What changed in this filing

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Item 1. Business

2022-03-11 compared with 2021-03-10 · 55 added, 52 removed, 285 unchanged (27% of the section changed)

We are an owner and developer of mixed-use, master-planned communities in California.

We are an owner and developer of mixed-use planned communities in California.

Our three existing communities have the general plan and zoning approvals necessary for the construction of thousands of homesites and millions of square feet of commercial space, and they represent a significant portion of the real estate available for development in three major markets in California—Los Angeles County, San Francisco County and Orange County.

In total, our communities consist of approximately 23 million square feet of built or planned commercial space and approximately 40,000 homes built or planned.

Structure and Formation of Our Company

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

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

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

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

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

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

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

In May 2016, we completed the formation transactions in which we acquired an interest in the San Francisco Venture, which is developing our Candlestick and The San Francisco Shipyard communities, a 37.5% percentage interest in the Great Park Venture, which is developing Great Park Neighborhoods, and the management company that has been the development manager of Great Park Neighborhoods since 2010.

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

Our company has an entity structure in which our two largest equity owners, Lennar and Castlelake, and our founder and Chairman Emeritus, Emile Haddad, separately hold, in addition to interests in our common shares, equity interests in either or both the operating company or the San Francisco Venture that can be exchanged for, at our option, either our Class A common shares or cash.

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

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

Until Class A units of the operating

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

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

Based on the closing price of our Class A common shares on February 28, 2022 ($5.92), our market capitalization on a fully exchanged basis was approximately $878.8 million.

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

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

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

units of the operating company.

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

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(4) Through a wholly owned subsidiary, the operating company owns a 37.5% percentage interest in the Great Park Venture.

Holders of legacy interests in the Great Park Venture are entitled to receive priority distributions in an amount equal to $565.0 million, of which $431.3 million has been distributed as of February 28, 2021.

Holders of legacy interests in the Great Park Venture were entitled to receive priority distributions up to an aggregate amount of $565.0 million, of which $482.3 million has been distributed as of February 28, 2022.

We are the administrative member of the Great Park Venture.

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

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

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

We may also retain a portion of the commercial and multi-family properties in our communities as income-producing assets.

Our planning and development process involves the following components:

Master planning .

Mixed-use planning .

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

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

In addition to the master land planning we undertake for each community, we typically create the floorplans and elevations for each home, as well as the landscape design for each neighborhood, considering each neighborhood’s individual character within the context of the overall plan for the community.

In addition to the mixed-use land planning we undertake for each community, we typically create the floorplans and elevations for each home, as well as the landscape design for each neighborhood, considering each neighborhood’s individual character within the context of the overall plan for the community.

For the commercial aspects of our communities, we look for commercial enterprises that will best add value to the community by providing needed services, additional amenities or local jobs.

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In order to balance the timing of our revenues and expenditures, we typically sequence the development of individual neighborhoods or villages within our communities.

As a result, many of the master planning, entitlement, development, sales and other activities described above may occur at the same time in different locations within a single community.

As a result, many of the mixed-use planning, entitlement, development, sales and other activities described above may occur at the same time in different locations within a single community.

Further, depending on the specific plans for each community and market conditions, we may vary the timing of certain of these activities.

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Valencia (formerly Newhall Ranch)

Valencia is a mixed-use, master-planned community in Los Angeles County that spans approximately 15,000 acres and is designed to include approximately 21,500 homesites, approximately 11.5 million square feet of commercial space, approximately 50 miles of trails, approximately 275 acres of community parks and approximately 10,000 acres of protected open space.

Valencia is a mixed-use planned community in Los Angeles County that spans approximately 15,000 acres and is designed to include approximately 21,500 homesites, approximately 11.5 million square feet of commercial space, approximately 50 miles of trails, approximately 275 acres of community parks and approximately 10,000 acres of protected open space.

The actual commercial square footage and number of homesites are subject to change based on ultimate use and land planning.

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

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

As of December 31, 2021, we had sold 1,866 homesites, and builders had sold 346 homes to homebuyers since home sales commenced in May 2021.

Candlestick and The San Francisco Shipyard

Candlestick and The San Francisco Shipyard, located on approximately 800 acres of bayfront property in the City of San Francisco, is designed to include approximately 12,000 homesites, approximately 6.3 million square feet of commercial space, approximately 100,000 square feet of community space, artist studios and approximately 355 acres of parks and open space.

approximately 100,000 square feet of community space, artist studios and approximately 355 acres of parks and open space.

The actual commercial square footage and number of homesites are subject to change based on ultimate use and land planning.

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We commenced horizontal development activities at Candlestick in 2015.

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

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

At The San Francisco Shipyard, approximately 408 acres are still owned by the U.S.

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and Tetra Tech EC, Inc.

(collectively, “Tetra Tech”), a contractor hired by the U.S.

(collectively, “Tetra Tech”), contractors hired by the U.S.

Navy, misrepresented sampling results at The San Francisco Shipyard have resulted in data reevaluation, governmental investigations, criminal proceedings, lawsuits, and a determination by the U.S.

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

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

Great Park Neighborhoods

Great Park Neighborhoods, located in Irvine, California, is an approximately 2,100 acre mixed-use, master-planned community that is being developed on the former site of the U.S.

