Real estate development takes a lot of time. Developers need to secure land, entitlements, permits, and other approvals before they can start breaking ground. Then, the building process is costly and often fraught with delay. These issues are what make real estate development risky.
However, real estate development can also be rewarding. For example, many of the richest real estate investors made their fortunes on development. While most real estate developers are privately held companies, a handful trade publicly, providing investors the opportunity to add some development upside to their portfolios.
One of those opportunities is Five Point Holdings (NYSE: FPH). Here's a closer look at the company.
Five Point Holdings company profile
Five Point Holdings is a real estate development company. Leading homebuilder Lennar (NYSE: LEN) formed the company in 2009 to manage its master-planned community (MPC) development projects in California. It spun that company off in 2017 by completing an initial public offering.
Today, Five Point Holdings designs and develops large mixed-use master-planned communities in Los Angeles County, San Francisco County, and Orange County, California. These developments combine residential, commercial, retail, educational, and recreational elements, including parks and open space.
The company's current community developments include:
- Great Park Neighborhoods in Irvine, California: Five Point is transforming the former Marine Corps Air Station El Toro into a community that will feature 10,500 homes, 1,050 affordable housing units, 4.9 million square feet of commercial space, and three new schools. Spanning 2,100 acres, Great Park Neighborhoods features the 1,300-acre Orange County Great Park along with 200 additional acres of planned parks and trails.
- Valencia in Los Angeles County: Five Point is developing a new community across 15,000 acres in Valencia. It's devoting 10,000 acres to open space and planning 275 additional acres of parks. The community will feature 21,500 homes, 2,200 affordable housing units, and 11.5 million square feet of commercial space, including retail, office, and entertainment options, along with seven schools.
- Candlestick and The San Francisco Shipyard in the City of San Francisco: The company is transforming the 700-acre site that was once home to a baseball stadium into a vibrant mixed-use community. It will feature 5 million square feet of commercial space, 1.25 million square feet of entertainment, cultural, and hotel space, 500,000 square feet of space for community use, and 340 acres of parks and open space. The development will also have 10,700 planned homes and 3,400 affordable housing units.
Overall, Five Point has designed these mixed-use developments to include 40,000 residential homes, 6,000 units of affordable housing, and 23 million square feet of commercial space.
Five Point also has a commercial segment, owning a 75% interest in the Gateway Commercial Venture. As of the end of 2021's first quarter, this entity held one commercial office building and 50 acres of land at a 73-acre office, medical, and research and development campus in Great Park Neighborhoods.
Five Point Holdings news
Five Point Holdings is still in the early stages of developing its MPCs. For example, the company sold its first homesites in Valencia in December of 2019. Because of that, the most important news relating to the company isn't its quarterly earnings but the progress it's making on developing its MPCs.
Despite the pandemic, Five Point had some notable achievements in 2020. A significant accomplishment was completing the sale of a 190,000 square foot, four-story building and adjacent land to City of Hope for $108 million in May of 2020 within its Gateway Commercial Venture. City of Hope will convert that building into a comprehensive cancer center and build an adjacent acute care cancer hospital as part of a $1 billion investment.
In addition, its Gateway Commercial Venture sold two more buildings comprising 660,000 square feet of research and development space for $355 million in August. Those sales brought in cash, which the company used to bolster its balance sheet.
Five Point closed 2020 on a high note as it sold another 487 homesites in Valencia during the fourth quarter, closing on 442 of the sites by year-end and generating $102 million in proceeds. That brought its cash position up to nearly $300 million, giving it significant liquidity to pursue developments across its communities.
Five Point's progress continued in early 2021 as it closed additional homesite sales in Valencia. Meanwhile, homebuilders worked toward completing the first homes in that community, putting them on track to welcome the first homeowners later this year. The company also noted that home sales at Great Park Neighborhoods were off to a strong start in 2021, with builders selling twice as many homes during that period compared to 2020.
Five Point Holdings stock price
Five Point's large-scale mixed-use developments haven't yet created value for its shareholders: