What changed in this filing

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Item 9A. Controls and Procedures

2025-02-24 compared with 2024-03-04 · 97 added, 107 removed, 472 unchanged (30% of the section changed)

17 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated March 1, 2024, expressed an unqualified opinion on those financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 21, 2025, expressed an unqualified opinion on those financial statements.

Basis for Opinion

16 unchanged sentences

Costa Mesa, California

March 1, 2024

February 21, 2025

Other Information

5 unchanged sentences

The information in the Proxy Statement relevant to this item is incorporated herein by reference.

We have adopted an insider trading policy applicable to our directors, officers, employees, and other covered persons, and have implemented processes for the Company that we believe are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the New York Stock Exchange listing standards.

A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.

Executive Compensation

59 unchanged sentences

Advisory Agreement, dated as of August 23, 2021, by and between Emile Haddad and Five Point Operating Company, LP (Exhibit 10.2 of the Company ’ s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 is incorporated herein by this reference)

Employment Transition Agreement, dated as of February 9, 2022, by and among Lynn Jochim, Five Point Operating Company, LP, Five Point Communities Management, Inc., and Five Point Holdings, LLC (Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 is incorporated herein by this reference)

Advisory Agreement, dated as of February 14, 2022, by and between Lynn Jochim and Five Point Operating Company, LP (Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 is incorporated herein by this reference)

First Amendment to Advisory Agreement, dated as of December 1, 2024, by and between Emile Haddad and Five Point Operating Company, LP**

Form of Indemnification Agreement by and between the Registrant and each of its Directors and Executive Officers (Exhibit 10.7 to Registrant ’ s Registration Statement on Form S-11 filed April 7, 2017 is incorporated herein by this reference)

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Second Amendment to Second Amended and Restated Development Management Agreement, dated as of December 28, 2022, by and among Heritage Fields El Toro, LLC, Five Point Communities Management, Inc., Five Point Operating Company, LP and Five Point Communities, LP (Exhibit 10.1 to the Current Report on Form 8-K filed on January 4, 2023 is incorporated herein by this reference)

Third Amendment to Second Amended and Restated Development Management Agreement, dated as of September 16, 2024, by and among Heritage Fields El Toro, LLC, Five Point Communities Management, Inc., Five Point Operating Company, LP and Five Point Communities, LP (Exhibit 10.1 to the Current Report on Form 8-K filed on September 18, 2024 is incorporated herein by this reference).

Termination of Development Management Agreement (Candlestick Point Mixed-Use Project) (Exhibit 10.27 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 is incorporated herein by this reference)

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and Citibank, N.A., as lenders (Exhibit 10.1 to the Current Report on Form 8-K filed on October 20, 2023 is incorporated herein by this reference)

First Amendment to Amended and Restated Credit Agreement, dated as of May 22, 2024, by and among Five Point Operating Company, LP, Zions Bancorporation, N.A.

dba California Bank & Trust, as administrative agent and as a lender, and Comerica Bank, JPMorgan Chase Bank, N.A.

and Citibank, N.A., as lenders (Exhibit 10.1 to the Current Report on Form 8-K filed on May 24, 2024 is incorporated herein by this reference).

Five Point Holdings, LLC Policy on Insider Trading**

List of Subsidiaries**

6 unchanged sentences

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

Five Point Holdings, LLC Policy for Recovery of Erroneously Awarded Compensation**

Five Point Holdings, LLC Policy for Recovery of Erroneously Awarded Compensation (Exhibit 97 of the Company ’ s Annual Report on Form 10-K for the fiscal year ended December 3 1 , 202 3 is incorporated herein by this reference )

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document

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Daniel Hedigan

Chief Executive Officer

March 1, 2024

President and Chief Executive Officer

February 21, 2025

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

1 unchanged sentence

Daniel Hedigan /s/ Daniel Hedigan

Chief Executive Officer Date:

March 1, 2024

President and Chief Executive Officer Date:

February 21, 2025

Principal Financial and Accounting Officer:

