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Item 8. Financial Statements and Supplementary Data

2024-03-04 compared with 2023-03-06 · 173 added, 197 removed, 1041 unchanged (26% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Five Point Holdings, LLC and subsidiaries (the "Company") as of December 31, 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").

We have audited the accompanying consolidated balance sheets of Five Point Holdings, LLC and subsidiaries (the “Company”) as of December 31, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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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.

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 income (loss) in the period it is identified as incurred.

For the year ended December 31, 2023, 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.

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 revenues, and development cost estimates 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 Company’s evaluation of indicators of impairment and significant input assumptions, including the discount rate, residential revenues, and development cost estimates by (1) evaluating the source information used by management, (2) independently obtaining and evaluating market data, (3) performing retrospective reviews, and (4) engaging our internal fair value specialists.

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

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$ 2,969,288 $ 2,885,784

$ 2,885,784 $ 2,942,910

LIABILITIES AND CAPITAL

6 unchanged sentences

Deferred income tax liability, net

11,506 12,998

Payable pursuant to tax receivable agreement

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185,483 101,523 221,411

OTHER INCOME:

OTHER INCOME (EXPENSE):

Interest income

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EQUITY IN EARNINGS FROM UNCONSOLIDATED ENTITIES 76,595 21,513 6,188

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

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

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

INCOME (LOSS) BEFORE INCOME TAX BENEFIT 109,298 ( 36,245 ) 12,985

INCOME TAX BENEFIT 4,418 1,471 325

NET INCOME (LOSS) 113,716 ( 34,774 ) 13,310

LESS NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 58,322 ( 19,371 ) 6,742

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY $ 55,394 $ ( 15,403 ) $ 6,568

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

$ 0.80 $ ( 0.22 ) $ 0.09

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145,131,125 68,430,212 143,491,204

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

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

Basic and diluted

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FIVE POINT HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

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2023 2022 2021

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 )

NET INCOME (LOSS) $ 113,716 $ ( 34,774 ) $ 13,310

OTHER COMPREHENSIVE INCOME (LOSS):

Net actuarial gain (loss) on defined benefit pension plan 889 ( 1,929 ) 1,067

Reclassification of actuarial loss on defined benefit pension plan included in net income (loss) 162 255 359

Other comprehensive income (loss) before taxes 1,051 ( 1,674 ) 1,426

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

OTHER COMPREHENSIVE INCOME (LOSS)—Net of tax 1,051 ( 1,674 ) 1,426

COMPREHENSIVE INCOME (LOSS) 114,767 ( 36,448 ) 14,736

LESS COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 58,715 ( 19,998 ) 7,271

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY $ 56,052 $ ( 16,450 ) $ 7,465

See accompanying notes to consolidated financial statements.

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BALANCE - January 1, 2021 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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BALANCE - December 31, 2022 69,068,354 79,233,544 $ 587,733 $ 33,386 $ ( 2,988 ) $ 618,131 $ 1,249,916 $ 1,868,047

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

Net income — — — 55,394 — 55,394 58,322 113,716

Share-based compensation expense — — 3,665 — — 3,665 — 3,665

Reacquisition of share-based compensation awards for tax-withholding purposes ( 83,660 ) — ( 202 ) — — ( 202 ) — ( 202 )

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

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

Issuance of share-based compensation awards, net of forfeitures 215,244 — — — — — — —

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

— — — — 658 658 393 1,051

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CASH FLOWS FROM OPERATING ACTIVITIES:

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

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

Net income (loss) $ 113,716 $ ( 34,774 ) $ 13,310

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

Equity in earnings from unconsolidated entities ( 76,595 ) ( 21,513 ) ( 6,188 )

Return on investment from Great Park Venture 78,200 — —

Return on investment from Gateway Commercial Venture — 352 —

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( 10,730 ) 3,714 2,184

Net cash used in operating activities

( 188,302 ) ( 81,420 ) ( 78,499 )

Net cash provided by (used in) operating activities 154,123 ( 188,302 ) ( 81,420 )

CASH FLOWS FROM INVESTING ACTIVITIES:

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Payment of financing costs

( 687 ) — ( 686 )

Related party reimbursement obligation

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Net cash used in financing activities ( 9,204 ) ( 9,717 ) ( 26,577 )

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

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH 222,030 ( 134,029 ) ( 32,682 )

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

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

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

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

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

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

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

No other-than-temporary impairments were identified during the years ended December 31, 2023, 2022 or 2021.

