Five Point Holdings LLC (FPH) 2017 Q2 法說會逐字稿

Good afternoon and welcome to the Five Point Holdings Second Quarter 2017 Earnings Call. (Operator Instructions) Today's conference call may include forward-looking statements, including statements regarding Five Points' business, financial condition, results of operations, cash flows, strategies, and prospects. Forward-looking statements represent only Five Points' estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties.

Many factors could affect future results that may make Five Points' actual activities or results to differ materially from the activities and results anticipated in forward looking statements. These factors include those described in today's press release, at Five Points' SEC filings, including those included in the risk factors section of the most recent quarterly report, Form 10-Q, filed with the SEC. Please note that Five Point assumes no obligation to update any forward-looking statements.

It is now my pleasure to introduce your host, Emile Haddad, Chairman and Chief Executive Officer. Please go ahead.

Thank you, Stacy. Good afternoon and welcome to our first earnings call. Today, I'm joined by Erik Higgins, our Chief Financial Officer; Mike Alvarado, our Chief Legal Officer; Lynn Jochim, our Executive Vice President; [Lee O'key], our Controller; and Mike White, our Treasurer.

Later, Erik will walk you through our financial results for the quarter. It is important, though, to remember that because of the lumpy nature of our earnings, our quarterly results will vary substantially from quarter-to-quarter.

Perhaps, the most relevant thing for me to highlight is that we ended the quarter with $514 million in cash after raising $420 million in the public offering. We have no debt, and the [$50 million line] of credit is untapped. As I said, Erik will go through the financials in more detail.

These are very exciting times for us. Our management team has been working together for many years to bring our irreplaceable assets to this point. Together, we will move the next phase of our strategy forward, a strategy of harvesting the value created through years of planning and entitlements for some of the best land parcels in the state, in some of the most desirable markets with extremely limited supply.

California has had a major housing shortage for several years, which is now being characterized by some public officials as a crisis. The California Department of Housing and Community Development stated that over the past decade, the state has had a deficit of 1 million homes built. Assemblyman Chiu from San Francisco said that California is in the most intense housing crises in its history. And last month, Governor Brown stated the housing crisis is his next priority.

With 40,000 home sites and 21 million square feet of commercial development opportunity within our three communities, we control a significant amount of the inventory available for development in San Francisco, Los Angeles, and Orange County. The flexibility of our entitlements allows us to change users and product offerings to adapt and reassign to market demands. The critical mass of each of our communities allows us to build infrastructure and amenities that add incremental value to our landholdings.

We build state of the art schools, sports park, music venues, and other amenities. Our 21 million square feet of commercial space provides additional demand for housing, obtaining a valued job-housing balance in our communities. Our amenities, like regional sports and music venues, further add to the demand for commercial space, hospitality, and food and beverage venues.

Five Points stands for live, work, play, learn, and connect. These are the five elements that power the virtuous circle in each of our communities. Our organic growth will be driven by building and operating our commercial land, and by repositioning and enhancing our entitlements to meet regional demands.

Our strategy is to capitalize on our residential land by selling developed land to builders, typically with profit participation on home revenue, and by redeploying the cash into building our commercial portfolio. As opportunities present themselves, we will seek to enhance our entitlements by working with our local public agencies, with whom we have had decades of long relationship to amend our existing entitlements for highest and best use.

Our clean balance sheet is our safety net if market conditions were to change. It also provides us the capacity to access the public market, I'm sorry to access the public debt market for future capital needs. We are currently adding members to our commercial team, which we'll execute on our commercial strategy.

We are a pure developer, a pure California developer, and view ourselves as a partner with the state. We expect that our communities over the course of their development will generate around 300,000 jobs and contribute approximately $55 billion in the economic benefits to the California economy. We expect to provide approximately 6,000 affordable homes for people who meet affordability requirements.

We are funding and building schools, and dedicating approximately 10,000 acres to open space. Our net zero greenhouse gas emission plan at Newhall aligns us with the government's agenda of having California be a global leader in setting new standards for greenhouse gas deductions.

We know California and California knows us. Now let me walk you through each of our communities and highlight some of the recent developments that have taken place. As I do, you will see that we are already executing on our strategy in each of our communities.

Let me start with the Great Park neighborhoods in Irvine. Our builders continue to see strong home sales. We currently have two active neighborhoods, Beacon Park, with a total of 1,029 homes, is 96 percent sold out; and Parasol Park, which opened earlier this year, has 727 homes and is 46 percent filled out. By Q1 2018, we anticipate that Parasol will be substantially sold out. We are currently finalizing our builder selection and completing our agreements for the sale of our next neighborhood. Cadence will have 1,007 homes and 14 [products]. Our sales to the builders are anticipated to close in Q3, and the grand opening of the models by the builders is scheduled for early spring next year.