1 unchanged sentence

Chief Financial Officer, Treasurer and Vice President

March 1, 2024

Kathleen Brown /s/ Kathleen Brown Gary Hunt /s/ Gary Hunt

March 1, 2024 Date:

March 1, 2024

February 21, 2025

Kathleen Brown /s/ Kathleen Brown Sam Levinson /s/ Sam Levinson

February 21, 2025 Date:

February 21, 2025

William Browning /s/ William Browning Stuart Miller /s/ Stuart Miller

March 1, 2024 Date:

March 1, 2024

Evan Carruthers /s/ Evan Carruthers Michael Rossi /s/ Michael Rossi

March 1, 2024 Date:

March 1, 2024

Jonathan Foster /s/ Jonathan Foster Michael Winer /s/ Michael Winer

March 1, 2024 Date:

March 1, 2024

Emile Haddad /s/ Emile Haddad

March 1, 2024

February 21, 2025 Date:

February 21, 2025

Jonathan Foster /s/ Jonathan Foster Michael Rossi /s/ Michael Rossi

February 21, 2025 Date:

February 21, 2025

Emile Haddad /s/ Emile Haddad Michael Winer /s/ Michael Winer

February 21, 2025 Date:

February 21, 2025

Gary Hunt /s/ Gary Hunt

February 21, 2025

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

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Costa Mesa, California

March 1, 2024

February 21, 2025

HERITAGE FIELDS LLC AND SUBSIDIARIES

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118,256 61,054

INVESTMENT IN JOINT VENTURE — 2,287

CONTRACT ASSETS, RECEIVABLES AND OTHER ASSETS—Net 166,793 41,668

CONTRACT ASSETS AND RECEIVABLES—Net 169,604 166,793

$ 562,598 $ 619,199

LIABILITIES, REDEEMABLE INTERESTS, AND MEMBERS’ CAPITAL

$ 1,005 $ 2,843

Cash flow participation debt $ — $ 1,005

Accrued management fees 160,710 120,971

Land sales deposits

66,945 17,147

Accounts payable and other liabilities

4 unchanged sentences

REDEEMABLE LEGACY INTERESTS

18,075 66,254

MEMBERS’ CAPITAL

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269,843 313,631 256,809

EQUITY IN EARNINGS (LOSS) FROM JOINT VENTURE 1,926 354 (1,409)

EQUITY IN EARNINGS FROM JOINT VENTURE — 1,926 354

INTEREST INCOME 6,221 7,490 1,532

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Cost of home sales — 161 29,692

Equity in (earnings) loss of from joint venture (1,926) (354) 1,409

Equity in earnings from joint venture — (1,926) (354)

Return on investment from joint venture — 871 —

2 unchanged sentences

Homes under construction — (161) (11,425)

Contract assets, receivables and other assets, net (125,125) (12,102) (5,117)

Contract assets and receivables, net (2,811) (125,125) (12,102)

Accrued management fees 39,739 (3,378) 21,663

Land sales deposits

49,798 17,147 —

Accounts payable and other liabilities 8,898 16,847 6,633

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Distributions from joint venture (return of investment) — 3,351 1,243

Net cash provided by (used in) investing activities 3,326 988 (4,394)

Net cash provided by investing activities — 3,326 988

CASH FLOWS FROM FINANCING ACTIVITIES:

Legacy Interest distributions (18,075) (48,179) (16,465)

Payments of debt (1,838) (824) (1,714)

Payments of cash flow participation debt (1,005) (1,838) (824)

Percentage Interest distributions (485,140) (411,168) (140,512)

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(504,220) (461,185) (157,801)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (88,272) 9,322 11,154

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 57,202 (88,272) 9,322

CASH AND CASH EQUIVALENTS—Beginning of year

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On December 22, 2005, the Company conveyed its rights, title, and interests in the Property to the Company’s subsidiary, Heritage Fields El Toro, LLC, a Delaware limited liability company (“HF El Toro”) at the Company’s original cost for the purpose of developing and selling homesites and certain commercial sites in a mixed-use and residential community located on the Company’s Property (the “Project”).