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

At December 31, 2022 and 2021, there was no material allowance for credit loss.

At December 31, 2023 and 2022, there was no material allowance for credit losses.

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

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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):

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

Year Ended December 31,

2023 2022 2021

Net periodic pension benefit $ 245 $ 290 $ 356

Other — 1,382 —

Net periodic pension (cost) benefit $ ( 82 ) $ 245 $ 290

( 694 ) — 1,382

Other—related party — — 2,048

Total miscellaneous other income $ 245 $ 3,720 $ 356

Recently adopted accounting pronouncements —Although there have been several new accounting pronouncements recently issued by the Financial Accounting Standards Board that the Company has adopted or will adopt, the Company does not believe any of these accounting pronouncements had or will have a material impact on the Company’s consolidated financial statements or disclosures.

Total miscellaneous other (expense) income $ ( 776 ) $ 245 $ 3,720

(1) In December 2023, the Company initiated an exchange offer on its $ 625.0 million 7.875 % Senior Notes that was settled in January 2024 (see Note 10).

For the year ended December 31, 2023, the Company incurred $ 1.8 million in third party costs related to the debt modification, which is included in other in the table above.

Recently issued accounting pronouncements —In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment

Disclosures , which primarily requires expanded disclosure of significant segment expenses and other segment items on an annual and interim basis.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The standard will be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the effect of this update on the Company’s financial statements disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which primarily requires expanded disclosures for income taxes paid and the effective tax rate reconciliation.

The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis.

The Company is currently evaluating the effect of this update on the Company’s financial statements disclosures.

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

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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.

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.

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.

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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 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 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 other receivables from contracts with customers and contract liabilities for the years ended December 31, 2023 and 2022 were insignificant.

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Great Park Venture

The Great Park Venture has two classes of interests—“Percentage Interests” and “Legacy Interests.” The Operating Company owned 37.5 % of the Great Park Venture’s Percentage Interests as of December 31, 2022.

The Great Park Venture has two classes of membership interests—“Percentage Interests” and “Legacy Interests.” The Operating Company owned 37.5 % of the Great Park Venture’s Percentage Interests as of December 31, 2023.

Legacy Interest holders were entitled to receive priority distributions in an aggregate amount equal to $ 476.0 million and up to an additional $ 89.0 million from participation in subsequent distributions of cash depending on the performance of the Great Park Venture.

The holders of the Percentage Interests will receive all other distributions.

During the year ended December 31, 2023, the Great Park Venture made aggregate distributions of $ 48.2 million to holders of Legacy Interests and $ 411.2 million to holders of Percentage Interests.

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The Company received $ 52.7 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, 2023 were $ 18.1 million, which will be paid to Legacy Interest holders pro-rata with payments to Percentage Interest holders.

Approximately 10 % of future distributions will be paid to the Legacy Interest holders until such time as the remaining balance has been fully paid.

The holders of the Percentage Interests will receive all other distributions.

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

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

During the year ended December 31, 2023, the Great Park Venture recognized $ 16.2 million in land sale revenues to related parties of the Company and $ 538.6 million in land sale revenues to third parties, of which $ 357.8 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.

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.

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”).

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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, 2023, 2022 and 2021 (in thousands):

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( 66,906 ) ( 69,539 ) ( 57,540 )

Net income (loss) of Great Park Venture $ 68,954 $ 56,918 $ ( 29,406 )

The Company’s share of net income (loss) $ 25,858 $ 21,344 $ ( 11,027 )

Basis difference amortization

( 5,414 ) ( 14,912 ) ( 2,073 )

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

Equity in earnings (loss) from Great Park Venture $ 20,444 $ 6,432 $ ( 39,951 )

Net income of Great Park Venture $ 250,610 $ 68,954 $ 56,918

The Company’s share of net income $ 93,979 $ 25,858 $ 21,344

Basis difference amortization, net ( 15,032 ) ( 5,414 ) ( 14,912 )

Equity in earnings from Great Park Venture $ 78,947 $ 20,444 $ 6,432

The following table summarizes the balance sheet data of the Great Park Venture and the Company’s investment balance as of December 31, 2023 and 2022 (in thousands):

2 unchanged sentences

61,054 149,326

Receivable and other assets

43,955 32,550

Contract assets, receivables and other assets, net 166,793 43,955

$ 619,199 $ 799,174

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During the years ended December 31, 2023, 2022 and 2021, the Great Park Venture did not recognize any impairment losses on its long-lived assets.