We continue to build our infrastructure and amenities. Last Saturday, we had the grand opening of the first phase of our world-class sports park. Thousands of people came to celebrate, and we had excellent media coverage across Southern California. We expect that by early summer next year, the sports park will be completed, which will be approximately two and a half times the size of Disneyland. The 270,000-square-foot community ice facility being built by the NHL's Anaheim Ducks is anticipated to open next year, which includes the FivePoint ice arena within its confines. And the 12,000 seat, live music, FivePoint amphitheater with LiveNation will celebrate its first concert this October.

For those who have tracked our commercial activity within the Great Park neighborhood, you will recall that our Great Park venture sold approximately 73 acres of land to Broadcom Corporation in 2015; on which Broadcom intended to build a 2 million square foot corporate campus. Today, I'm extremely excited to announce that we have taken a major step forward in our commercial business by acquiring the campus back from Broadcom. The newly named Five Point Gateway is comprised of approximately 1 million square feet and four buildings. Seventy seven percent of the space is already leased. In newly formed venture, in which we own 75 percent is the acquirer. The other 25 percent is owned by affiliates of two of our existing partners in our Great Park venture. Five Point is the managing member.

The Broadcom transaction is a very good example of our long-term strategy and our discipline of controlling all the parts of our master plans. Broadcom started building approximately 1 million square feet and had the entitlements to build approximately another 1 million square feet of buildings. In the sales to Broadcom, we restricted the use of the site, and retained certain rights to repurchase if they decided to sell the campus.

On May 19, 2017, we filed an eight case disclosing an intent to exercise this right to repurchase. The transaction that closed today included not only the purchase of the entire campus, but also the future entitlements and the price was $443 million.

That is the price that the large institutional real estate investor had signed the contract for. The new acquiring venture will convey the future entitlements, the unbuilt building square footage originally planned for Broadcom Campus to the Great Park neighborhood venture to be used on other undeveloped plans within the Great Park neighborhood.

As we build our community, we will seek to convert these entitlements to the mix of uses the market drives. However, let me give you a feel for what those entitlements can be converted to. If all is converted to office use, that will equate to approximately 734,000 square feet. If all were converted to apartments that will equate to approximately 1,300 apartments. And if all is converted to for sale residential, that will equate to approximately a thousand home sites. And we, of course, have the ability to provide a mix of those uses commercial, retail, and residential.

Erik will walk you through the capitalization of the deal. However, this transaction establishes a solid foundation for our commercial operation. The stabilized NOI is currently anticipated to be approximately $27 million. Additionally, we anticipate providing for a meaningful upside to our Great Park venture with the deployment of the future entitlements.

At Newhall in Los Angeles County, we have been working for the past 14 months on revising our plans to respond to the directives by the State Supreme Court dealing with two issues the court determined needed further analysis and corrective action before we are clear to start development.

The main one is further analysis of greenhouse gas emissions. On June 14, the California Department of Fish and Wildlife preapproved our plan and certified that our net zero emission plan will offset 100 percent of the project's greenhouse gas. It's further stated that the two issues are resolved. And in its press release stated that Newhall will be the largest net zero greenhouse gas emission project in the nation.

Further, on July 18, the County of Los Angeles held a public hearing and reapproved the maps for our first two villages, which add up to approximately 5,500 home sites in 2 1/2 million square feet of commercial. The hearing was attended by hundreds of people; the vast majority of whom came in support of our project.

In addition, there were over 1,000 support (inaudible), and [two dozen] leaders and stakeholders, representing various business interest, environmental groups, housing advocates, and labor constituents, gave supporting testimony. These approvals put us on track for what we anticipate to be the start of development by the fall of next year once we go through the court system. The amount of unprecedented support the project has received is very refreshing. We believe that the enthusiasm of the environmental community about our net zero greenhouse gas, as well as the need for housing and jobs, has put a very positive light on Newhall.

In San Francisco, (inaudible) recent home sales have started to show that the gap of price per square foot between Downtown San Francisco and the Shipyard is starting to close. The most recent home sales have been at the value per square foot that is close to other sales in the city.

