Op-Ed: Some (Very) Basic Information about FivePoint

  • July 29, 2019, 10:00 am America/Los_Angeles

Introduction

Five Point Holdings LLC (“Five Point”) is one of two primary developers in Irvine. The other is Irvine Company. In this article, we examine basic facts about Five Point. This is just a little of the information a potential investor would routinely look into before investing. Our goal is not to be critical, but simply to provide background. In the national political climate, there are some who attack large corporations generally. That is not this article. (Note: The company often goes by “FivePoint,” but in legal filings uses the two-word “Five Point.” We use the latter but consider the two interchangeable.)

Five Point’s Three Large Projects

Five Point is a publicly-traded real estate company based in Irvine. It has three main development projects, all in coastal California: Great Park Neighborhoods (Irvine), Newhall Ranch (North LA County), and San Francisco (Candlestick Point/Shipyard). Five Point describes these projects in its June 2019 10-Q filing with the Security and Exchange Commission.

The following summary of its projects is taken from the 10-Q:

Great Park (Irvine)

“Great Park Neighborhoods consists of approximately 2,100 acres in Orange County and is being built around the approximately 1,300 acre Orange County Great Park… In the first quarter of 2019, Great Park Neighborhoods received approval to develop an additional 1,056 homesites.  As a result of the approval, Great Park Neighborhoods is now designed to include approximately 10,500 homesites and approximately 4.9 million square feet of commercial space.”

Valencia (North LA County)

“Our Valencia property (formerly known as Newhall Ranch) consists of approximately 15,000 acres in northern Los Angeles County and is designed to include approximately 21,500 homesites and approximately 11.5 million square feet of commercial space.”

San Francisco (Bayfront North of San Francisco Airport)

“Located almost equidistant between downtown San Francisco and the San Francisco International Airport, Candlestick and The San Francisco Shipyard consist of approximately 800 acres of bayfront property in the City of San Francisco. Candlestick and The San Francisco Shipyard are designed to include approximately 12,000 homesites and approximately 6.3 million square feet of commercial space.”

Note: Part of Five Point’s holdings in San Francisco (“Shipyard”) is a decommissioned Navy base that may need decontamination. (see Five Point Earnings Call, June 2018)

Five Point (FPH) Financials

Potential investors investigate a number of key data points. If you wish to dive into that, this article will explain what to look for. We share just a few points.

As noted, in the Irvine market there are only two developers, Irvine Company and Five Point. (Five Point Earning Call, May 7, 2019, p. 7). Irvine Company is privately owned and does not file disclosures with the SEC. (“Irvine Company is a private real estate investment company”). Consequently, relatively little is publicly known about Irvine Company finances.

More financial information is known about Five Point because it is publicly traded. As with any public company, it discloses detailed information to the SEC every quarter.

Five Point’s stock first appeared on the New York Stock Exchange (NYSE) on May 10, 2017. Its ticker is FPH. The stock debuted at $15.20/share. On July 25, 2019, the stock closed at $7.39. Basic financial data about the stock, the company’s balance sheet, and the like is here.

As of today, the market capitalization of the company is about $500 million.

Executive Compensation

It is common in the corporate world for top executives to be paid a lot. Some feel the executive team is one of the most important factors in the success of a company. Top executive talent is hard to find, and companies pay well to attract and retain it. (“Properly crafted, an executive compensation plan can help attract top-notch talent, retain best performing executives…help ensure the company’s goals are being reached.”)

According to public filings, total compensation (equity and cash compensation) of key Five Point executives in 2018 is as follows. Compensation is down significantly compared to 2017.

  • CEO, Chairman, President: $6,702,891
  • Co-Chief Operating Officer: $3,128,685
  • Chief Financial Officer: $3,103,685

* Note: Some of this compensation is restricted stock and presumably can’t be sold for a certain period of time. Consequently, the value of this portion of compensation will ultimately depend on how the stock performs in the future.

We take no position on whether this is too much or too little or just right. But perhaps it’s helpful for Irvine residents to know. A member of the Irvine City Council earns about $10,800/year, plus a car allowance for the miles they drive, and sometimes health and a minor contribution to a pension plan. They frequently attend community events, represent Irvine on other boards, and prepare for and attend Council meetings.

On an hourly basis, Council members may be earning less than minimum wage. Serving on the Council is, in most cases, true public service. As far as compensation, corporate executives and Irvine Council members are different creatures.

Questions

1. As in all publicly traded companies, Five Point’s board and top executives are under pressure from shareholders, financial markets, and stock-based compensation programs to maximize shareholder value. How does Five Point balance maximizing its own value with doing what is best for the Irvine community?

2. Irvine Company has a long track record in Irvine. It feels it has a reputation for careful planning and commitment to the City (e.g. donation of land to permanent open space). Five Point is a relative newcomer. Without much history in Irvine, how can Five Point fully earn the trust of local residents?

 

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