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Item 8. Financial Statements and Supplementary Data

2023-03-06 compared with 2022-03-11 · 219 added, 192 removed, 1019 unchanged (29% of the section changed)

3 unchanged sentences

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, 2021 and 2020, 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, 2021, and the related notes and schedule III—real estate and accumulated depreciation (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, 2022 and 2021, 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, 2022, and the related notes and schedule III—real estate and accumulated depreciation (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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Investment in unconsolidated entities – Other-than-temporary impairment assessment of Heritage Fields LLC (“Great Park Venture”)— Refer to Notes 2 and 4 to the financial statements

Critical Audit Matter Description

As of December 31, 2022, the Company’s investments in unconsolidated entities consist of three investments totaling $331.6 million, and the carrying value of the investment in Great Park Venture is $289.0 million of the total balance.

The Company evaluates its investments in unconsolidated entities for other-than-temporary impairment by reviewing its investments for an absence of an ability to recover the carrying amount of the investment, by considering indicators of impairment including the fair value of the investment determined by a discounted cash flow of distributions.

If the carrying value of the investment in unconsolidated entities is greater than its estimated fair value, management makes an assessment of whether the impairment is other-than-temporary.

In making this assessment, management considers the length of time and the extent to which the fair value of the investment has been less than its carrying value.

In the event that an impairment is other-than-temporary, the Company will reduce the carrying value of the investment to its estimated fair value and recognize an impairment expense within the consolidated statements of comprehensive (loss) income in the period it is identified as incurred.

For the year ended December 31, 2022, management identified no indicators of impairment and no impairment loss has been recognized.

Given the quantitative significance of the investment in Great Park Venture and the complexities and judgments involved in identifying impairment indicators and developing the significant inputs used to develop management’s Great Park Venture discounted cash flow of distributions, a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, was deployed in performing audit procedures to evaluate the reasonableness of management’s identification of impairment indicators, and its estimates and assumptions related to significant inputs, including discount rate, residential revenue appreciation rates, and cost appreciation rates used in the Great Park Venture discounted cash flow of distributions.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s evaluation of indicators of impairment and the fair value of the investment in Great Park Venture included the following, among others:

– We tested the effectiveness of controls over management’s evaluation of indicators of impairment and the fair value of the investment in Great Park Venture, including those over significant input assumptions, including the discount rate, residential revenue appreciation rates and cost appreciation rates.

– We tested the Company’s evaluation of indicators of impairment and significant input assumptions, including the discount rate, residential revenue appreciation rates and cost appreciation rates by (1) evaluating the source information used by management, (2) independently obtaining and evaluating market data, and (3) engaging our internal fair value specialists.

– We tested the mathematical accuracy of the discounted cash flow of distributions.

/s/ DELOITTE & TOUCHE LLP

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54,591 77,118 83,504

Restructuring 19,437 — —

Total costs and expenses

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Interest income

94 1,369 7,844

Gain on settlement of contingent consideration—related party

Miscellaneous

245 3,720 356

Total other income

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EQUITY IN EARNINGS FROM UNCONSOLIDATED ENTITIES 21,513 6,188 42,364

INCOME BEFORE INCOME TAX PROVISION 12,985 2,838 24,713

(LOSS) INCOME BEFORE INCOME TAX BENEFIT (PROVISION) ( 36,245 ) 12,985 2,838

INCOME TAX BENEFIT (PROVISION) 1,471 325 ( 1,744 )

NET INCOME 13,310 1,094 22,268

LESS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 6,742 1,522 13,235

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY $ 6,568 $ ( 428 ) $ 9,033

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

NET (LOSS) INCOME ( 34,774 ) 13,310 1,094

LESS NET (LOSS) INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 19,371 ) 6,742 1,522

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY $ ( 15,403 ) $ 6,568 $ ( 428 )

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

$ ( 0.22 ) $ 0.09 $ ( 0.01 )

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68,430,212 143,491,204 69,000,096

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

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

Basic and diluted

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FIVE POINT HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

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2022 2021 2020

NET INCOME $ 13,310 $ 1,094 $ 22,268

OTHER COMPREHENSIVE INCOME (LOSS):

Net actuarial gain (loss) on defined benefit pension plan 1,067 ( 332 ) 917

Reclassification of actuarial loss on defined benefit pension plan included in net income 359 97 143

Other comprehensive income (loss) before taxes 1,426 ( 235 ) 1,060

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

OTHER COMPREHENSIVE INCOME (LOSS)—Net of tax 1,426 ( 235 ) 1,060

COMPREHENSIVE INCOME 14,736 859 23,328

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 7,271 1,434 13,633

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY $ 7,465 $ ( 575 ) $ 9,695

NET (LOSS) INCOME $ ( 34,774 ) $ 13,310 $ 1,094

OTHER COMPREHENSIVE (LOSS) INCOME:

Net actuarial (loss) gain on defined benefit pension plan ( 1,929 ) 1,067 ( 332 )

Reclassification of actuarial loss on defined benefit pension plan included in net (loss) income 255 359 97

Other comprehensive (loss) income before taxes ( 1,674 ) 1,426 ( 235 )

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

OTHER COMPREHENSIVE (LOSS) INCOME—Net of tax ( 1,674 ) 1,426 ( 235 )

COMPREHENSIVE (LOSS) INCOME ( 36,448 ) 14,736 859

LESS COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 19,998 ) 7,271 1,434

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY $ ( 16,450 ) $ 7,465 $ ( 575 )

See accompanying notes to consolidated financial statements.

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BALANCE - January 1, 2020 68,788,257 79,233,544 $ 571,532 $ 42,844 $ ( 2,682 ) $ 611,694 $ 1,272,106 $ 1,883,800

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

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

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

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

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 ) —

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

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

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BALANCE - December 31, 2020 69,051,284 79,233,544 $ 578,278 $ 42,221 $ ( 2,833 ) $ 617,666 $ 1,267,432 $ 1,885,098

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

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

Net income — — — 6,568 — 6,568 6,742 13,310

Share-based compensation expense — — 7,898 — — 7,898 — 7,898

Reacquisition of share-based compensation awards for tax-withholding purposes ( 324,905 ) — ( 2,047 ) — — ( 2,047 ) — ( 2,047 )

Settlement of restricted share units for Class A common shares 335,078 — — — — — — —

Issuance of share-based compensation awards, net of forfeitures 1,381,173 — — — — — — —

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

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

— — — — 897 897 529 1,426

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BALANCE - December 31, 2021 70,107,552 79,233,544 $ 587,587 $ 48,789 $ ( 1,952 ) $ 634,424 $ 1,265,954 $ 1,900,378