In the first quarter, we closed the sale of 3.6 acres approved for 390 high-density residential over retail. We received the price of $91 million at closing. In addition, we will receive approximately 90,000 square feet of ground floor retail space which will be reconveyed to us concurrent with the completion of the buildings, housing, the residential units that sit above retail space.

We recently completed a building which houses a modern commercial kitchen, it acts as an -- I'm sorry, it acts as an incubator for about 50 small catering businesses. Over the next few weeks, we will start site preparation for a new studio, building [any] gallery for 90 artists. These amenities will define the unique character of our master plan.

The [message] venture has revised its retail plan to create a more urban feel. As a result, the infrastructure plans were revised to be consistent with the design, and the anticipated start of construction got pushed back. The grand opening is anticipated to occur in mid-2021.

On July -- on June 13, the San Francisco Board of Supervisors unanimously approved amending the redevelopment plans for the Shipyard and Candlestick, exempting the office development from the restrictions imposed by (inaudible). This approval gives us a meaningful advantage over all other office projects in the city, which compete for allocation of the allowed amount of office construction annually. In addition, we have started the process of amending the disposition and development agreement to increase the total amount of commercial use by over 2 million square feet. Most of which we anticipate will be for office use.

As you can see, we have been busy. Everyone in the company understands the strategy and everybody knows the playbook very well. We all have been on the same team for a long time. Our results will be driven by us continuing to execute on our unmatched efforts.

Over the next quarters, we will report on the progress in each of the areas which contribute to our financial results. We will approve our baseline of that of the value of our land. As we report sales to builders and as we build our commercial land, we will grow our recurring income. We will report an additional infrastructure and amenities, which create additional value for our residential and commercial land. The Irvine Company, which we co-exist within Orange County, has proven up the virtuous circle on a mixed use master plan. And as we go forward, you will see the parallels between our two companies.

Now, let me turn it over to Erik and then we will be happy to take questions.

Thanks, Emile, and thanks to everyone for joining us this afternoon. As Emile mentioned, our land positions are located in California's most desirable and supply-constraint housing markets. As a reminder, we own 100 percent of the Newhall Ranch in Los Angeles County, 100 percent of the Hunters Point Shipyard and Candlestick Point in San Francisco, and a 37 1/2 percent interest in Heritage Fields, LLC, which are the entity developing the Great Park neighborhoods in Orange County.

Our economic interest in the Great Park Neighborhoods is closer to 40 percent when taking into account the incentive compensation payments that we earn as the manager of the joint venture. With our ownership positions in these three communities, the foundation for the company's growth is already in place. Our focus is on execution of the business plan and harvesting the value embedded in our communities.

Our earnings from quarter-to-quarter will not be consistent since we are not a traditional manufacturing business. Our residential land sales are market driven and are timed to maximize value when homebuilders are winding down sales activity in our existing neighborhoods, and are sufficiently capitalized to purchase home sites in our new neighborhoods. Our current efforts at the Great Park Neighborhoods is a perfect example of this, where we have positioned the next 1,000 home sites for sale at Cadence Park, while our homebuilders are nearing the sellout of their inventory at Beacon Park.

As we redeploy cash flow from residential land sales into investments and income-producing assets within our own communities, we expect to have a growing foundation of consistent earnings, which will mitigate the inconsistency of earnings from land sales. Fortunately, the company is uniquely positioned with significant asset value and virtually no debt on its consolidated balance sheet after many years of investment in planning and entitlements. This affords us with the financial and operational flexibility to react to market conditions in order to optimize the timing of our residential land sales and to achieve the highest values and to limit investment risk in a cyclical industry.

Our 10-Q for the second quarter will be filed with the SEC tomorrow. A summary of our quarterly results are included in the earnings release, which was issued earlier this afternoon. The financial results for the second quarter reflect the completion of our IPO in May and our continued investment in our three communities.

Focusing first on our liquidity and capital position, we started the year with $62.3 million in cash. As of June 30, we had 514.4 million of cash and cash equivalents. The 452 million increase was primarily due to the closing of the IPO and a private placement in May of 2017, which generated approximately 420 million in net cash proceeds after paying underwriting discounts in commissions, and collection of the last $30 million installment of the $120 million capital contribution from the prior owners of the San Francisco venture.

In January, we sold 3.6 acres at Candlestick Point for 91.4 million. The parcel is planned for up to 390 for sale attached homes adjacent to the proposed [Mays Ridge] Retail Project. Because the purchase in sale agreement for this transaction was marked to fair value at the time we acquired the San Francisco assets, back in May of 2016, the earnings related to the sale were minimal. As of June 30, we have deferred 10.3 million of revenue from the sale, which will be recognized as we complete certain infrastructure improvements.