In March 2020, the Company determined that an other-than-temporary impairment existed for the Company’s investment in the Great Park Venture and recognized a $ 26.9 million impairment charge that is included in equity in earnings from unconsolidated entities on the consolidated statement of operations during the year ended December 31, 2020.

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

Unobservable inputs Range

Annual home price appreciation 0 % - 7 %

Annual horizontal development cost appreciation 0 % - 3 %

Average annual absorption of homesites (market rate homesites) 900

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

Unlevered discount rate 9 %

Gateway Commercial Venture

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The Five Point Gateway Campus consists of four buildings totaling approximately one million square feet.

Prior to May 2020, the Gateway Commercial Venture owned and operated all four buildings.

In August 2020, the Gateway Commercial Venture closed on the sale of two buildings at the Five Point Gateway Campus, comprising a total of approximately 660,000 square feet of research and development space for a purchase price of $ 355.0 million.

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

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

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

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

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

The Company and a subsidiary of Lennar Corporation separately lease portions of the fourth building, which remains under the ownership of the Gateway Commercial Venture, and during the years ended December 31, 2022, 2021 and 2020, the Gateway Commercial Venture recognized $ 8.4 million, $ 8.5 million and $ 8.4 million, respectively, in rental revenues from those leasing arrangements.

The Company and a subsidiary of Lennar Corporation separately lease portions of the building under the ownership of the Gateway Commercial Venture, and during the years ended December 31, 2023, 2022 and 2021, the Gateway Commercial Venture recognized $ 8.5 million, $ 8.4 million and $ 8.5 million, respectively, in rental revenues from those leasing arrangements.

The following table summarizes the statements of operations of the Gateway Commercial Venture for the years ended December 31, 2023, 2022 and 2021 (in thousands):

3 unchanged sentences

Depreciation and amortization ( 4,015 ) ( 3,960 ) ( 3,938 )

Gain on asset sales, net — — 112,260

Interest expense ( 2,531 ) ( 1,541 ) ( 1,235 )

3 unchanged sentences

Real estate and related intangible assets, net $ 76,719 $ 82,797

Cash 4,244 13,279

Cash and restricted cash 5,574 4,244

Other assets 3,554 4,588

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The Company’s investment in the Gateway Commercial Venture $ 37,781 $ 40,695

In August 2023, the Gateway Commercial Venture refinanced its mortgage note, extending the maturity date to August 2025.

As a condition of the refinancing, the Company is subject to certain guaranties of the Gateway Commercial Venture's mortgage note, including an interest and carry guaranty along with a springing guaranty of 50 % of the outstanding balance in the event the Gateway Commercial Venture's leases with either the Company or the affiliate of Lennar are no longer in effect and the Gateway Commercial Venture is unable to meet certain financial covenants.

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.

Valencia Landbank Venture

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The Company does not have a controlling financial interest in the Valencia Landbank Venture, however, the Company has the ability to significantly influence the Valencia Landbank Venture’s operating and financial policies, and most major decisions require the Company’s approval in addition to the approval of the Valencia Landbank Venture’s other unaffiliated member, and therefore the Company accounts for its investment in the Valencia Landbank Venture using the equity method.

During the years ended December 31, 2021 and 2020, the Valencia Landbank Venture took assignment of certain purchase and sale agreements and purchased land from the Company for $ 42.0 million and $ 51.6 million, respectively, (see Note 9) while concurrently entering into option and development agreements with third-party homebuilders.

During the year ended December 31, 2021, the Valencia Landbank Venture took assignment of certain purchase and sale agreements and purchased land from the Company for $ 42.0 million (see Note 9) while concurrently entering into option and development agreements with third-party homebuilders.