Net income — — — 6,568 — 6,568 6,742 13,310

Net loss — — — ( 15,403 ) — ( 15,403 ) ( 19,371 ) ( 34,774 )

Share-based compensation expense — — 6,230 — — 6,230 — 6,230

Reacquisition of share-based compensation awards for tax-withholding purposes ( 417,716 ) — ( 2,736 ) — — ( 2,736 ) — ( 2,736 )

Issuance of share-based compensation awards, net of forfeitures 1,381,173 — — — — — — —

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

Forfeitures of share-based compensation awards, net of issuances ( 621,482 ) — — — — — — —

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

— — — — ( 1,047 ) ( 1,047 ) ( 627 ) ( 1,674 )

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CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 13,310 $ 1,094 $ 22,268

Adjustments to reconcile net income to net cash used in operating activities:

Net (loss) income $ ( 34,774 ) $ 13,310 $ 1,094

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

Equity in earnings from unconsolidated entities ( 21,513 ) ( 6,188 ) ( 42,364 )

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16,946 25,988 14,142

Gain on settlement of contingent consideration—related party

— — ( 64,870 )

Gain on distribution from indirect Legacy Interest in Great Park Venture—related party — ( 978 ) —

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CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds of Class B common share offering

Proceeds from senior notes offering

Senior notes pre-issuance accrued interest proceeds

Payment of pre-issuance accrued interest on senior notes

— — ( 1,941 )

Principal payment on Macerich note

— — ( 65,130 )

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

1 unchanged sentence

Payment of financing costs

( 686 ) — ( 2,822 )

Related party reimbursement obligation

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Tax distribution to noncontrolling interest ( 435 ) ( 4,429 ) ( 4,568 )

Contribution from noncontrolling interest

Proceeds from issuance of redeemable noncontrolling interest

Net cash (used in) provided by financing activities ( 26,577 ) ( 23,541 ) 83,206

Borrowings under revolving credit facility 15,000 — —

Repayments under revolving credit facility ( 15,000 ) — —

Net cash used in financing activities ( 9,717 ) ( 26,577 ) ( 23,541 )

NET DECREASE IN CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH ( 134,029 ) ( 32,682 ) ( 49,100 )

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

In some of its development management agreements, the Company receives compensation equal to the actual general and administrative costs incurred by the Company as it performs services.

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 financial performance of a customer.

The Company’s management agreements may 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.

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

In some of its development management agreements, the Company previously received compensation equal to the actual general and administrative costs incurred by the Company as it performed services.

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.

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For operating properties, the Company’s projected cash flows also include estimates and assumptions about the use and eventual disposition of such properties, including utilization, capital expenditures, operating expenses, and the amount of proceeds to be realized upon eventual disposition of such properties.

In determining these estimates and assumptions, the Company utilizes historical trends from past development projects of the Company in addition to internal and external market studies and trends, which generally include, but are not limited to, statistics on population demographics and unemployment rates.

Using all available information, the Company calculates its estimate of projected cash flows for each asset.

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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.

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 investee’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’s interests in Heritage Fields LLC (the “Great Park Venture”), Five Point Office Venture Holdings I, LLC (the “Gateway Commercial Venture”) and FP-HS Lot Option Joint Venture - Valencia, LLC (the “Valencia Landbank Venture”) were accounted for using the equity method for all years presented in the accompanying consolidated financial statements.

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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.

If indicators are present, the Company estimates the fair value of the investment.

The Company evaluates its investments in unconsolidated entities for other-than-temporary impairment by reviewing each investment for any indicators of impairment, including the fair value of such investments compared to their carrying amounts.

The Company typically estimates the fair value of its investments by discounting the cash flows from distributions the Company expects to receive from the venture.

Significant input assumptions used in estimating the distributions the Company expects to receive from the

venture include revenue appreciation rates and cost appreciation rates.

The determination of fair value also requires discounting the estimated cash flows at a rate that the Company believes a market participant would determine to be commensurate with the inherent risks associated with the investment and related estimated cash flow streams.

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

If the carrying value of the investment is greater than the estimated fair value, management makes an assessment of whether the impairment is “temporary” or “other-than-temporary.” In making this assessment, management considers the following:

(1) the length of time and the extent to

which fair value has been less than cost, (2) the financial condition and near-term prospects of the entity, and (3) the Company’s intent and ability to retain its interest long enough for a recovery in market value.

(1) the length of time and the extent to which fair value has been less than cost, (2) the financial condition and near-term prospects of the entity, and (3) the Company’s intent and ability to retain its interest long enough for a recovery in market value.

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

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Level 3 —Significant inputs to the valuation model are unobservable

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input

that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

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.

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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The Holding Company recognizes interest or penalties related to income tax matters in income tax expense.

Restructuring —Restructuring costs consist of one-time employee-related termination benefits and other postemployment compensation arrangements.

On February 9, 2022, Daniel Hedigan was appointed as the Company’s Chief Executive Officer.

Preceding Mr.

Hedigan’s appointment, Emile Haddad stepped down from his roles as Chairman, Chief Executive Officer and President effective as of September 30, 2021 and transitioned into a senior advisory role pursuant to a three-year advisory agreement.

Haddad remains a member of the Company’s Board of Directors serving as Chairman Emeritus.

Concurrent with Mr.

Hedigan’s appointment, Lynn Jochim transitioned from her position as President and Chief Operating Officer into an advisory role pursuant to a three-year advisory agreement (see Note 9).

Upon the appointment of Mr.

Hedigan as the Company’s Chief Executive Officer, the Company accrued a related party liability of $ 15.6 million attributed to advisory agreement payments due to Mr.

Haddad and Ms.

In addition, the Company determined the service condition associated with Mr.

Haddad and Ms.

Jochim’s unvested restricted share awards had been modified (see Note 16).

As a result of this modification, the Company recognized approximately $ 3.0 million in share-based compensation expense as a restructuring cost during the year ended December 31, 2022.

In addition to the Company’s executive management restructuring activities, the Company incurred and paid $ 0.9 million in restructuring costs resulting from severance benefits incurred in March 2022.

Miscellaneous other income — Miscellaneous other income consisted of the following (in thousands):

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The A&R DMA had an original term commencing on December 29, 2010 and ending on December 31, 2021 (the “Initial Term”).

By mutual agreement, the Initial Term has been extended through April 30, 2022 while the terms of renewal are being discussed.

In addition to a fixed base fee and variable cost reimbursements, the Initial Term of the A&R DMA included incentive compensation that becomes payable in connection with and as a percentage of distributions made to the members of the Great Park Venture, including distributions made in periods after the Initial Term.