In April of 2017, the operating company entered into a 50 million senior, unsecured revolving credit facility that provides for borrowings and issuances of letters of credit. The facility has an accordion feature that will allow the company to increase the maximum aggregate amount to 100 million, subject to certain conditions including the receipt of commitments from additional lenders. The facility has an initial term of two-years, with two options to extend the maturity date, in each case by an additional year; subject to satisfaction of certain conditions, including the approval of the administrative agent and other lenders.

Borrowings under the facility will bear interest at LIBOR plus a margin ranging from 1.75 percent to 2 percent based on the operating company's leverage ratio. No funds have been drawn on the facility to date.

Total capital of the company at the end of the second quarter was 1.9 billion, reflecting 2.4 billion in assets and 569 million in liabilities. It's worth pointing out as a result of the purchase accounting, in connection with the formation transactions of May 2016, the company recognized assets and liabilities acquired in the business combination at fair value. Since Newhall was the acquiring entity in the formation transactions, Newhall's assets are not recognized at fair value and continue to be stated at historical basis on our balance sheet. Of the 2.4 billion in total assets of the company, only 397 million are related to Newhall.

Our operating results for the quarter are as follows -- total revenues were 13.2 million for the quarter and there were no significant land sales. Corporate and divisional G&A was $28 million for the quarter. Approximately 60 percent is related to compensation in employee-related costs with the majority of the balance being legal fees associated with Newhall, professional fees for tax, audit and consulting services as well as marketing expenses. The value of our investment in Heritage Fields LLC, which owns the Great Park Neighborhoods, decreased by 2.4 million due to the second quarter operating results for the joint venture. There were no land sales at Great Park Neighborhoods in the first or second quarters of 2017.

The consolidated net loss for the quarter was 24.3 million. Fourteen-point-five million or just under 60 percent of the loss was allocated to the non-controlling interests, resulting in a net loss attributable to the company of 9.8 million.

The last thing I'd like to touch on is the Broadcom transaction, which we announced earlier today. This is an exciting opportunity for the company, and as Emile mentioned embodies multiple aspects of our business strategy and provides an example of how we intend to capitalize our commercial opportunities. Five Point will own a 75 percent interest and be the manager and the entity, which is acquiring the property. The purchase price for the entire campus was $443 million. The campus includes four buildings totaling just over 1 million square feet.

Broadcom entered into a 20-year triple net lease for two of the buildings totaling approximately 660,000 square feet. In addition, subsidiaries of Five Point and Lennar Corporation have each entered into 10-year full service gross leases for an aggregate of approximately 135,000 square feet. These three leases represent approximately 77 percent of the total leasable square footage in the campus.

We secured at 339 million non-recourse loan to finance the acquisition and future tenant improvements in capital expenditures. The total required equity to close the transaction was 142 million, of which Five Point contributed 75 percent or 106.5 million. We expect the annualized, stabilized net operating income from the campus to be approximately 27 million in cash flow after debt service of approximately 13 million per year. Five Point's share of the NOI would be 20 million, and its share of the cash flow after debt service would be approximately 9.6 million per year.

We believe this is a great use of the company's capital in terms of the pure economics of the transaction, the additional benefit of transferring the excess entitlements to the Great Park venture, and our ability to access the debt markets within the next year, demonstrating our commitment to building a portfolio of income-producing assets.

With that, I'll turn it over to the operator for questions.

(Operator Instructions) Our first question comes from Bob Wetenhall with RBC Capital Markets.

Good afternoon and congratulations on becoming a public company and having your first earnings call. Emile, just to drive a deeper understanding of the strategy that underpins Five Point, it's a unique animal, and I wanted to see if you could take a minute to explain what differentiates Five Points from other home builders who are typically your customers? What are the key distinctions between you and other companies in the land business?

Bob, thanks, Bob, and nice to hear from you. Well, there's a -- this is a two-part question, and I'm going to start with the second part, which is what differentiates us from other land companies. We are unique and that we are a California developer. Our assets are all 100 percent in California. We're also in the coastal markets and the primary markets of the state. And the size of our community is allowing us to do some things that really become analogous to building cities within cities.

A lot of the land developers have to prove up a market because they are building in the secondary or tertiary markets. We have the luxury of building in markets that have already been established, like San Francisco, like Orange County, and like L.A., and therefore we don't have to, for instance, rely on rooftops to prove up to commercial because the market's already in demand.