The Company has two classes of membership interests, Percentage Interests and Legacy Interests.

The Company previously had two classes of membership interests, Percentage Interests and Legacy Interests.

The Company is managed by an Executive Committee comprised of representatives appointed by only the holders of Percentage Interests.

The holders of Legacy Interests are entitled to receive certain priority distributions (see Note 6).

The holders of Legacy Interests were entitled to receive certain priority distributions, which were fully satisfied during the year ended December 31, 2024, and as a result of which, the Legacy Interests are no longer deemed to be outstanding (see Note 6).

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

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There were no impairments identified for the years ended December 31, 2024, 2023 and 2022.

Homes under construction —Homes under construction are a result of a fee build agreement with an unrelated third-party (“Fee Builder”) that the Company contracted to build and act as a sales agent for a population of residential homes within the Project.

The Fee Builder initially incurred all costs to build, market and sell the residential homes and the Company reimbursed the Fee Builder as construction progressed.

The Company paid the Fee Builder a fixed monthly overhead allowance for its services to construct, manage and maintain the homes during the construction process that was capitalized to homes under construction as incurred.

Homes under construction —Homes under construction were a result of a fee build agreement with an unrelated third-party (“Fee Builder”) that the Company contracted to build and act as a sales agent for a population of residential homes within the Project.

Land, land development, amenities and home construction costs attributed to the fee build agreement were capitalized to homes under construction and allocated to cost of sales using the relative sales value method when homes were sold.

The Company set and approved the price at which the completed homes were sold to homebuyers and upon the closing of a residential home to a third-party homebuyer, the Fee Builder received additional fees that were expensed as a cost of the home sale.

Costs incurred for tangible assets constructed solely for model homes directly used in the sale process such as sales offices, design studios, landscaping, and furnishings were capitalized to contract assets, receivables and other assets, net on the accompanying consolidated balance sheets and were depreciated over the expected selling life of the fee build community which was complete as of December 31, 2022.

The Company set and approved the price at which the completed homes were sold to homebuyers.

Costs incurred for tangible assets constructed solely for model homes directly used in the sale process were capitalized and depreciated over the expected selling life of the fee build community which was complete as of December 31, 2022.

All other selling and marketing costs, such as commissions and advertising, were expensed as incurred.

Homes under construction were reviewed for potential impairment when events or changes in circumstances indicate that the carrying value of the homes may not be recoverable.

Impairment indicators for the homes include, but are not limited to significant increases in construction costs, significant decreases in pace and pricing of home sales for the Project and surrounding areas, and political and societal events that may negatively impact the local economy.

As of December 31, 2022, all homes subject to the fee build agreement had been sold to homebuyers and closed escrow.

No impairments were identified for the years ended December 31, 2022 and 2021.

Investment in joint venture —For investments in entities that the Company does not control, but exercises significant influence, the Company uses the equity method of accounting.

2 unchanged sentences

The Company eliminates a portion of intra-entity profits resulting from land sales between the Company and the joint venture until the assets are sold to a third-party.

In 2021, the Company obtained a 10% interest in an entity (the “Landbank Venture”) organized for the purpose of taking assignment from homebuilders land purchase and sale agreements and purchasing residential lots within the Project while concurrently entering into option and development agreements with homebuilders in which the homebuilder retains the option to purchase the land to construct and sell homes.

The Company sold land to the Landbank Venture in 2021 and eliminated its pro-rata share of the intra-entity profits generated from the sale through earnings (loss) from unconsolidated entities until the land was sold by the Landbank Venture to third-party homebuilders.

As of December 31, 2023, the third-party homebuilders had exercised all the options from the option and development agreements with the Landbank Venture, and the Landbank Venture had distributed all available cash.

The Company’s investment in the Landbank Venture had no carrying value at December 31, 2024 and 2023.