Great Park Neighborhoods, located in Irvine, California, is an approximately 2,100 acre mixed-use planned community that is being developed on the former site of the U.S.

Marine Corp’s El Toro Air base (“El Toro Base”) in Orange County.

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The first homesites at the Great Park Neighborhoods were sold in April 2013 and, as of December 31, 2021, the Great Park Venture had sold 7,099 homesites (including 709 affordable homesites) and commercial land allowing for development of up to 2 million square feet of commercial (research and development) space.

As of December 31, 2021, builder sales totaled 5,422 market rate homes at the Great Park Neighborhoods (including 37 homes under a fee build arrangement).

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

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

We currently expect to develop and operate certain commercial properties within our existing master-planned communities.

We currently expect to develop and operate certain commercial properties within our existing mixed-use planned communities.

We may develop and operate these properties on our own, or we may choose from time to time to develop and/or operate a particular property or properties in a strategic joint venture or other financing or entity structure with a third-party.

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

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

In August 2017, the Gateway Commercial Venture, in which we own a 75% interest, acquired the Five Point Gateway Campus, consisting of approximately 73 acres of commercial land in the Great Park Neighborhoods.

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

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

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

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

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

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

• the recreational and cultural amenities available within our communities;

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We have incurred significant costs and expenses over the last 10 to 15 years in order to obtain the primary entitlements (general plan and zoning approvals) for our communities.

Once these primary entitlements are obtained, we continue to refine the master plan for each community by planning specific development areas and obtaining the necessary governmental approvals for a development area.

Once these primary entitlements are obtained, we continue to refine the mixed-use plan for each community by planning specific development areas and obtaining the necessary governmental approvals for a development area.

Among other things, we typically need to obtain the following approvals for each development area:

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In addition, our development projects are subject to the California Environmental Quality Act (“CEQA”), which is similar in scope to NEPA, and requires potential environmental impacts of projects subject to discretionary governmental approval to be studied by the California governmental entity approving the proposed projects.

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

Projects with significant expected impacts require an Environmental Impact Report (“EIR”) while

more limited projects may be approved based on a Mitigated Negative Declaration.

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

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Investments in Real Estate or Interests in Real Estate

We are a real estate development and operating company that specializes in the development and operation of mixed-use, master-planned communities.

We are a real estate development and operating company that specializes in the development and operation of mixed-use planned communities.

Our goal is to create sustainable, long-term growth and value for our shareholders.

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

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

All of our associates must adhere to a code of business conduct and

ethics that sets standards for appropriate behavior and participate in required training on preventing and identifying harassment and discrimination.

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

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

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

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

At December 31, 2021, women constituted approximately 46% of our workforce, and ethnic and racial minorities constituted approximately 42% of our workforce.

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

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

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

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

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

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

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

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

In response to the COVID-19 pandemic, we took immediate steps to protect the health and well-being of our associates and to preserve the financial strength of the company.

The substantial majority of our associates are still working remotely with access to necessary systems and resources to ensure business continuity.

We have utilized various technological resources to expand the use of virtual interactions, including holding company-wide meetings, which we use to keep the team informed of the company’s plans regarding the evolving nature of the work environment.

We will transition our associates back to our offices when we believe it is appropriate after taking into account all federal, state and local laws, rules and regulations.

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

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

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Name Age Position

Emile Haddad 62 Chairman, President and Chief Executive Officer

Higgins 53 Chief Financial Officer and Vice President

Daniel Hedigan 68 Chief Executive Officer

54 Chief Financial Officer and Vice President

Michael Alvarado 56 Chief Legal Officer, Vice President and Secretary

Lynn Jochim 57 Chief Operating Officer

Greg McWilliams 70 Chief Policy Officer

Emile Haddad .

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

Haddad has been a member of our board since 2009.

From 2009 until May 2016, Mr.

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

58 Incoming Interim Chief Financial Officer

(1) On January 20, 2022, Mr.

Higgins provided notice of his intent to resign from the company after the filing of this annual report on Form 10-K.

Upon the effective date of Mr.

Higgins’ resignation, Leo Kij, who currently serves as the company’s Vice President and Corporate Controller, will serve as interim Chief Financial Officer until Mr.

Higgins’ successor is appointed.

Daniel Hedigan.

Hedigan was appointed our Chief Executive Officer in February 2022.

Prior to his appointment, Mr.

Hedigan served as President of Land Sales and Home Building for the Irvine Company from 2013 to 2021, where he oversaw the design, building and sales of new homes in the master-planned villages of the Irvine Ranch in Orange County, California.

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

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Alvarado served as General Counsel for the management company.

Lynn Jochim .

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

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

Jochim served as our Executive Vice President.

From 2009 until May 2016, Ms.

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

Greg McWilliams .

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McWilliams was President of Newhall Land & Farming.

Kij has served as our Vice President and Corporate Controller since 2016.

From 2009 to 2016, he served as Controller of our subsidiary, Five Point Communities Management, Inc.

Available Information

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We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(d) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after being filed with, or furnished to, the Securities and Exchange Commission (“SEC”).

The information contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this annual report on Form 10-K.

In addition, you may obtain the documents that we file with the SEC from the SEC’s website at www.sec.gov.

We use our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

Investors should monitor such website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

Information relating to our corporate governance is also included on our investor relations website.

The information contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this annual report on Form 10-K.

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

What changed 10-K

Item 1. Business