Also, our focus on California and our long history in California gives us a big ability to really have a partnership with the state and with public agencies. And as I said before, we always say we know California, but more importantly California knows us. And as you know, in our business, it is very, very important to have the credibility with public agencies because we need that partnership for things to happen.

In terms of the home builders, I think you're talking about two separate businesses. The home building business is the business of mass production of homes. And land for a homebuilder is a component of the home and therefore it's viewed really as a commodity rightfully so. The -- how it impacts the margin, meaning land, is all dependent on the price that the builder pays for the land as well as the timing of the land.

For us, we look at land as a living asset. We're daily working with our land assets to keep on increasing value. And because of the size of our communities, we really have an ability to truly create a virtuous circle. Every component that we build ends up creating the positive momentum for the other components, whether it's residential to commercial, commercial to residential; the amenities create the demand, as I said before.

So it's really a living asset, and it could go into perpetuity because once we build our income producing and once we start generating that, we still own the land and we can go back and repurpose that land, and we can intensify. We can adjust in real time to market conditions long-term. So it's totally different businesses, Bob, and I'm glad you asked that question because it's very important to highlight that land is not the same for a manufacturing business than for a massive developer business.

That makes a lot of sense. The Broadcom deal sounds like a new and very positive to development for the Five Point platform. What size of commitment are you making to the commercial space? What should we expect on the commercial side of the business going forward?

Well, you should expect us to do exactly what we said on the road show and during the public offerings, which is to take our cash from our residential sales, redeploy that in our commercial opportunities, and over time build our commercial land. We then will create a revenue stream that takes care of the bumpiness of land sales and provides us with that stability of earnings. But more importantly, it also gives us an ability to control that component of our massive [bank] community both as an amenity and also as a value that goes up as the community gets built. And as I said before, we always are thinking five and 10 and 15 years down the road, and providing ourselves the flexibility to go back and repurpose the land either because conditions change in terms of demand or because of the maturity of the community requiring something that's more intense. So we will be making more announcements as we go. We are currently in the process right now of our next [land] opportunity and expect us to be in that space in a big way.

Got it. That sounds like the tip of the iceberg and very promising. One question for Erik and then I'll turn it over. It sounds like you had a very profitable land sale of 3.6 acres at the Shipyard for $91 million. How does that impact the net asset value of the portfolio? And how should we be thinking about NAV going forward? Thanks and good luck. Congratulations on a nice start.

Thank you.

So, the sale in San Francisco was for 3.6 acres, and a total cash received was 91.4 million. I think that works out to about $25 million an acre, which I believe is you know substantially higher than what we disclosed on the road show.

Yes. And we basically said that we look at our NAV value breaker on a mixed basis at about $16 million an acre. Obviously the use ends up having an impact with that. But the answer to your question, Bob, is this substantiates our NAV valuation. And as we go through the quarters going forward, you will see that every land sale will act as another substantiation of the NAV valuation of the company.

Yes, it's a nice validation of what you talked about on the road show plus the development of Broadcom is also very positive. Good luck next quarter. Thanks for the clarity on the strategy and best wishes. Thank you.

Thanks, Bob.

Our next question comes from Nishu Sood with Deutsche Bank.

Thank you. And also congratulations on the first conference call and the IPO. I wanted to ask about, you know, in terms of setting goals and targets. And I think Erik and Emile, you both mentioned this; I wanted to get a sense of how you expect to do that. I think you said you might do that by the yearend. Obviously, there's a lot going on and so helping us to understand. What can we expect in terms of what kind of goals and targets you might lay out for us?

Hi, Nishu. Again, nice hearing from you. Look, that's something that we are discussing internally a lot. We know that all of you need to see guidance from us. And because of the fact that we are a different company than a homebuilding company, our guidance is going to be a little bit different than what you would expect from a homebuilding company.

Right now, for instance, on this call, I've already said that you should expect the sale and total to happen of about 1,000 home sites to happen by Q3. We even went into some of the things that will happen even in later years. But we're working through that, and I think you should expect us to give you feel for land sales that are coming and give you a feel for when they're going to come within, you know, which quarter.

As we do our commercial opportunities, we will be giving you guidance on when we expect to break ground and when we expect to deliver. These are long term, these are not quarter-by-quarter, but we will -- we're working on all of that. And on the financial side, we've been spending a lot of time, Erik and I, trying to think about some type of guidance that we can give you that is meaningful in terms of financial matrix. And it just gave us another quarter to work through that, and hopefully we'll be able to give you something that will be helpful.