In addition to an annual fixed base fee and variable cost reimbursements, the Initial Term of the A&R DMA included incentive compensation that becomes payable in connection with and as a percentage of distributions made to the members of the Great Park Venture, including distributions made in periods after the Initial Term.

Consideration in the form of contingent incentive compensation from the A&R DMA was recognized as revenue and a contract asset as services were provided over the contract term.

During the year ended December 31, 2021, the Great Park Venture made distributions to its members that resulted in the Company receiving incentive compensation payments of $ 21.3 million (see Note 9).

By mutual agreement, the Initial Term had been extended through December 31, 2022 (the "2022 Extension").

The 2022 Extension resulted in the elimination of variable cost reimbursements and an increase in the annual fixed base fee to $ 12.0 million for 2022.

The 2022 Extension did not change the incentive compensation provisions of the A&R DMA applicable to the Initial Term.

In December 2022, the Company and the Great Park Venture entered into a second amendment to the A&R DMA.

Under the amendment, the term of the A&R DMA has been renewed through December 31, 2024 (the "First Renewal Term").

The compensation payable to the Company during the First Renewal Term remains unchanged from the 2022 Extension and includes the annual fixed base fee and incentive compensation payments.

In 2024, the base fee will equal the amount of the fee included in the annual business plan approved by the Great Park Venture's executive committee, which is currently anticipated to be approximately the same as the current base fee.

Due to the contingencies associated with estimating the amount of incentive compensation that ultimately will become payable for services provided through the Initial Term, the Company has constrained, under the guidance of ASC Topic 606, its estimate of incentive compensation revenues such that the Company believes that a significant reversal of revenues is not probable of occurring.

As the contingencies are resolved and incentive compensation payments are made in future periods, the Company may record adjustments to revenue to reflect changes in the Company’s estimate of incentive compensation expected to be received.

As the contingencies are resolved in future periods, the Company may record adjustments to revenue to reflect changes in the Company’s estimate of incentive compensation expected to be received.

Significant judgment is involved in management’s estimate of the amount of variable consideration included in the transaction price.

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

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, the expected contract period, and other factors.

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, the expected contract period, and other factors.

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, 2022 were $ 87.6 million ($ 79.1 million related party, see Note 9) and $ 86.5 million ($ 79.9 million related party, see Note 9), respectively.

The increase of $ 2.5 million between the opening and closing balances of the Company’s contract assets primarily resulted from a timing difference between when payments are made and the Company’s recognition of revenue earned for the performance of management services in the period.

Offsetting the timing difference was a reduction of $ 21.3 million from the receipt of incentive compensation payments from the Great Park Venture.

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) and $ 85.1 million ($ 78.1 million related party, see Note 9), respectively.

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 net decrease of $ 1.1 million between the opening and closing balances of the Company’s contract assets primarily resulted from additional incentive compensation revenue recognized during the period that resulted from changes in the estimated constrained transaction price of the A&R DMA offset by the receipt of $ 15.9 million in incentive compensation payments from the Great Park Venture and the receipt of marketing fees from prior period land sales.

The opening and closing balances of the Company’s contract assets for the year ended December 31, 2021 were $ 85.1 million ($ 78.1 million related party, see Note 9) and $ 87.6 million ($ 79.1 million related party, see Note 9), respectively.

The net increase of $ 2.5 million between the opening and closing balances of the Company’s contract assets primarily resulted from a timing difference between when payments are received and the Company’s recognition of revenue earned for the performance of management services in the period, offset in large part by a reduction of $ 21.3 million from the receipt of incentive compensation payments from the Great Park Venture.

The opening and closing balances of the Company’s other receivables from contracts with customers and contract liabilities for the years ended December 31, 2022 and 2021 were insignificant.

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The Company received $ 52.7 million for its 37.5 % Percentage Interest.

With the distributions to the holders of Legacy Interests during the year ended December 31, 2021, the Great Park Venture fully satisfied the $ 476.0 million priority distribution rights and reduced the remaining maximum participating Legacy Interest distribution rights to $ 82.7 million.

During the year ended December 31, 2021, the Great Park Venture made aggregate distributions of $ 51.0 million to holders of Legacy Interests and $ 204.3 million to holders of Percentage Interests.

The Company received $ 76.6 million for its 37.5 % Percentage Interest.

As of December 31, 2021, the Great Park Venture had fully satisfied the $ 476.0 million priority distribution rights, and the remaining maximum participating Legacy Interest distribution rights at December 31, 2022 were $ 66.3 million.

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

The Company, through the A&R DMA, manages the planning, development and sale of the Great Park Neighborhoods and supervises the day-to-day affairs of the Great Park Venture.

The Company, through the A&R DMA, as amended, manages the planning, development and sale of the Great Park Neighborhoods and supervises the day-to-day affairs of the Great Park Venture.

The Great Park Venture is governed by an executive committee of representatives appointed by only the holders of Percentage Interests.

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

The Company accounts for its investment in the Great Park Venture using the equity method.

The Company accounts for its investment in the Great Park Venture using the equity method of accounting.

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”), 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.

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During the year ended December 31, 2022, the Great Park Venture recognized $ 12.5 million in land sale revenues to related parties of the Company and $ 270.9 million in land sale revenues to third parties.

Land sale revenues to third parties included $ 236.6 million in revenues from homesites sold to an unaffiliated land banking entity whereby a related party of the Company retained the option to acquire these homesites in the future from the land bank entity.

Land sales to related parties included $ 57.4 million in sales to an entity in which the Great Park Venture holds a 10 % interest (the “Great Park Landbank Venture”).

During the year ended December 31, 2021, the Great Park Venture recognized $ 62.8 million in land sale revenues to related parties of the Company and $ 346.8 million in land sale revenues to third parties, of which $ 236.6 million relates to homesites sold to an unaffiliated land banking entity whereby a related

party of the Company retained the option to acquire these homesites in the future from the land bank entity.

Land sales to related parties in 2021 included $ 57.4 million sold to an entity in which the Great Park Venture holds a 10% interest (the “Great Park Landbank Venture”).

The Great Park Landbank Venture is a land banking entity that was formed in June 2021.

The Great Park Venture made an initial contribution of $ 4.6 million for its interest and accounts for the investment under the equity method of accounting.

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.

The Great Park Venture accounts for the investment under the equity method of accounting.

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.