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

At December 31, 2023 and 2022, the Company’s investment in the Valencia Landbank Venture was $ 1.2 million and $ 1.9 million, 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.

During the years ended December 31, 2023 and 2022, the Company recognized equity in earnings of $ 0.6 million and $ 1.2 million, respectively, from the Valencia Landbank Venture, and during the year ended December 31, 2021, the Company recognized equity in loss of $ 0.9 million.

NONCONTROLLING INTERESTS

1 unchanged sentence

The Holding Company’s wholly owned subsidiary is the managing general partner of the Operating Company, and at December 31, 2023, the Holding Company and its wholly owned subsidiary owned approximately 62.6 % 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 37.5 % 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”).

The Holding Company consolidates the financial results of the Operating Company and its subsidiaries and records a noncontrolling interest for the remaining 37.4 % 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, 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.

During the years ended December 31, 2023, 2022 and 2021, 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.

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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Total tax distributions $ 4,033 $ 435 $ 4,429

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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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.

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 community 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.

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

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

In addition, the San Francisco Venture is only

allowed to make a capital call on the Operating Company and not any other interest holders, which could be a significant financial risk to the Operating Company.

As of December 31, 2023, the San Francisco Venture had total combined assets of $ 1.36 billion, primarily comprised of $ 1.36 billion of inventories and $ 0.9 million in related party assets, and total combined liabilities of $ 61.9 million, including $ 59.4 million in related party liabilities.

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For the years ended December 31, 2023, 2022 and 2021, the Company recognized revenue from management services of $ 47.2 million, $ 31.0 million and $ 38.7 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, 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.

At December 31, 2023 and 2022, included in contract assets in the table above is $ 66.1 million and $ 77.4 million, respectively, attributed to incentive compensation revenue recognized but not yet due (see Note 3).

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

The Company leases corporate office space in the building owned by the Gateway Commercial Venture at the Five Point Gateway Campus (See Note 12).

The Company leases corporate office space in the building owned by the Gateway Commercial Venture, the Company’s equity method investee, at the Five Point Gateway Campus (See Note 12).

Indirect Legacy Interest in Great Park Venture

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The San Francisco Venture has entered into reimbursement agreements for which it has agreed to reimburse CPHP or its subsidiaries for a portion of the EB-5 loan liabilities and related interest that were assumed by CPHP or its subsidiaries pursuant to the Separation Agreement.

At December 31, 2022 and 2021, the balance of the reimbursement obligation to CPHP or its subsidiaries was $ 63.0 million and $ 69.5 million, respectively.

Interest paid monthly totaled $ 3.0 million, $ 3.4 million and $ 4.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Interest totaled $ 2.7 million, $ 3.0 million and $ 3.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

All of the incurred interest for the years ended December 31, 2023, 2022 and 2021 was capitalized into inventories.

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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 consolidated statement of operations.

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

At December 31, 2023 and 2022, included in accrued advisory fees in the table above is $ 3.6 million and $ 8.4 million, respectively, attributed to Mr.

Haddad’s advisory agreement (see Note 2).

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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.

At December 31, 2023 and 2022, included in accrued advisory fees in the table above is $ 1.1 million and $ 2.1 million, respectively, attributed to Ms.

Jochim’s advisory agreement (see Note 2).

Valencia Purchase and Sale Agreements

In 2021, the Company sold 123 homesites on approximately 13 acres to the Valencia Landbank Venture (see Note 4).

In 2023, the Company entered into a purchase and sale agreement with an unaffiliated land banking entity for the sale of 583 homesites on approximately 46 acres at the Company’s Valencia community.

Initial gross proceeds were $ 101.8 million, representing the base purchase price.

The Company also recognized $ 1.2 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.

In 2020, the Company sold 210 homesites on approximately 26 acres to the Valencia Landbank Venture.

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

In 2021, the Company sold 123 homesites on approximately 13 acres at the Company’s Valencia community to the Valencia Landbank Venture (see Note 4).

Initial gross proceeds were $ 42.0 million, representing the base purchase price.

The Company also recognized $ 1.2 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.

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.

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 at the Company’s Valencia community.

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.

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In each of the years ended December 31, 2023, 2022, and 2021, 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 year ended December 31, 2020, the Company recognized revenue from these management services of $ 0.8 million.