Note Receivables —Note receivables held by the Company are reflected at principal and accrued interest amounts due, net of an allowance for expected credit losses or discounts, if any.

Interest payments are accrued in the period earned based on the stated interest rate and the outstanding principal balance, less any interest discounts stipulated by the note.

Included in contract assets, receivables and other assets, net on the accompanying consolidated balance sheets are notes and accrued interest receivables that the Company has with builders that are constructing affordable housing apartments on the Project (“Affordable Notes”).

Included in contract assets and receivables, net on the accompanying consolidated balance sheets are notes and accrued interest receivables that the Company has with builders that are constructing affordable housing apartments on the Project (“Affordable Notes”).

The Company records a discount on the principal balance for Affordable Notes when the note is zero interest bearing or contains other terms that are below market rate.

1 unchanged sentence

The Company monitors the payment provisions of each note when determining past due or delinquency status.

Additionally, the Company evaluates the carrying value of note and interest receivables at each reporting date to determine the need for an allowance for credit losses.

Revenue Recognition —Under Accounting Standards Codification (“ASC”) Topic 606, Revenue From Contracts With Customers (“ASC 606”), revenues from land sales are recognized when the Company satisfies the performance obligation at a point in time, which typically occurs when the control of the land passes to its customers.

2 unchanged sentences

The transaction price typically contains fixed and variable components in which the fixed consideration represents the stated purchase price for the land.

Some of the Company’s purchase and sale agreements contain a profit participation provision, a variable form of consideration, whereby the Company receives from homebuilders a portion of profit after the builder has received an agreed-upon margin.

If the project profitability falls short of the participation threshold, no additional revenues are received.

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

Profit participation revenue of $39.8 million, $21.0 million and $19.6 million were recognized for the years ended December 31, 2024, 2023 and 2022, respectively.

In addition, some residential homesite sale agreements contain a price participation provision requiring the homebuilder to pay a “marketing fee” or additional consideration per residence sold to homebuyers, as a percentage of the home sale price.

The Company estimates the amount of variable price participation consideration it expects to be entitled to receive and recognizes revenue and a contract asset at the time of land sale to the extent

that it is not probable that a significant reversal of revenues would result when the contingency of the variable price participation consideration is resolved.

The Company utilizes current home sale pricing offered by homebuilders in the community along with estimates of price appreciation when determining the estimate of the amount of variable price participation consideration to recognize.

In addition, some residential homesite sale agreements contain a price participation provision, a variable form of consideration, requiring the homebuilder to pay additional consideration as a percentage of the home sale price.

Price participation revenue of $67.6 million, $144.9 million and $2.0 million were recognized for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company estimates the amount of variable price and profit consideration it expects to be entitled to receive and recognizes revenue and a contract asset at the time of land sale to the extent that it is not probable that a significant reversal of revenues would result when the contingency of the variable consideration is resolved.

The Company utilizes current home sale pricing offered by homebuilders in the community along with estimates of price appreciation and construction costs when determining the estimate of the amount of variable consideration to recognize.

A contract asset or liability is recognized when the timing of the satisfaction of a performance obligation is different from the timing of the payments made by customers.

Contract assets typically consist of estimates of contingent or variable consideration that has been included in the transaction price and recognized as revenue before the contingency is resolved and the contractual payment is due.

Contract liabilities typically consist of payments received prior to satisfying the associated performance obligation.

Changes in estimates of variable components of transaction prices could result in cumulative catch-up adjustments to revenue in periods after the Company transfers control of the land to the builder.

Contract liabilities typically consist of payments received prior to satisfying the associated performance obligation, including land sale deposits received from a customer.

Changes in estimates of variable components of transaction prices could result in cumulative catch-up adjustments to revenue and contract assets in periods after the Company transfers control of the land to the builder.

Home sale revenues are recognized at the time of escrow closing, when title to and possession of the home is transferred to the homebuyer, and the single performance obligation of the Company, the delivery of a completed home, has been satisfied.

