net (loss) income attributable to common shareholders $ ( 408 ) $ 9,083 $ ( 34,493 )

Numerator — basic common shares:

Net income (loss) attributable to common shareholders

Net (loss) income attributable to common shareholders $ ( 408 ) $ 9,083 $ ( 34,493 )

net income allocated to participating securities

Allocation of net income (loss) among common shareholders

Numerator for basic net income (loss) available to Class A Common Shareholders

Numerator for basic net income (loss) available to Class B Common Shareholders

$ — $ ( 390 ) $ —

Allocation of net (loss) income to common shareholders $ ( 408 ) $ 8,693 $ ( 34,493 )

Numerator for basic net (loss) income available to Class A Common Shareholders $ ( 408 ) $ 8,690 $ ( 34,480 )

Numerator for basic net (loss) income available to Class B Common Shareholders $ — $ 3 $ ( 13 )

Numerator — diluted common shares:

Net income (loss) attributable to common shareholders

Reallocation of income (loss) to Company upon assumed exchange of common units

Net (loss) income attributable to common shareholders $ ( 408 ) $ 9,083 $ ( 34,493 )

Reallocation of (loss) income upon assumed exchange of dilutive potential securities $ ( 16 ) $ 9,501 $ —

net income allocated to participating securities $ — $ ( 372 ) $ —

Allocation of net income (loss) among common shareholders

Numerator for diluted net income (loss) available to Class A Common Shareholders

Numerator for diluted net income (loss) available to Class B Common Shareholders

Allocation of net (loss) income to common shareholders $ ( 424 ) $ 18,212 $ ( 34,493 )

Numerator for diluted net (loss) income available to Class A Common Shareholders $ ( 424 ) $ 18,209 $ ( 34,480 )

Numerator for diluted net (loss) income available to Class B Common Shareholders $ — $ 3 $ ( 13 )

Basic weighted average Class A common shares outstanding

66,722,187 66,261,968 65,002,387

Diluted weighted average Class A common shares outstanding

69,000,096 145,491,898 65,002,387

Basic and diluted weighted average Class B common shares outstanding

Basic earnings (loss) per share:

79,233,544 79,221,176 79,859,730

Basic (loss) earnings per share:

Class A common shares

$ ( 0.01 ) $ 0.13 $ ( 0.53 )

Class B common shares

Diluted earnings (loss) per share:

$ ( 0.00 ) $ 0.00 $ ( 0.00 )

Diluted (loss) earnings per share:

Class A common shares

$ ( 0.01 ) $ 0.13 $ ( 0.53 )

Class B common shares

$ ( 0.00 ) $ 0.00 $ ( 0.00 )

Anti-dilutive potential RSUs

Anti-dilutive potential Performance RSUs

338,813 388,155 —

Anti-dilutive potential Restricted Shares (weighted average)

1,690,773 — 1,817,020

Anti-dilutive potential Performance Restricted Shares (weighted average)

Anti-dilutive potential Class A common shares (weighted average)

In January 2020, the Company granted 0.7 million restricted shares to employees and non-employee directors (see Note 16).

76,120,180 — 79,883,687

ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss attributable to the Company consists of unamortized defined benefit pension plan net actuarial losses that totaled $ 2.7 million and $ 3.4 million at December 31, 2019 and 2018 , net of tax benefits of $ 0.8 million and $ 0.9 million , respectively.

Accumulated other comprehensive loss attributable to the Company consists of unamortized net actuarial losses for the Retirement Plan that totaled $ 2.8 million and $ 2.7 million at December 31, 2020 and 2019, net of tax benefits of $ 0.7 million and $ 0.8 million, respectively.

At December 31, 2020 and 2019, the Company held a full valuation allowance related to the accumulated tax benefits, respectively.

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Net actuarial gains or losses are re-determined annually or upon remeasurement events and principally arise from changes in the rate used to discount benefit obligations and differences between expected and actual returns on plan assets.

Reclassifications from accumulated other comprehensive loss to net loss related to amortization of net actuarial losses were approximately $ 89,000 , $ 55,000 and $ 64,000 , net of taxes, and are included in selling, general, and administrative expenses on the accompanying consolidated statements of operations for the years ended December 31, 2019 , 2018 and 2017 , respectively.

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

2019 Quarterly Periods

(in thousands, except per share amounts)

Income (loss) before income tax

Net income (loss) attributable to the Company

Net income (loss) attributable to the Company per Class A Share (Basic and diluted)

Net income (loss) attributable to the Company per Class B Share (Basic and diluted)

2018 Quarterly Periods

(in thousands, except per share amounts)

Loss before income tax

Net loss attributable to the Company

Net loss attributable to the Company per Class A Share (Basic)

Net loss attributable to the Company per Class A Share (Diluted)

Net loss attributable to the Company per Class B Share (Basic and diluted)

(1) Included in the quarterly financial results for the first quarter of 2019 is gain on settlement of contingent consideration—related party of $ 64.9 million related to the termination of the Retail Project and the San Francisco Venture being released from certain development obligations (see Note 9).

Reclassifications from accumulated other comprehensive loss to net loss related to amortization of net actuarial losses were approximately $ 61,000 , $ 89,000 and $ 55,000 , net of taxes, and are included in miscellaneous other income on the accompanying consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018, respectively.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data