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 statement of operations.

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

NOTES PAYABLE, NET

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$ 622,186 $ 620,651

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

Proceeds from the offering, after underwriting fees and offering expenses were $ 490.7 million.

In July 2019, the Issuers offered, sold and issued $ 125.0 million aggregate principal amount of 7.875 % unsecured senior notes as a further issuance of the Original Notes (the “Add-On Notes”).

The terms of the Add-On Notes are identical to the Original Notes (the Add-On Notes and, together with the Original Notes, the “Senior Notes”).

The Add-On Notes were issued at par plus pre-issuance interest that had accrued from May 15, 2019 to the issuance date.

Proceeds from the offering of the Add-On Notes, after underwriting fees and offering expenses and excluding pre-issuance accrued interest was $ 122.8 million.

The Operating Company and Five Point Capital Corp., a directly wholly owned subsidiary of the Operating Company (the “Co-Issuer” and, together with the Operating Company, the “Issuers”), previously offered, sold and issued $ 625.0 million aggregate principal amount of 7.875 % unsecured senior notes due November 15, 2025 (the “Senior Notes”).

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

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

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

On January 16, 2024, the Issuers settled an exchange offer to exchange any and all of their $ 625.0 million 7.875 % Senior Notes for new 10.500 % initial rate senior notes due January 15, 2028 (the “New Senior Notes”).

Pursuant to the exchange offer, the Issuers exchanged $ 623.5 million aggregate principal amount of Senior Notes, which represented 99.76 % of the existing Senior Notes outstanding immediately prior to the exchange offer, for $ 523.5 million aggregate principal amount of New Senior Notes and $ 100.0 million of aggregate cash consideration, plus accrued interest.

The New Senior Notes accrue interest at a rate of 10.500 % per annum from and including January 16, 2024 to, but not including, November 15, 2025, 11.000 % per annum from and including November 15, 2025 to, but not including, November 15, 2026, and 12.000 % per annum from and including November 15, 2026 to, but not including, January 15, 2028.

Interest on the New Senior Notes is payable semi-annually on each May 15 and November 15, commencing May 15, 2024.

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

Revolving Credit Facility

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.

The Operating Company has a $ 125.0 million unsecured revolving credit facility that matures in April 2026.

Any borrowings under the revolving credit agreement will bear interest at CME Term Secured Overnight Financing Rate 1 Month increased by 0.10 % plus a margin of either 2.25 % or 2.50 % based on the Company's leverage ratio.

The revolving credit facility may be further extended to April 2027, subject to the satisfaction of certain conditions, including the approval of the administrative agent and lenders.

As of December 31, 2023, no borrowings or letters of credit were outstanding on the revolving credit facility.

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As of December 31, 2023, 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 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’s office leases have remaining lease terms of approximately five years 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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In January 2012, the Company entered into an agreement with Los Angeles County, in which the Company would finance up to a maximum of $ 45.8 million for the construction costs of an interchange project that Los Angeles County is managing.

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

As of December 31, 2022, the Company has made aggregate payments of $ 37.0 million and the interchange project was completed in 2019.

The interchange project was completed in 2019 and is a critical infrastructure project that benefits Valencia.

As of December 31, 2023, the Company has made aggregate payments of $ 37.0 million.

At both December 31, 2023 and 2022, the Company had $ 8.9 million included in accounts payable and other liabilities in the accompanying consolidated balance sheets, representing unreimbursed construction costs payable to Los Angeles County.

Performance and Completion Bonding Agreements

In the ordinary course of business and as a part of the entitlement and development process, the Company is required to provide performance bonds to ensure completion of certain development obligations.

In the ordinary course of business and as a part of the entitlement and development process, the Company is required to provide performance bonds to ensure completion of certain of the Company’s development obligations.

The Company had outstanding performance bonds of $ 306.9 million and $ 315.0 million as of December 31, 2023 and 2022, respectively.

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Letters of Credit

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

At both December 31, 2023 and 2022, the Company had outstanding letters of credit totaling $ 1.0 million.

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

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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.

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 (the “Homeowners Action”) .

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.