9 unchanged sentences

Income Taxes —The consolidated financial statements contain no provision for income taxes since the income or loss of the Company flows through to the members who are responsible for including their share of the taxable results of operations on their respective tax returns.

Accounting Standards Updates —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.

CONTRACT ASSETS, RECEIVABLES AND OTHER ASSETS, net

Contract assets, receivables and other assets, net as of December 31, 2023 and 2022, consisted of the following (in thousands):

Accounting Standards Updates —In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , which primarily requires disclosure of disaggregated information about certain income statement expense line items in the notes to the financial statements on an interim and annual basis.

For entities that meet the definition of a public business entity, the standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted and can be applied on either a prospective or retrospective basis.

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

CONTRACT ASSETS AND RECEIVABLES, net

Contract assets and receivables, net as of December 31, 2024 and 2023, consisted of the following (in thousands):

Affordable notes, net $ 15,962 $ 16,022

Marketing fee contract assets (see Note 7) 2,476 8,946

2023 residential land sale price participation contract asset 143,100 —

Other contract assets 5,195 16,625

Total contract assets, receivables and other assets, net $ 166,793 $ 41,668

Contract assets 153,642 150,771

Total contract assets and receivables, net $ 169,604 $ 166,793

Affordable Notes, net

Principal and interest collected on affordable notes, net, was $0.6 million, $0.9 million and $3.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

1 unchanged sentence

At December 31, 2024 and 2023, the Company had an allowance for credit losses of $1.5 million and $1.5 million, respectively, associated with the affordable notes.

For the years ended December 31, 2023, 2022 and 2021, marketing fee revenue of $1.8 million, $2.0 million and $9.5 million, respectively, is included in land sale revenues in the accompanying consolidated statements of operations.

Of these amounts, for the years ended December 31, 2022 and 2021, $0.6 million and $9.1 million, respectively, represent marketing fee estimates recorded as contract assets when escrow closed with the homebuilder.

Receipts of contractual amounts were $6.5 million, $5.8 million and $4.3 million for the years ended December 31, 2023, 2022 and 2021, respectively, and reduced the carrying amount of the contract assets.

In 2023, the Company closed a residential land sale which contained variable consideration in the form of price participation that will be payable when homes are sold to homebuyers.

At December 31, 2023, the Company had a contract asset of $143.1 million representing additional consideration from this transaction that the Company expects to be entitled to receive.

The Company’s other contract assets as of December 31, 2023 and 2022 primarily consisted of consideration held in escrow from the sale of commercial land that closed during 2023 and 2022 that the Company expects to be entitled to receive upon the satisfaction of certain contingencies or completion of administrative tasks or immaterial contract promises.

Funds released from escrow accounts totaled $15.0 million for the year ended December 31, 2023, and reduced the carrying amount of the other contract assets.

Contract Assets

Contract assets consist of variable consideration such as price participation and profit participation.

The opening and closing balances of the Company’s contract assets for the year ended December 31, 2024 were $150.8 million and $153.6 million, respectively.

The net increase of $2.9 million between the opening and closing balances of the Company’s contract assets primarily resulted from additional price participation revenue recognized during the period that resulted from changes in the estimated constrained variable consideration that reflects updated pricing and absorption assumptions used to calculate expected price participation payments, partially offset by the receipt of $63.7 million in price participation payments from homebuilders attributed to prior land sales.

The opening and closing balances of the Company’s contract assets for the year ended December 31, 2023 were $25.6 million and $150.8 million, respectively.

The net increase of $125.2 million between the opening and closing balances of the Company’s contract assets primarily resulted from variable consideration related to a residential sale that closed in 2023 in the form of price participation that will be payable when homes are sold to homebuyers, partially offset by $21.5 million in receipts related to prior land sales.

CASH FLOW PARTICIPATION DEBT

In 2010, HF El Toro entered into an unsecured cash flow participation agreement in connection with a series of transfers, payoffs, and pay downs related to its then outstanding loan facility (“Debt Restructure”).