The following table summarizes the statements of operations of the Great Park Venture for the years ended December 31, 2022, 2021 and 2020 (in thousands):

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Interest expense ( 1,541 ) ( 1,235 ) ( 8,857 )

Net income (loss) of Gateway Commercial Venture $ 878 $ 111,845 $ ( 5,140 )

Equity in earnings (loss) from Gateway Commercial Venture $ 659 $ 83,884 $ ( 3,855 )

Net (loss) income of Gateway Commercial Venture $ ( 169 ) $ 878 $ 111,845

Equity in (loss) earnings from Gateway Commercial Venture $ ( 127 ) $ 659 $ 83,884

The following table summarizes the balance sheet data of the Gateway Commercial Venture and the Company’s investment balance as of December 31, 2022 and 2021 (in thousands):

Real estate and related intangible assets, net $ 82,797 $ 86,601

Cash 4,244 13,279

Other assets 4,588 4,486

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The Company’s investment in the Gateway Commercial Venture $ 40,695 $ 49,447

During the year ended December 31, 2022, the Company received $ 8.6 million in distributions of excess cash from the Gateway Commercial Venture.

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.

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At December 31, 2022 and 2021, the Company’s investment in the Valencia Landbank Venture was $ 1.9 million and $ 3.8 million, respectively.

During the years ended December 31, 2021 and 2020, the Company recognized equity in loss of $ 0.9 million and $ 1.6 million from the Valencia Landbank Venture, respectively.

During the year ended December 31, 2022, the Company recognized equity in earnings of $ 1.2 million from the Valencia Landbank Venture, and during the years ended December 31, 2021 and 2020, the Company recognized equity in loss of $ 0.9 million and $ 1.6 million, respectively.

NONCONTROLLING INTERESTS

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The Holding Company’s wholly owned subsidiary is the managing general partner of the Operating Company, and at December 31, 2022, 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.

The Holding Company consolidates the financial results of the Operating Company and its subsidiaries and records a noncontrolling interest for the remaining 37.1 % of the outstanding Class A Common Units of the Operating Company that are owned separately by affiliates of Lennar Corporation (“Lennar”), affiliates of Castlelake, LP (“Castlelake”) and an entity controlled by Emile Haddad, the Company’s Chairman Emeritus of the Board of Directors and former Chief Executive Officer (the “Management Partner”).

The Holding Company consolidates the financial results of the Operating Company and its subsidiaries and records a noncontrolling interest for the remaining 37.5 % of

the outstanding Class A Common Units of the Operating Company that are owned separately by affiliates of Lennar Corporation (“Lennar”), affiliates of Castlelake, LP (“Castlelake”) and an entity controlled by Emile Haddad, the Company’s Chairman Emeritus of the Board of Directors and former Chief Executive Officer (the “Management Partner”).

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.

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Such equity transactions result in an adjustment between members’ capital and the noncontrolling interest in the Company’s consolidated balance sheet and statement 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, 2021, 2020 and 2019, 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.

During the years ended December 31, 2022, 2021 and 2020, the Holding Company’s ownership interest in the Operating Company changed 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 tax distributions to the Operating Company's partners in an amount equal to the estimated income tax liabilities resulting from taxable income or gain allocated to those parties.

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Year Ended December 31,

2022 2021 2020

Management Partner $ 435 $ 2,932 $ 4,568

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Total tax distributions $ 435 $ 4,429 $ 4,568

In January 2023, the Operating Company made a tax distribution of $ 2.0 million to the Management Partner.

Generally, tax distributions are treated as advance distributions under the LPA and are taken into account when determining the amounts otherwise distributable under the LPA.

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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.

In 2019, the San Francisco Venture issued 25.0 million 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 received up to a maximum amount of $ 25.0 million.

The San Francisco Venture also maintains the ability to redeem the then outstanding balance of Class C units for

cash at any time.

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.

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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 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”), the entity developing Valencia (formerly known as Newhall Ranch), all of which have also been determined to be VIEs.

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”), the entity developing Valencia, all of which have also been determined to be VIEs.

The San Francisco Venture is a VIE as the other members of the venture, individually or as a group, are not able to exercise kick-out rights or substantive participating rights.

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As of December 31, 2022, the San Francisco Venture had total combined assets of $ 1.31 billion, primarily comprised of $ 1.31 billion of inventories and $ 0.8 million in related party assets, and total combined liabilities of $ 67.3 million, including $ 63.0 million in related party liabilities.

As of December 31, 2020, the San Francisco Venture had total combined assets of $ 1.2 billion, primarily comprised of $ 1.22 billion of inventories, $ 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, 2021, the San Francisco Venture had total combined assets of $ 1.28 billion, primarily comprised of $ 1.27 billion of inventories and $ 1.1 million in related party assets, and total combined liabilities of $ 76.9 million, including $ 69.5 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 Operating Company, or a wholly owned subsidiary of the Operating Company, is the primary beneficiary of FP LP and FPL.

As of December 31, 2021, FP LP and FPL had combined assets of $ 1.0 billion, primarily comprised of $ 826.4 million of inventories, $ 51.4 million of intangibles, $ 82.0 million in related party assets and total combined liabilities of $ 94.0 million, including $ 85.6 million in accounts payable and other liabilities and $ 8.4 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, 2022, FP LP and FPL had combined assets of $ 1.1 billion, primarily comprised of $ 927.9 million of inventories, $ 40.3 million of intangibles and $ 79.9 million in related party assets, and total combined liabilities of $ 77.2 million, including $ 70.5 million in accounts payable and other liabilities and $ 6.7 million in related party liabilities.

As of December 31, 2021, FP LP and FPL had combined assets of $ 1.0 billion, primarily comprised of $ 826.4 million of inventories, $ 51.4 million of intangibles and $ 82.0 million in related party assets, and total combined liabilities of $ 94.0 million, including $ 85.6 million in accounts payable and other liabilities and $ 8.4 million in related party liabilities.

The Company evaluates its primary beneficiary designation on an ongoing basis and assesses the appropriateness of the VIE’s status when events have occurred that would trigger such an analysis.

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Operating lease liability (see Note 12) 12,535 13,931

Accrued advisory fees 10,525 —

$ 93,086 $ 95,918

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In 2010, the Great Park Venture, the Company’s equity method investee, engaged the Management Company under a development management agreement to provide management services to the Great Park Venture.

The initial term of the development management agreement with the Great Park Venture expired on December 31, 2021 but has been extended by mutual agreement of the parties through April 30, 2022 while the terms of a renewal are discussed.

The compensation structure in place as per the A&R DMA’s Initial Term consists of a base fee and incentive compensation.

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.” 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 to which the Great Park Venture is a party.

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 available to be made by the Great Park Venture to holders of Percentage Interests of the Great Park Venture (see Note 4).

The initial term of the development management agreement with the Great Park Venture expired on December 31, 2021 but had been extended by mutual agreement of the parties through December 31, 2022.

The compensation structure in place consisted of a base fee and incentive compensation.

Incentive compensation is characterized as “Legacy Incentive Compensation” and “Non-Legacy Incentive Compensation.” 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 to which the Great Park Venture is a party.