Got it. No, that sounds good. Also, I just wanted to ask about the tone that you're sensing from the builders. So far this year, public home builders in particular have stepped up their intent and their pace of land purchases. So, clearly, as a provider of that, I mean a lot of -- it seems as though a lot of the incremental dollars are going towards the entry level. So perhaps less of an effect on you, folks, but I wanted to get your thoughts on the conversations you're hearing, the intent from the builders, whether you've sensed any change on your side?

Yes. So we have been going through a process at the Great Park Neighborhood of our sales. We have had discussions and proposals from multiple builders. And I can tell you that there's a great amount of interest from the builders to be there. We are not the entry level, but still this is a very important market for the builders because of its -- you know, it's a safe market that has a huge imbalance of supply/demand. Job creation to permit is a high multiple. But I can tell you that -- the best thing I can tell you is we recently, in the last two, three weeks, have seen builder's proposals and have been meeting with builders. And there's a huge amount of interest at the Great Park.

Okay, thank you.

Sure.

Our next question comes from Michael Rehaut with JP Morgan.

Hi, it's actually Jason Marcus in for Mike. First question is on Newhall Ranch. Great to see that you received the re-approvals there. But just wanted to get a little bit more color on what the current timeline looks like for the project. And what legal issues, if any, may still be in front of you prior to commencement and development?

Hi, Jason, thanks. So I'm going to try to take something that is really complex and do it in a way that is a little bit simplified. So we, technically speaking now, are approved. In other words, we have an ability tomorrow to put the shovel in the ground if we choose to, assuming that we -- even if we get sued. But today, we are technically approved, and we can start development, which then puts the burden on the plaintiff's to file for an injunction in the courts. And of the courts rejecting junction, then that gives us the ability to go forward with development.

The reason I said we are still on track for next year is because I want to be conservative and because I'm assuming the worst that we will be sued and that we will fail if we move forward with development in terms of an injunction. Having said that, because of the fact that we went to a net zero, which is a standard that has not been established yet and [established] that goes way beyond the expectation of the environmental community, including people, I think, who have sued us. We have been spending time with the opposition, educating them on all of the things that lead us to a net zero. And our hope is that they will look at it now as a new standard that was not expected, and maybe we'll be able to move forward faster. But we wanted to stay true to what we said before and be on the conservative side.

Okay, great. And then moving on to your capital news. I just want to get a sense of how you're thinking about your funding requirements and needs relative to this current project pipeline, and how much runway you have before an additional capital raise and what's inside of that might look like?

Sure, I'm going to let Erik tell you so I don't misstate exactly the timing of the cash. But as we said we are sitting on a lot of cash, we have clean balance sheet. We will expect that sometime within the coming year or so, within the coming few quarters, we will access the public market. As you know the public market seems to be favorable right now. We don't expect to go back to the equity market again. But I mean why don't I let Erik tell you what at least are our expectations in terms of timing of when we would need to raise capital.

Sure. So as we mentioned at the end of the quarter, we had $514 million of cash. Obviously, the Broadcom deal that was just announced today, we've used 106.5 million.

The way we're looking at it going forward is there will be points in time where we do need to raise capital. And as we get closer to the commencement date of Newhall Ranch, we view that as an opportune time to tap into the debt markets.

We feel our balance sheet is in really good shape right now, to be able to do that. And we are talking to our bankers and our advisors about our prospects of possibly tapping into the high yield market, within the next year to raise in the neighborhood of you know $300 million to $350 million.

So we have plenty of runway right now. Our burn rate is sufficient. We'll have plenty of capital for the next year to 18 months. But we're always assessing windows in time that might be advantageous for us to raise additional capital and improve our liquidity position. But it's really tied to the commencement of Newhall Ranch, and so we're monitoring that closely.

Okay, great. Thanks.

Our next question comes from Stephen Kim with Evercore ISI.

Yes, thanks very much, guys, and, yes, again, let me add my congratulations. It's nice to be on this side of things, I'm sure. I wanted to ask regarding Great Park. You were talking about targets with an issue earlier. And I guess, perhaps, we might get a sense for would you least think the multi-fam/single-fam split might be, or if you have maybe a generalized revenue target for the 1,000 lots or something like that?

Yes. I think that, first of all, Stephen, nice hearing from you. And it is nice be on the other side of this. We're excited to be finally acting as a public company. Yes, in terms of the Great Park, in terms of the [mix], currently everything we've done has been for sale. We have actually, today, filed an application for our next map, which actually two of them, one will be pure residential and the other will be actually commercial and residential. And within that there might be a thought process here to have some for rent that actually would be more conducive to the mix use nature of the commercial village. But in terms of the mix, you have to assume right now that we're doing for sale and not doing for rent.