1 unchanged sentence

Under the terms of the participation agreement, 4.66% of capital distributions (as defined in the participation agreement) made by HF El Toro are due to the holder of the participation agreement.

When a participation payment is made or reasonably assured to be made, the Company uses a proportional interest method to determine the portion of the payment that represents interest expense and the portion applied to the principal.

The principal carrying balance of the participation agreement was $1.0 million and $2.8 million as of December 31, 2023 and 2022, respectively, and is included in debt on the accompanying consolidated balance sheets.

When a participation payment is made or reasonably assured to be made, the Company used a proportional interest method to determine the portion of the payment that represents interest expense and the portion applied to the principal.

The full amount of the principal balance had been satisfied as of December 31, 2024 and $1.0 million was outstanding as of December 31, 2023 and is included in debt on the accompanying consolidated balance sheet.

Future participation payments will be recognized fully as additional interest on the original principal.

Total interest incurred related to the participation agreement during the years ended December 31, 2024, 2023 and 2022 was $26.6 million, $23.4 million and $7.8 million , respectively, and was capitalized to land under development in the accompanying consolidated balance sheets.

1 unchanged sentence

Accounts payable and other liabilities as of December 31, 2024 and 2023, consisted of the following (in thousands):

Accounts payable

$ 7,500 $ 12,265

Accounts payable and retention payable $ 11,602 $ 7,500

Other liabilities:

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REDEEMABLE LEGACY INTERESTS

The Legacy Interest is classified as temporary equity and reported on the consolidated balance sheet as Redeemable Legacy Interests.

The Legacy Interests are not reported as permanent equity within Members’ Capital as management believes that it is probable that the Legacy Interests will be fully redeemed through distributions of available cash in accordance with the terms of the amended and restated limited liability company agreement.

The Legacy Interest was classified as temporary equity and reported on the consolidated balance sheet as Redeemable Legacy Interests.

The Legacy Interests were not reported as permanent equity within Members’ Capital as management believed that it was probable that the Legacy Interests would be fully redeemed through distributions of available cash in accordance with the terms of the amended and restated limited liability company agreement.

The holders of Legacy Interests were entitled to receive i) $476.0 million in priority distributions over Percentage Interests, plus ii) an amount up to $89.0 million in distributions paid jointly with distributions to holders of Percentage Interests.

Distributions of $18.1 million, $48.2 million and $16.5 million were made to holders of the Legacy Interest during the years ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2021, the $476.0 million priority distributions had been fully paid and at December 31, 2023 $18.1 million in Legacy Interests to be paid jointly with distributions to holders of Percentage Interests were outstanding.

After the cumulative distributions to the holders of Legacy Interests has reached $565.0 million, the Legacy Interest will no longer be deemed outstanding.

As of December 31, 2021, the $476.0 million priority distributions had been fully paid, and with the distributions to the holders of Legacy Interests during the year ended December 31, 2024, the Company fully satisfied the $89.0 million maximum participating Legacy Interest distribution rights, as a result of which, the Legacy Interests are no longer deemed to be outstanding.

RELATED PARTY TRANSACTIONS

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The A&R DMA’s initial term was extended by mutual agreement of the parties to December 31, 2022 (the “2022 Extension”) and in December 2022, an amendment to the A&R DMA was entered into in which the A&R DMA was renewed through December 31, 2024 (the “First Renewal Term Amendment”).

In September 2024, an amendment to the A&R DMA was entered into in which the A&R DMA has been renewed through December 31, 2026 (the “Second Renewal Term”).

Under the Second Renewal Term, the annual fixed base management fee will be $13.5 million beginning in 2025, which reflects an increase from the $12.0 million annual fixed base management fee under the First Renewal Term.

The incentive compensation provisions (described below) of the A&R DMA were not changed pursuant to the Second Renewal Term.

The total annual base management fee incurred for the years ended December 31, 2024, 2023 and 2022 was $12.0 million, $12.0 million and $9.3 million, respectively, and is included in management fee in the accompanying consolidated statements of operations.