Holders of the Management Company’s Class B interests are entitled to receive 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 available to be made by the Great Park Venture to holders of Percentage Interests of the Great Park Venture during the Initial Term (see Note 4).

In December 2022, the Company and the Great Park Venture entered into the First Renewal Term.

The compensation payable to the Company during the First Renewal Term continues to include a base fee and incentive compensation payments.

If the A&R DMA is not extended by mutual agreement of the parties beyond December 31, 2024 and the Company is no longer providing management services subsequent to December 31, 2024, the Company will continue to be entitled to 6.75 % of Distributions paid thereafter.

During the year ended December 31, 2022, the Great Park Venture made a Legacy Incentive Compensation payment to the Company of $ 1.7 million and a Non-Legacy Incentive Compensation payment of $ 14.2 million.

Upon receiving the Legacy Incentive Compensation payment, the Company distributed the $ 1.7 million in proceeds to the holders of the Management Company's Class B interests.

During the year ended December 31, 2021, the Great Park Venture made a Legacy Incentive Compensation payment to the Company of $ 0.6 million and a Non-Legacy Incentive Compensation payment of $ 20.7 million.

Upon receiving the Legacy Incentive Compensation payment, the Company distributed the $ 0.6 million in proceeds to the holders of the Management Company's Class B interests.

For the years ended December 31, 2022, 2021 and 2020, the Company recognized revenue from management services of $ 31.0 million, $ 38.7 million and $ 26.9 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, 2022 and 2021, included in contract assets in the table above is $ 77.4 million and $ 74.3 million, respectively, attributed to Legacy and Non-Legacy Incentive Compensation revenue recognized but not yet due (see Note 3).

At December 31, 2021 and 2020, the Company had a receivable from the Great Park Venture of $ 2.9 million and $ 3.1 million, respectively, related to cost reimbursements under the A&R DMA.

The receivable amounts are included in other related party assets in the table above.

At December 31, 2021, the Company had a receivable from the Great Park Venture of $ 2.9 million related to cost reimbursements under the A&R DMA.

The receivable amount is included in other related party assets in the table above.

Operating Lease Right-of-Use Asset and Operating Lease Liability

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In 2018, the Company purchased an indirect interest in rights to certain Legacy Interests in the Great Park Venture through an equity method investment.

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

During the year ended December 31, 2021, the Company received a cash distribution of $ 1.0 million which was in excess of the carrying value of the interests resulting in a miscellaneous other—related party gain of $ 978 thousand.

During the year ended December 31, 2021, the Company received a cash distribution of $ 1.0 million which was in excess of the carrying value of the interest resulting in a miscellaneous other—related party gain of $ 978 thousand.

After receiving the distribution, the Company’s indirect Legacy Interest had no carrying value and has no additional distribution rights in the Great Park Venture.

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The weighted average interest rate as of December 31, 2022 was 4.5 %.

Throughout 2021, the Company was notified by CPHP or its affiliates that certain reimbursements that were previously expected to be paid in 2021 had been deferred to subsequent years.

Throughout 2022, the Company was notified by CPHP or its affiliates that certain reimbursements totaling $ 49.8 million that were previously expected to be paid in 2022 had been deferred to 2023.

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

Principal payments of $ 56.3 million, $ 0.6 million and $ 12.6 million are expected to be paid in 2022, 2023, and 2025, respectively, however, additional deferral notices may further extend the expected payment dates.

Principal payments of $ 50.4 million and $ 12.6 million are expected to be paid in 2023 and 2025, respectively, however, additional deferral notices may further extend the expected payment dates.

Employment Transition Agreement and Advisory Agreement with Emile Haddad

On August 23, 2021, the Company and the Company’s then Chairman, Chief Executive Officer and President, Emile Haddad, entered into an employment transition agreement and an advisory agreement pursuant to which, effective as of September 30, 2021 (the “Transition Date”), Mr.

Haddad stepped down from his roles as Chairman, Chief Executive Officer and President and transitioned to a senior advisor to the Company.

Haddad will remain a member of the Board of Directors, and as the Company’s founder, the Board elected him as Chairman Emeritus.

Under the terms of the employment transition agreement, Mr.

Haddad received his regular compensation through the Transition Date.

The employment transition agreement also provides that Mr.

Haddad will be paid a pro-rated 2021 annual cash bonus of $ 3.8 million for services he provided as an employee of the Company through September 30, 2021.

The bonus was paid in early 2022.

Additionally, Mr.

Haddad was granted 396,825 restricted share awards that vest in three equal amounts on January 15, 2022, January 15, 2023 and January 15, 2024, subject to his continued service to the Company as a senior advisor.

On August 23, 2021, the Company and the Company’s then Chairman, Chief Executive Officer and President, Emile Haddad, entered into an employment transition agreement pursuant to which, effective as of September 30, 2021, Mr.

Haddad stepped down from his roles as Chairman, Chief Executive Officer and President.

Haddad remained a member of the Company’s Board of Directors serving as Chairman Emeritus.

Concurrently, the Company also entered into an advisory agreement with Mr.

Haddad for an initial term of three years , which became effective on October 1, 2021.

Haddad will receive an annual retainer of $ 5.0 million, and his unvested equity awards will continue to vest in accordance with their terms, subject to continued service as an advisor or member of the Company’s Board of Directors.

Compensation expense attributed to the advisory agreement for the year ended December 31, 2022 is included in restructuring expense on the accompanying consolidated statement of operations.

All compensation expense to Mr.

Haddad for the year ended December 31, 2021 is included in selling, general and administrative expenses on the accompanying condensed consolidated statement of operations.

At December 31, 2021, included in other related party liabilities in the table above is the $ 3.8 million cash bonus due to Mr.

The advisory agreement has an initial term of three years .

Haddad will receive an annual retainer of $ 5.0 million, and his existing unvested equity awards will continue to vest in accordance with their terms, subject to continued service as an advisor and/or member of the Board.

In the event of an involuntary termination of the advisory agreement by the Company other than for cause, by Mr.

Haddad for good reason, following Mr.

Haddad’s death or disability, or upon a change in control of the Company, Mr.

Haddad will remain eligible to receive the remaining payments under the advisory agreement for its then-current term (or, in the case of death or disability, for a period of 12 months (but in no event beyond the then-current term)), and his equity awards will accelerate (or remain eligible to vest, in the case of his performance-based equity awards).

Haddad for the year ended December 31, 2021 is included in selling, general and administrative expenses on the accompanying consolidated statement of operations.

At December 31, 2022, included in accrued advisory fees in the table above is $ 8.4 million attributed to Mr.

Haddad’s advisory agreement (see Note 2).