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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NONCASH INVESTING AND FINANCING ACTIVITIES:

Purchase of properties and equipment in accounts payable and other liabilities

$ — $ — $ 103

Adjustment to operating lease right-of-use assets from lease modification, net $ 982 $ — $ —

Accrued financing costs $ 117 $ — $ —

Adjustment to liability recognized under TRA $ 140 $ ( 1,058 ) $ 878

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

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

Supplemental cash flow information related to leases for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands):

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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.

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.

As of December 31, 2023, 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.

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The Company and a subsidiary of Lennar lease portions of the building owned by the Gateway Commercial Venture.

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

The Gateway Commercial Venture also owns approximately 50 acres of the surrounding commercial land with additional

development rights at the campus.

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

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(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.

For the years ended December 31, 2023, 2022 and 2021, Valencia’s net expenditures include $ 64.1 million, $ 34.8 million and $ 4.5 million, respectively, San Francisco’s net expenditures include $ 1.1 million, $ 3.3 million and $ 0.7 million, respectively, and Great Park Venture’s net expenditures include $ 89.6 million, $ 43.7 million and $ 52.1 million, respectively, in inventory cost reimbursements and recoveries received.

Two third-party home builders represented major customers of the Company during the year ended December 31, 2023, accounting for approximately $ 39.4 million, or 19 %, and $ 21.7 million, or 10 %, of total consolidated revenues, respectively.

Revenues generated from these customers were from the sale of homesites and variable land sale consideration from profit participation and marketing fees in Valencia.

An unaffiliated land banking entity that acquired homesites in Valencia in 2023 represented one of the Company’s major customers during the year ended December 31, 2023 and accounted for approximately $ 101.8 million, or 48 % 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.

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.

Two third-party home builders represented majors customer of the Company during the year ended December 31, 2021, accounting for approximately $ 30.3 million, or 14 %, and $ 22.5 million, or 10 %, of total consolidated revenues, respectively.

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

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

Two third-party home builders represented major customers of the Company during the year ended December 31, 2021, accounting for approximately $ 30.3 million, or 14 %, and $ 22.5 million, or 10 %, of total consolidated revenues, respectively.

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

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SHARE-BASED COMPENSATION

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

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

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

In April 2023, the Company’s Board of Directors approved the Five Point Holdings, LLC 2023 Incentive Award Plan (the “Incentive Award Plan”) as the successor to the Five Point Holdings, LLC Amended and Restated 2016 Incentive Award Plan (the “Prior Plan”).

The Incentive Award Plan became effective on June 7, 2023, the date on which it was approved by shareholders at the 2023 Annual Meeting of Shareholders.

The Incentive Award Plan increased the aggregate number of common shares available for issuance under the Prior Plan by 7,500,000 Class A common shares of the Holding Company.

As of December 31, 2023, there were 7,582,152 remaining Class A common shares available for future issuance under the Incentive Award Plan.

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.

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

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 performance or market performance conditions.

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.

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

Awards with a service and performance condition generally vest at the end of a two or three-year service period if the performance condition was achieved during the service period.

Restricted share awards entitle the holders to non-forfeitable distributions and to vote the underlying Class A common share during the restricted period.

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

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

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

The grant date fair value of awards with a market condition are determined using a Monte-Carlo approach.

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

The grant date fair value of awards with a market condition are determined using a Monte-Carlo valuation model.

The Monte Carlo model is based on random projections of share price

paths and must be repeated numerous times to achieve a probabilistic assessment.

The model incorporates assumptions related to the expected volatility of our share price and risk free interest rates.

Expected volatility was 57.98 % and was calculated based on the historical volatility of the Company's common stock using daily share price returns over a three-year lookback period from the date of grant.

The risk-free interest rate was 4.44 % and was based on U.S.

Treasury yield curve rates with maturities consistent with the three-year vesting period.

During the years ended December 31, 2023, 2022 and 2021, the Company reacquired vested RSUs and restricted share awards from employees for $ 0.2 million, $ 2.7 million and $ 2.0 million, respectively, for the purpose of settling tax withholding obligations.

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Nonvested at December 31, 2022 2,166 $ 3.77

( 834 ) $ 2.96

Cancelled ( 906 ) $ 2.16

( 798 ) $ 5.50

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Fair value of plan assets—beginning of year $ 15,661 $ 20,463

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

Actual gain (loss) on plan assets 449 ( 3,676 )

Employer contributions 86 —

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The accumulated benefit obligation for the Retirement Plan was $ 15.6 million and $ 17.2 million at December 31, 2023 and 2022, respectively.