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During the years ended December 31, 2024, 2023 and 2022, the Company paid $49.1 million, $41.6 million and $14.2 million, respectively, in non-legacy incentive compensation and $1.8 million, $4.9 million and $1.7 million, respectively, in legacy incentive compensation to the Management Company.

Non-legacy incentive compensation reflects incentive payments that resulted from distributions to Percentage Interest holders, and legacy incentive compensation reflects incentive payments that resulted from distributions to Legacy Interest holders.

As of December 31, 2024 and 2023, $123.9 million and $92.8 million, respectively, was accrued for incentive compensation management fees due to the Management Company, and is included in accrued management fees in the accompanying consolidated balance sheets.

Included in selling, general and administrative costs and expenses in the accompanying consolidated statements of operations for the years ended December 31, 2022 and 2021 are $3.1 million and $11.2 million, respectively, for general and administrative expenses incurred by the Management Company on behalf of the Company that were reimbursable under the A&R DMA prior to the 2022 Extension.

Included in selling, general and administrative costs and expenses in the accompanying consolidated statements of operations for the year ended December 31, 2022 is $3.1 million for general and administrative expenses incurred by the Management Company on behalf of the Company that were reimbursable under the A&R DMA prior to the 2022 Extension.

General and administrative expense reimbursements were settled in cash on a monthly basis.

2 unchanged sentences

Commercial Sub-Management Agreement

Effective June 30, 2013, HF El Toro terminated its commercial development sub-management agreement (“Sub-MA”) with a member of the Company that holds a 12.5% Percentage Interest and a 12.5% Legacy Interest in the Company.

Effective June 30, 2013, HF El Toro terminated its commercial development sub-management agreement (“Sub-MA”) with a member of the Company that holds a 12.5% Percentage Interest in the Company.

Under the terms of the Sub-MA, certain incentive compensation provisions were vested upon termination.

Incentive compensation payments become payable, calculated generally, as 2% of distributions (as defined in the Sub-MA) in excess of the first $476 million of priority Legacy Interests.

During the years ended December 31, 2024, 2023 and 2022, total incentive compensation management fee expense incurred pertaining to the Sub-MA was $20.0 million, $10.0 million and $9.1 million, respectively, and is included in management fee in the accompanying consolidated statements of operations.

As of December 31, 2024 and 2023, $36.8 million and $28.1 million, respectively, of incentive compensation management fee pertaining to the Sub-MA was accrued and is included in accrued management fees in the accompanying consolidated balance sheets.

1 unchanged sentence

Management’s estimate is based on various underlying assumptions which include but are not limited to, the current and projected performance of the Project and the resulting cash that will be available for distributions.

Changes in the estimated amount of aggregate payments probable of being made in future periods will be recognized as a cumulative adjustment to management fee expense in the period the estimate changes.

Changes in the estimated amount of aggregate payments probable of being made in future periods will be recognized as a cumulative adjustment to

management fee expense in the period the estimate changes.

Actual payments of incentive compensation may differ materially from current estimates.

During the years ended December 31, 2023, 2022 and 2021, the Company paid $10.3 million, $3.5 million and $4.6 million in incentive compensation pertaining to the Sub-MA.

Purchase and Sale and Development Agreements

In the normal course of business, the Company may enter into purchase and sale agreements, development agreements or other contracts with the Company's Joint Venture or the Company's members or affiliates of members.

Land sale revenues recognized from related party transactions and included in the accompanying consolidated statements of operations during the years ended December 31, 2023, 2022 and 2021 are as follows (in thousands):

2023 2022 2021

$ — $ — $ 56,112

Profit participation

15,174 11,811 5,127

Marketing fees

1,039 709 1,558

Related party land sale revenues

$ 16,213 $ 12,520 $ 62,797

Contract Asset

At December 31, 2023 and 2022, included in contract assets, receivables and other assets, net on the accompanying consolidated balance sheets were related party contract assets of $1.0 million and $4.9 million, respectively, for variable land sale consideration attributed to marketing fees expected to be received.