In terms of guidance, look, I -- we said that we look at the NAV valuation at the Great Park Neighborhood in the range of about $4 million an acre and I think in terms of what we get paid. And I think you should expect that we definitely will be at least consistent with that.

Okay, great, that's helpful. And then with regards to the Broadcom repurchase, you had mentioned your goals for -- or your expectations for a stabilized NOI. And I was curious as to -- if you could give some sense of the timing of when you thought we might see stabilization? I know you're a good ways there. But just when you're referring to stabilization, when were you thinking that, that was likely to happen? And also the structure of the purchase and the asset being held in a JV, is that likely to be the preferred structure in other projects when you do -- you take on some commercial?

Well, I mean look the reason why this was structured in a JV is because the lead purchase opportunity that we had when we sold the Broadcom was an opportunity that was available to the members of the Great Park Neighborhood venture. So that was an opportunity for the members, and some of those members chose to budget space obviously based on the fact that our percentage is 75 percent in the Broadcom Venture versus 37 1/2 in the Great Park Neighborhood. Tells you that we have -- we took more of a percentage of that.

So I don't know whether the opportunities going forward will be structured in venture are wholly owned. Those will be strategic decisions. As you know, in San Francisco, we made a decision to be a 50/50 partner with Mays Ridge because partner with somebody that has the expertise and the credibility to build such a product. So expect us to be looking at those decisions more from a strategic point of view than from a capitalization point of view.

As to the timing of Broadcom, the good news for us is we closed on the transaction with 77 percent of the space already leased. And it's not leased to anybody, it's leased to people that we feel have the credit and the relationship with. So we're extremely comfortable that we start from that place.

We have been so busy with the transaction that we have not had really the opportunity to go and test the market, and we are currently in the process of working with brokers. So we don't know really who's out there in the market, we hear a lot of noise who might want to lease the balance of it. And that might happen very quickly if we have a big user, which means that the stabilization would happen sooner rather than later. But right now, we're conservatively assuming somewhere between two to three years before we get to that stabilized number. But as I said we're starting with 77 percent already.

Yes, yes, so it could be quicker for sure. Okay, that's helpful. And then in San Francisco, I think you had mentioned that you were working on the additional two million square feet. I was curious if you gave us some sense of when this could be finalized. And then you had mentioned Mays Ridge was choosing to redesign to give it a more urban feel, that mall, and delaying the opening. So I just wanted to get a sense for -- if you maybe you can elaborate on the rationale for the change and the delay, a little bit more color on what you mean by redesigning it to more urban feel at this point? Thanks.

Sure. So the 2 million square feet, when we entitled the community, we entitled it to allow it to have the additional 2 million square feet. And if you recall, we discussed the fact that we entitled it for a stadium 49ers to stay there and for the 49ers to not be there. So we had two alternatives. And the assumption that we had was obviously that if the stadium were not to leave, it's staying to be there, then we would have the 3.1 million square feet of commercial that we basically had our business then structured around.

The approvals themselves gave us the ability to go to the 5 million, so the good news is we don't have to go through a lengthy process. But we have to go back now and amend the plan that is attached to our developer agreement with the city to go ahead and allow for the 5 million square feet. We don't see that as a lengthy process, we think that sometime by next year, probably less than a year from now, that will be concluded. And obviously that will be way ahead of any timing of starting a major office project anyways. So it's not a critical path.

Yes.

But that's going to be concluded in 2018. And as I said, we've already taken the first step in that direction with the board of supervisors.

Yes, yes.

As it relates to Mays Ridge, that's the -- Mays Ridge is the managing member of the Mays Ridge [rancher], and obviously we look to them and their expertise, and they have a finger on the pulse in where the world is heading in retail. And what ended up happening over the last few months is a redesign of the original conceptual plan of the mall itself to make it more efficient from a construction and parking perspective as well as give it more of an urban feel, mainly have the mall lot rather than in the inward looking be more outward.

And if you recall, we own a lot of areas around that mall that we are planning to have a very much -- an activated lifestyle mixed use community with cafes and things like that on the sea. So the mall basically now has more synergy with that and becomes a part of a much larger entertainment area rather than a standalone.

Yes, that sounds great, actually. Okay, great. Well, I appreciate the color and congratulations again.

Thank you, Stephen.