The components of net periodic benefit and other amounts recognized in accumulated other comprehensive loss for the years ended December 31, 2022, 2021 and 2020, are as follows (in thousands):

The components of net periodic cost (benefit) and other amounts recognized in accumulated other comprehensive loss for the years ended December 31, 2023, 2022 and 2021, are as follows (in thousands):

2023 2022 2021

Net periodic benefit:

Net periodic cost (benefit):

Interest cost $ 809 $ 544 $ 512

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Amortization of net actuarial loss 162 255 359

Net periodic benefit ( 245 ) ( 290 ) ( 356 )

Net periodic cost (benefit) 82 ( 245 ) ( 290 )

Adjustment to accumulated other comprehensive loss:

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

Net actuarial (gain) loss ( 889 ) 1,929 ( 1,067 )

Amortization of net actuarial loss ( 162 ) ( 255 ) ( 359 )

Total adjustment to accumulated other comprehensive loss ( 1,051 ) 1,674 ( 1,426 )

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

Total recognized in net periodic cost (benefit) and accumulated other comprehensive loss $ ( 969 ) $ 1,429 $ ( 1,716 )

The weighted-average assumptions used to determine benefit obligations as of December 31, 2023 and 2022 were as follows:

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

The Company does not expect to have a minimum required contribution in 2023 and expects future benefit payments to be paid as follows (in thousands):

The Company expects to have a minimum required contribution of approximately $ 0.1 million in 2024 and expects future benefit payments to be paid as follows (in thousands):

2029-2033 5,073

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

The benefit (expense) for income taxes for the years ended December 31, 2022, 2021 and 2020 was as follows (in thousands):

The benefit for income taxes for the years ended December 31, 2023, 2022 and 2021 was as follows (in thousands):

2023 2022 2021

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

Deferred income tax benefit (expense):

Deferred income tax (expense) benefit:

$ ( 8,982 ) $ 2,574 $ ( 2,655 )

( 4,139 ) 1,188 ( 1,977 )

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

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

Total deferred income tax (expense) benefit ( 13,121 ) 3,762 ( 4,632 )

Decrease (increase) in valuation allowance 17,625 ( 2,204 ) 4,243

Expiration of unused loss carryforwards ( 65 ) ( 66 ) ( 31 )

Benefit (expense) for income taxes $ 1,471 $ 325 $ ( 1,744 )

Benefit for income taxes $ 4,418 $ 1,471 $ 325

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

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Deferred tax liability, net $ ( 7,067 ) $ ( 11,506 )

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required, if based on the available evidence;

it is more likely than not that such assets will not be realized.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required, if based on the available evidence, it is more likely than not that such assets will not be realized.

In the continual assessment of the requirement for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets.

5 unchanged sentences

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

Based upon the review of all positive and negative evidence, the Holding Company released the valuation allowance against the deferred tax assets during the year ended December 31, 2023.

At December 31, 2023, the Holding Company had federal tax effected net operating loss (“NOL”) carryforwards totaling $ 125.4 million, and state tax effected NOL carryforwards, net of federal income tax benefit, totaling $ 39.2 million.

2 unchanged sentences

The Internal Revenue Code generally limits the availability of NOLs if an ownership change occurs within any three-year period under Section 382.

If the Holding Company were to experience an ownership change of more than 50%, the use of all NOLs (and potentially other built-in losses) would generally be subject to a limitation equal to the value of the Holding Company’s equity before the ownership change, multiplied by the long-term tax-exempt rate.

The Holding Company estimates that after giving effect to

various transactions by members who hold a 5% or greater interest in the Holding Company, it has not experienced an ownership change as computed in accordance with Section 382.

If the Holding Company were to experience an ownership change of more than 50%, the use of all NOLs

(and potentially other built-in losses) would generally be subject to a limitation equal to the value of the Holding Company’s equity before the ownership change, multiplied by the long-term tax-exempt rate.

The Holding Company estimates that after giving effect to various transactions by members who hold a 5% or greater interest in the Holding Company, it has not experienced an ownership change as computed in accordance with Section 382.