Investment in Joint Venture

In 2021, the Company made a capital contribution of $4.6 million and received a 10% interest in an entity (the “Landbank Venture”) organized for the purpose of taking assignment from homebuilders land purchase and sale agreements and purchasing residential lots within the Project while concurrently entering into option and development agreements with homebuilders in which the homebuilder retains the option to purchase the land to construct and sell homes.

Subsequent to the Company’s investment in 2021, the Landbank Venture took assignment of certain purchase and sale agreements and purchased land from the Company for $56.1 million while concurrently entering into option and development agreements with third-party homebuilders.

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

The Company’s investment in the Landbank Venture had no carrying value at December 31, 2023, and at December 31, 2022, the carrying value of the Company’s investment in the Landbank Venture was $2.3 million.

During the years ended December 31, 2024, 2023 and 2022, the Company paid $11.3 million, $10.3 million and $3.5 million, respectively, in incentive compensation pertaining to the Sub-MA.

Purchase and Sale Agreements

In the normal course of business, the Company may enter into purchase and sale agreements or other contracts with the Company’s members or affiliates of members.

Land sale revenues recognized from related party transactions was $22.6 million, $16.2 million and $12.5 million during the years ended December 31, 2024, 2023 and 2022, respectively, and is included in land sales in the accompanying consolidated statements of operations.

The related party land sale revenues primarily relate to profit participation.

COMMITMENTS AND CONTINGENCIES

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In addition to the Great Park Improvements, the ALA II and a memorandum of understanding (“MOU”) regarding funding of Marine Way infrastructure improvements committed HF El Toro to perform on certain other defined items as well as it committed HF El Toro to make $20.0 million of certain direct payments to the City beginning in August 2016.

As of December 31, 2022, the carrying balance of amounts payable to the City related to ALA II totaled $1.2 million and is included within accounts payable and other liabilities on the consolidated balance sheets.

At December 31, 2022, the Company estimated the present value of the direct payments to equal their carrying amounts.

The Company made $1.3 million in payments to the City under the ALA II and MOU for the year ended December 31, 2022.

Amortization expense, all of which was capitalized to inventories, totaled $0.1 million for the year ended December 31, 2022.

As also defined in the agreements, HF El Toro will have the right to receive up to an additional $40.0 million in CFD reimbursements for public infrastructure components of the Great Park Improvements.

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In October 2022, the Company and the City entered into the Framework Plan Implementation Agreement (“FPIA”).

The FPIA terminates ALA II, as amended, upon the effective date of the FPIA and restructures the Company’s remaining development obligations to the City.

The FPIA terminated ALA II, as amended, upon the effective date of the FPIA and restructured the Company’s remaining development obligations to the City.

Additionally, the Company agreed to pay $18.0 million to the City upon the City completing certain administrative steps but no sooner than 2025.

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Upon the effective date of the FPIA, the Company’s remaining obligations under the ALA II were terminated.

As of December 31, 2023, the carrying balance of amounts payable to the City related to the FPIA totaled $18.0 million and is included within accounts payable and other liabilities on the consolidated balance sheets.

At each of December 31, 2024 and 2023, the carrying balance of amounts payable to the City related to the FPIA totaled $18.0 million and is included within accounts payable and other liabilities on the consolidated balance sheets.

The Company may be a party to various claims, legal actions, and complaints arising in the ordinary course of business.

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SUBSEQUENT EVENTS

The Company has evaluated subsequent events through March 1, 2024 the date the consolidated financial statements were issued, and has determined that, other than as disclosed, no events or transactions have occurred subsequent to December 31, 2023 that require adjustments to or disclosure in the Company’s consolidated financial statements.

The Company has evaluated subsequent events through February 21, 2025 the date the consolidated financial statements were issued, and has determined that, other than as disclosed, no events or transactions have occurred subsequent to December 31, 2024 that require adjustments to or disclosure in the Company’s consolidated financial statements.

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 9A. Controls and Procedures