(Operator Assistance) Our next question comes from Alan Ratner with Zelman & Associates.

Hey guys, good afternoon, and I'll add my congrats. I'm sure you're not tired of hearing that yet. But congrats on all the progress. So first question on the Great Park, just looking at the home sales trends that you reported, it looks like you added some pretty nice activity especially in Parasol Park, if I'm calculating it right, versus some of the data you gave on the road show; it looks like an absorption rate of about six sales per month per community there over the last three or four months.

So I was just curious if you can maybe give a little bit of color on what type of pricing activity you're seeing or hearing from your builders. Are they raising prices? And if so, what magnitude and just generally how you're thinking about the pricing for the next phase of lot sales coming up in the third quarter? And then just with regard to those lot sales, should would expect all of those to close in the third quarter? Or is that going to be bled out over a quarter or two? Thanks.

Hi, Alan, thank you very much for the congrats. Yes, we are not tired. And if you want to send another email with congrats, we'll take that as well. So the Great Park Neighborhood, they -- you're right, we are seeing a much higher rate of absorption. There's a lot of excitement at Parasol. And I think a lot of it is driven by the fact that people now can see the schools. And this summer a lot of people were vying to enroll their kids in the state of the art schools that have opened.

Our second case (inaudible) is under construction and will be opening next year. So schools have been a huge factor in attracting people, and that is something that I think is driving a lot of it. The Great Park itself now is finally open and what we opened over the weekend, last weekend, has been overwhelming, and now people can see all of the amenities, the ice facilities under construction. So I think people today realize the uniqueness of this community and wanting to be there. And I think that's driving a lot of sales for our builders.

In terms of pricing, it's very difficult for me to give you a sense of the pricing just because obviously we're not the ones selling, the builders are. And I see the sales report. But I don't need to tell you that sometimes the sales report could have -- could be confusing because of the mix of products, because of everything else.

We're hearing from our builders that they're very happy with the sales and that, you know, prices seem to be moving the right direction, but I can't give you more color. In terms of land price, first of all, all of the closings will occur at the same time within the same quarter so there's nothing that's going to bleed into a future quarter. It's going to be a [1,007 home] (inaudible) within the same period. The only thing I can tell you is that, we are going to see a price and we expect to see a price breakers that is higher than the price that we received for Parasol.

That's all I can share right now. But, hopefully, that will give you comfort to the value creation at the Great Park.

Yes, that's great, that's definitely helpful, appreciate that. And then Erik, just wanted to confirm on the Mays Ridge timing, the 2021, I had in my notes that you guys were going to start to -- or I guess start to recognize JV income there I think in 2021 or 2022. So what exactly was the date that is being pushed back and what was that previously? I just want to make sure I'm understanding exactly when you're going to actually start to recognize profit from Mays Ridge now versus what your prior expectations were.

Sure, let me take that one. What I -- just because I'm the one who actually touched on it. What I said is there has been a delay in terms of the start of construction. I think the efficiency of the project itself allows the project to be built faster than originally expected. We knew that there was going to be a redesign when we were on the road show and the whole process. And our 2021 anticipated that there would be a delay from the original thought of when the mall was going to be open.

Which I don't recall, but I think Mays Ridge at that time thought it was going to be some time in 2019. So we are currently consistent with what we shared with everybody that we will -- that the mall is supposed to open 2021. So there's not a change from when it's supposed to open. I just wanted to highlight the fact that construction got delayed, you know to start.

In terms of when do we see cash? Obviously that's a venture and the venture will make decisions for -- in terms of distributions. So we have the grand opening in mid-21, that's the expectation and when the venture decides to distribute cash, that's when we will start seeing it at the Five Point level.

Thank you very much for that clarification, Emile. Good luck, guys.

Thank you.

There are no further questions. I would like to turn the floor back over to Emile for closing comments.

Thank you very much for being with us today, I don't know if you guys went light on us because it's our first and we're rookies, but we appreciate everybody being on the call. I think we heard loud and clear what you all are looking for and what our investors are looking for. And I can assure you that we are working very hard at making sure that what's going to help you do your job is something that we will provide. And I know that the guidance is very important to you and we're going to get there. But what's more important was to show you that since May 10, when went public to today, as you can see we have made a lot of progress in every area that we talked about on the road show. And I hope that as we go forward, you will see that we will execute exactly the way we told everybody we were going to execute.

So with that, thank you very much and we'll talk to you in three months.

This concludes today's teleconference, you may disconnect your lines at this time and thank you for your participation.