In the event of an ownership change, the Holding Company’s use of the NOLs may be limited and not fully available for realization.

25 unchanged sentences

At December 31, 2022, the estimated fair value of notes payable, net was $ 525.5 million compared to a carrying value of $ 620.7 million.

During the years ended December 31, 2022, 2021 and 2020, the Company had no assets that were measured at fair value on a nonrecurring basis, other than a valuation adjustment to the Company's investment in the Great Park Venture during 2020 (see Note 4).

During the years ended December 31, 2023, 2022 and 2021, the Company had no assets that were measured at fair value on a nonrecurring basis.

EARNINGS PER SHARE

7 unchanged sentences

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

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

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

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

The following table summarizes the basic and diluted earnings (loss) per share calculations for the years ended December 31, 2023, 2022 and 2021 (in thousands, except shares and per share amounts):

2023 2022 2021

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 )

Net income (loss) attributable to the Company $ 55,394 $ ( 15,403 ) $ 6,568

Adjustments to net income (loss) attributable to the Company ( 16 ) 85 ( 176 )

Net income (loss) attributable to common shareholders $ 55,378 $ ( 15,318 ) $ 6,392

Numerator — basic common shares:

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

Net income (loss) attributable to common shareholders $ 55,378 $ ( 15,318 ) $ 6,392

net income allocated to participating securities $ 270 $ — $ 164

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 $ —

Allocation of basic net income (loss) among common shareholders $ 55,108 $ ( 15,318 ) $ 6,228

Numerator for basic net income (loss) available to Class A common shareholders $ 55,089 $ ( 15,313 ) $ 6,226

Numerator for basic net income (loss) available to Class B common shareholders $ 19 $ ( 5 ) $ 2

Numerator — diluted common shares:

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 (loss) attributable to common shareholders $ 55,378 $ ( 15,318 ) $ 6,392

Reallocation of income (loss) from dilutive potential securities $ 55,891 $ ( 252 ) $ 6,645

net income allocated to participating securities $ 258 $ — $ 159

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 $ —

Allocation of diluted net income (loss) among common shareholders $ 111,011 $ ( 15,570 ) $ 12,878

Numerator for diluted net income (loss) available to Class A common shareholders $ 110,992 $ ( 15,565 ) $ 12,876

Numerator for diluted net income (loss) available to Class B common shareholders $ 19 $ ( 5 ) $ 2

Basic weighted average Class A common shares outstanding 68,826,340 68,429,271 67,394,794

1 unchanged sentence

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

Basic (loss) earnings per share:

Basic earnings (loss) per share:

Class A common shares

2 unchanged sentences

$ 0.00 $ ( 0.00 ) $ 0.00

Diluted (loss) earnings per share:

Diluted earnings (loss) per share:

Class A common shares

5 unchanged sentences

Anti-dilutive potential Restricted Shares (weighted average)

672,690 — 1,690,773

Anti-dilutive potential Performance Restricted Shares (weighted average)

24,730 — 695,154

Anti-dilutive potential Class A common shares from exchanges (weighted average) 3,137,134 76,120,180 3,160,904

1 unchanged sentence

Accumulated other comprehensive loss attributable to the Company consists of unamortized net actuarial losses for the Retirement Plan that totaled $ 2.3 million and $ 3.0 million at December 31, 2023 and 2022, net of tax benefits of $ 0.6 million and $ 0.8 million, respectively.

At December 31, 2022 and 2021, the Company held a full valuation allowance related to the accumulated tax benefits, respectively.

Accumulated other comprehensive loss of $ 1.5 million and $ 1.9 million is included in noncontrolling interests at December 31, 2023 and 2022, respectively.

Net actuarial gains or losses are re-determined annually or upon remeasurement events and principally arise from changes in the rate used to discount benefit obligations and differences between expected and actual returns on plan assets.

Reclassifications from accumulated other comprehensive loss to net (loss) 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.

Reclassifications from accumulated other comprehensive loss to net income (loss) attributable to the Company related to amortization of net actuarial losses were approximately $ 102,000 , $ 160,000 and $ 225,000 , net of taxes, and are included in miscellaneous other income on the accompanying consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021, 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