Employment Transition Agreement and Advisory Agreement with Lynn Jochim

On February 9, 2022, the Company entered into an employment transition agreement with Lynn Jochim, the Company’s former President and Chief Operating Officer.

Pursuant to the agreement, Ms.

Jochim agreed to continue in her then current positions, at her then current compensation levels, until February 14, 2022.

Concurrently, the Company also entered into an advisory agreement with Ms.

Jochim for an initial term of three years , which became effective on February 15, 2022.

Pursuant to the advisory agreement, the Company agreed to pay Ms.

Jochim an annual retainer of $ 1.0 million.

Compensation expense attributed to the advisory agreement for the year ended December 31, 2022 is included in restructuring expense on the accompanying consolidated statement of operations.

At December 31, 2022, included in accrued advisory fees in the table above is $ 2.1 million attributed to Ms.

Jochim’s advisory agreement (see Note 2).

Valencia Purchase and Sale Agreements

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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 unaffiliated homebuilders will purchase lots from the Valencia Landbank Venture and construct and sell homes to the homebuying public.

In 2021, the Company entered into a purchase and sale agreement with an unaffiliated land banking entity for the sale of 328 homesites on approximately 26 acres.

Initial gross proceeds were $ 74.0 million, representing the base purchase price, and the Company also recognized $ 2.5 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 retained the option to acquire these homesites in the future from the unaffiliated land banking entity.

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

In 2021, the Company entered into a purchase and sale agreement with an unaffiliated land banking entity for the sale of 328 homesites on approximately 26 acres.

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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.

For the years ended December 31, 2021, 2020, and 2019, the Company recognized revenue from these management services of $ 0.4 million, $ 0.4 million and $ 0.3 million, respectively, which is included in management services—related party in the accompanying consolidated statements of operations.

In each of the years ended December 31, 2022, 2021, and 2020, the Company recognized revenue from these management services of $ 0.4 million, which is included in management services—related party in the accompanying consolidated statements of operations.

San Francisco Bay Area Development Management Agreements

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 and 2019, the Company recognized revenue from these management services of $ 0.8 million and $ 2.4 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.

For the year ended December 31, 2020, the Company recognized revenue from these management services of $ 0.8 million.

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

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

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.

NOTES PAYABLE, NET

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Interest on the Senior Notes is payable on May 15 and November 15 of each year.

Interest incurred, including amortization of debt issuance costs, on the Senior Notes during the years ended December 31, 2021, 2020 and 2019 totaled $ 50.8 million, $ 50.8 million, and $ 45.0 million, respectively.

Interest incurred, including amortization of debt issuance costs, on the Senior Notes during each of the years ended December 31, 2022, 2021 and 2020 totaled $ 50.8 million.

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

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Revolving Credit Facility

In April 2021, the Operating Company entered into the third amendment to its $ 125.0 million unsecured revolving credit facility which, among other things, (i) extended the maturity date of the revolving credit facility from April 2022 to April 2024, 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 and (ii) amended the revolving credit facility to include customary provisions to provide for the eventual replacement of LIBOR as a benchmark interest rate.

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

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.

As of December 31, 2021, no funds have been drawn on the revolving credit facility.

However, letters of credit of $ 0.3 million were issued and outstanding under the revolving credit facility, thus reducing the available capacity to $ 124.7 million.

The Operating Company has a $ 125.0 million unsecured revolving credit facility with a maturity date in April 2024, 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.

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

The revolving credit facility includes 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.

As of December 31, 2022, no borrowings or letters of credit were outstanding on the revolving credit facility.

TAX RECEIVABLE AGREEMENT

The Company is a party to a TRA with all of the holders of Class A Common Units of the Operating Company, all the holders of Class A units of the San Francisco Venture, and prior holders of Class A Common Units of the Operating Company and prior holders of Class A units of the San Francisco Venture that have exchanged their holdings for Class A common shares (as parties

to the TRA, the “TRA Parties”).

The TRA provides for payment by the Company to the TRA Parties or their successors of 85 % of the amount of cash savings, if any, in income tax the Company realizes as a result of:

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(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.

At December 31, 2021 and 2020, the Company’s consolidated balance sheets include liabilities of $ 174.1 million and $ 173.2 million, respectively, for payments expected to be made under certain components of the TRA which the Company deems to be probable and estimable.

At December 31, 2022 and 2021, the Company’s consolidated balance sheets included liabilities of $ 173.1 million and $ 174.1 million, respectively, for payments expected to be made under certain components of the TRA which the Company deems to be probable and estimable.

Management deems a TRA payment related to the benefits expected to be received by the Company under the application of Section 704(c) of the Code to be probable and estimable when an event occurs that results in the Company measuring the Operating Company’s direct or indirectly held property at fair value in the Company’s consolidated balance sheet or the sale of such property at fair value.

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As of December 31, 2022, all leasing arrangements are classified as operating leases and do not contain residual value guarantees or material restrictions.

The Company’s office leases have remaining lease terms of approximately two years to seven 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’s office leases have remaining lease terms of approximately one year to six 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.

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As of December 31, 2022, the remaining estimated maximum potential amount of monetary payments subject to the guaranty was $ 10.3 million with the final payment due in 2026.

Water Purchase Agreement

Valencia Water Purchase Agreement

The Company is subject to a water purchase agreement requiring annual payments in exchange for the delivery of water for the Company’s exclusive use.

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Letters of Credit

At both December 31, 2021 and 2020, the Company had outstanding letters of credit totaling $ 1.3 million.

At December 31, 2022 and 2021, the Company had outstanding letters of credit totaling $ 1.0 million and $ 1.3 million, respectively.

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

At both December 31, 2021 and 2020, the Company had restricted cash and certificates of deposit of $ 1.0 million pledged as collateral under certain of the letters of credit agreements.

At both December 31, 2022 and 2021, the Company had restricted cash and certificates of deposit of $ 1.0 million pledged as collateral under the letters of credit agreements.

Legal Proceedings

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and Tetra Tech EC, Inc., an independent contractor hired by the U.S.

Navy to conduct testing and remediation of toxic radiological waste at The San Francisco Shipyard (“Tetra Tech”), Lennar and the Company as defendants.

Navy to conduct testing and remediation of toxic radiological waste at The San Francisco Shipyard (“Tetra Tech”), Lennar and the Company as defendants (the “Bayview Action”) .

The plaintiffs allege that, among other things, Tetra Tech fraudulently misrepresented its test results and remediation efforts.

The plaintiffs are seeking damages against Tetra Tech and the Company and have requested an injunction to prevent the Company and Lennar from undertaking any development activities at The San Francisco Shipyard.

Since July 2018, a number of lawsuits have been filed in San Francisco Superior Court on behalf of homeowners in The San Francisco Shipyard, which name Tetra Tech, Lennar and the Company, among others, as defendants.

Given the preliminary nature of the claims, the Company cannot predict the outcome of the Bayview Action.

The Company believes that it has meritorious defenses to the allegations in the Bayview Action and may have insurance and indemnification rights against third parties with respect to the claims.

The plaintiffs allege that environmental contamination issues at The San Francisco Shipyard were not properly disclosed to them before they purchased their homes.

They also allege that Tetra Tech and other defendants (not including the Company) have created a nuisance at The San Francisco Shipyard under California law.

They seek damages as well as certain declaratory relief.

All of these cases have been removed to the U.S.

District Court for the Northern District of California.

The Company believes that it has meritorious defenses to the allegations in all of these cases and may have insurance and indemnification rights against third parties, including related parties, with respect to these claims.

Given the preliminary nature of these claims, the Company cannot predict the outcome of these matters.

In March 2022, the District Court approved the terms of a settlement of the Homeowners Action, including the payment of $ 6.3 million in damages to be paid out of insurance proceeds under a joint

insurance policy held by the Company and Lennar, as well as a dismissal with prejudice to be entered on behalf of the Company.

The settlement amount has been funded by the insurance policy, and the Company has been dismissed from the Homeowners Action.

Other than the actions outlined above, the Company is also a party to various other claims, legal actions, and complaints arising in the ordinary course of business, the disposition of which, in the Company’s opinion, will not have a material adverse effect on the Company’s consolidated financial statements.

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Cash paid for interest, all of which was capitalized to inventories $ 52,295 $ 52,584 $ 53,325

Noncash lease expense $ 4,632 $ 4,421 $ 4,254

NONCASH INVESTING AND FINANCING ACTIVITIES:

Class A common shares issued for redemption of noncontrolling interests

$ — $ — $ 458

Purchase of properties and equipment in accounts payable and other liabilities

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Adjustment to liability recognized under TRA $ ( 1,058 ) $ 878 $ 615

Noncash lease expense is included within the depreciation and amortization adjustment to net (loss) income on the Company’s consolidated statements of cash flows.

Supplemental cash flow information related to leases for the years ended December 31, 2022, 2021 and 2020 is as follows (in thousands):

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The Company’s reportable segments consist of:

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

• Valencia—includes the community of Valencia 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.

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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, 2021, the Company had a 37.5 % Percentage Interest in the Great Park Venture and accounted for the investment under the equity method.

December 31, 2022, the Company had a 37.5 % Percentage Interest in the Great Park Venture and accounted for the investment under the equity method.

The reported segment information for the Great Park segment includes the results of 100% of the Great Park Venture at the historical basis of the venture, which did not apply push down accounting at acquisition date.

The Great Park segment derives revenues at the Great Park Neighborhoods from sales of residential and

commercial land sites to homebuilders, commercial developers and commercial buyers, sales of homes constructed and marketed under a fee build arrangement, and management services provided by the Company to the Great Park Venture.

The Great Park segment derives revenues at the Great Park Neighborhoods from sales of residential and commercial land sites to homebuilders, commercial developers and commercial buyers, sales of homes constructed and marketed under a fee build arrangement, and management services provided by the Company to the Great Park Venture.

• Commercial—includes the operations of the Gateway Commercial Venture, which owns an approximately 189,000 square foot office building at the Five Point Gateway Campus.

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(2) Represents intersegment balances that eliminate in consolidation.

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

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

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, 2021, Valencia’s net expenditures include $ 4.5 million in inventory cost reimbursements received.

For the years ended December 31, 2021 and 2020, San Francisco’s net expenditures include $ 0.7 million and $ 2.2 million, respectively, and Great Park Venture’s net expenditures include $ 52.1 million and $ 9.3 million, respectively, in inventory cost reimbursements received.

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

For the years ended December 31, 2022 and 2021, Valencia’s net expenditures include $ 34.8 million and $ 4.5 million, respectively, in inventory cost reimbursements and recoveries received.

For the years ended December 31, 2022, 2021 and 2020, San Francisco’s net expenditures include $ 3.3 million, $ 0.7 million and $ 2.2 million, respectively, and Great Park Venture’s net expenditures include $ 43.7 million, $ 52.1 million and $ 9.3 million, respectively, in inventory cost reimbursements and recoveries received.

A related party of the Company represented one of the Company’s major customers during the year ended December 31, 2022, accounting for approximately $ 7.5 million, or 18 %, of total consolidated revenues.

Revenues generated from this customer primarily consisted of variable land sale consideration from profit participation in Valencia.

The Valencia Landbank Venture represented one of the Company’s major customers during the years ended December 31, 2021 and 2020, accounting for approximately $ 43.2 million, or 19 %, and $ 53.2 million, or 35 %, of total consolidated revenues, respectively.

2 unchanged sentences

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

An unaffiliated land banking entity that acquired homesites in Valencia in 2021 and 2019 represented one of the Company’s major customers during the years ended December 31, 2021 and 2019 and accounted for approximately $ 76.5 million, or 34 %, and $ 139.9 million, or 76 %, of total consolidated revenues, respectively.

An unaffiliated land banking entity that acquired homesites in Valencia in 2021 represented one of the Company’s major customers during the year ended December 31, 2021 and accounted for approximately $ 76.5 million, or 34 % 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.

7 unchanged sentences

Under the incentive award plan, the Company has granted restricted share units (“RSUs”) and restricted share awards either fully vested, with service conditions or with service and market performance conditions based on the market price of the Company’s Class A common shares.

Awards with a service condition generally vest over a three-year period or in the case of non-employee directors over one year .

Awards with a service condition generally vest over a two-year or three-year period or in the case of non-employee directors over one year .

Awards with a service and market performance condition generally vest at the end of a three-year period.

20 unchanged sentences

Nonvested at December 31, 2022 2,166 $ 3.77

On January 15, 2022, 644,734 restricted share awards with a service and market condition included in the table above were forfeited for no consideration as the threshold levels had not been attained.

The shares had a grant date fair value of $ 1.47 .

Share-based compensation expense was $ 6.2 million, $ 7.9 million and $ 11.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Share-based compensation expense is included in selling, general, and administrative expenses in the accompanying consolidated statements of operations.

In February 2022, the Company accelerated the expense attributed to the outstanding restricted share awards of two former officers of the Company resulting from a modification of the required service condition of the awards (see Note 2).

As a result, for the year ended December 31, 2022, share-based compensation expense of $ 3.0 million is included in restructuring expense and $ 3.2 million is included in selling, general, and administrative expenses on the accompanying consolidated statement of operations.

All share-based compensation for the years ended December 31, 2021 and 2020 is included in selling, general, and administrative expenses on the accompanying consolidated statements of operations.

Approximately $ 3.0 million of total unrecognized compensation cost related to non-vested awards is expected to be recognized over a weighted-average period of 1.7 years from December 31, 2022.

8 unchanged sentences

Benefits paid ( 1,126 ) ( 2,029 )

Actuarial (gain) loss ( 242 ) 1,788

Actuarial gain ( 2,791 ) ( 242 )

Projected benefit obligation—end of year $ 17,240 $ 20,613

1 unchanged sentence

Fair value of plan assets—beginning of year $ 20,463 $ 20,507

Actual gain on plan assets 1,985 2,565

Actual (loss) gain on plan assets ( 3,676 ) 1,985

Employer contributions — —

13 unchanged sentences

Adjustment to accumulated other comprehensive loss:

Net actuarial (gain) loss ( 1,067 ) 332 ( 917 )

Net actuarial loss (gain) 1,929 ( 1,067 ) 332

Amortization of net actuarial loss ( 255 ) ( 359 ) ( 97 )

1 unchanged sentence

Total recognized in net periodic benefit and accumulated other comprehensive loss $ 1,429 $ ( 1,716 ) $ ( 121 )

$ ( 1,716 ) $ ( 121 ) $ ( 1,095 )

The weighted-average assumptions used to determine benefit obligations as of December 31, 2022 and 2021 were as follows:

40 unchanged sentences

2022 2021 2020

Current income tax benefit (expense):

Current income tax (expense) benefit:

$ ( 14 ) $ ( 17 ) $ ( 24 )

( 7 ) 762 ( 770 )

Total current income tax benefit (expense) 745 ( 794 ) —

Deferred income tax (expense) benefit:

Total current income tax (expense) benefit ( 21 ) 745 ( 794 )

Deferred income tax benefit (expense):

$ 2,574 $ ( 2,655 ) $ ( 379 )

1,188 ( 1,977 ) 530

Total deferred income tax (expense) benefit ( 4,632 ) 151 ( 5,482 )

Decrease (increase) in valuation allowance 4,243 ( 1,101 ) 3,062

Total deferred income tax benefit (expense) 3,762 ( 4,632 ) 151

(Increase) decrease in valuation allowance ( 2,204 ) 4,243 ( 1,101 )

Expiration of unused loss carryforwards ( 66 ) ( 31 ) —

65 unchanged sentences

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 (loss) per share calculations for the years ended December 31, 2021, 2020 and 2019 (in thousands, except shares and per share amounts):

The following table summarizes the basic and diluted (loss) earnings per share calculations for the years ended December 31, 2022, 2021 and 2020 (in thousands, except shares and per share amounts):

2022 2021 2020

Net income (loss) attributable to the Company $ 6,568 $ ( 428 ) $ 9,033

Adjustments to net income (loss) attributable to the Company ( 176 ) 20 50

Net income (loss) attributable to common shareholders $ 6,392 $ ( 408 ) $ 9,083

Net (loss) income attributable to the Company $ ( 15,403 ) $ 6,568 $ ( 428 )

Adjustments to net (loss) income attributable to the Company 85 ( 176 ) 20

Net (loss) income attributable to common shareholders $ ( 15,318 ) $ 6,392 $ ( 408 )

Numerator — basic common shares:

Net income (loss) attributable to common shareholders $ 6,392 $ ( 408 ) $ 9,083

Net (loss) income attributable to common shareholders $ ( 15,318 ) $ 6,392 $ ( 408 )

net income allocated to participating securities $ — $ 164 $ —

Allocation of basic net income (loss) among common shareholders $ 6,228 $ ( 408 ) $ 8,693

Numerator for basic net income (loss) available to Class A common shareholders $ 6,226 $ ( 408 ) $ 8,690

Numerator for basic net income (loss) available to Class B common shareholders $ 2 $ — $ 3

Allocation of basic net (loss) income among common shareholders $ ( 15,318 ) $ 6,228 $ ( 408 )

Numerator for basic net (loss) income available to Class A common shareholders $ ( 15,313 ) $ 6,226 $ ( 408 )

Numerator for basic net (loss) income available to Class B common shareholders $ ( 5 ) $ 2 $ —

Numerator — diluted common shares:

Net income (loss) attributable to common shareholders $ 6,392 $ ( 408 ) $ 9,083

Reallocation of income (loss) upon assumed exchange of dilutive potential securities $ 6,645 $ ( 16 ) $ 9,501

Net (loss) income attributable to common shareholders $ ( 15,318 ) $ 6,392 $ ( 408 )

Reallocation of (loss) income upon assumed exchange of dilutive potential securities $ ( 252 ) $ 6,645 $ ( 16 )

net income allocated to participating securities $ — $ 159 $ —

Allocation of diluted net income (loss) among common shareholders $ 12,878 $ ( 424 ) $ 18,212

Numerator for diluted net income (loss) available to Class A common shareholders $ 12,876 $ ( 424 ) $ 18,209

Numerator for diluted net income (loss) available to Class B common shareholders $ 2 $ — $ 3

Allocation of diluted net (loss) income among common shareholders $ ( 15,570 ) $ 12,878 $ ( 424 )

Numerator for diluted net (loss) income available to Class A common shareholders $ ( 15,565 ) $ 12,876 $ ( 424 )

Numerator for diluted net (loss) income available to Class B common shareholders $ ( 5 ) $ 2 $ —

Basic weighted average Class A common shares outstanding 68,429,271 67,394,794 66,722,187

1 unchanged sentence

Basic and diluted weighted average Class B common shares outstanding 79,233,544 79,233,544 79,233,544

Basic earnings (loss) per share:

Basic (loss) earnings per share:

Class A common shares

2 unchanged sentences

$ ( 0.00 ) $ 0.00 $ ( 0.00 )

Diluted earnings (loss) per share:

Diluted (loss) earnings per share:

Class A common shares

7 unchanged sentences

Anti-dilutive potential Performance Restricted Shares (weighted average)

24,730 — 695,154

Anti-dilutive potential Class A common shares from exchanges (weighted average) 76,120,180 3,160,904 76,120,180

4 unchanged sentences

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 income (loss) attributable to the Company related to amortization of net actuarial losses were approximately $ 225,000 , $ 61,000 and $ 89,000 , net of taxes, and are included in miscellaneous other income on the accompanying consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019, respectively.

Reclassifications from accumulated other comprehensive loss to net (loss) income attributable to the Company related to amortization of net actuarial losses were approximately $ 160,000 , $ 225,000 and $ 61,000 , net of taxes, and are included in miscellaneous other income on the accompanying consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020, 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