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What changed in Five Point Holdings, LLC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Five Point Holdings, LLC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+230 added−242 removedSource: 10-K (2024-03-04) vs 10-K (2023-03-06)

Top changes in Five Point Holdings, LLC's 2023 10-K

230 paragraphs added · 242 removed · 195 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

39 edited+6 added−4 removed105 unchanged
Biggest changeWe may develop and operate these properties on our own, or we may choose from time to time to develop and/or operate a particular property or properties in a strategic joint venture or other financing or entity structure with a third-party. 4 Table of Contents Factors we consider in determining whether or not to proceed with a particular commercial investment include (1) our existing knowledge of the mixed-use planned communities we are currently developing and understanding their respective needs, (2) whether, in our judgment, a particular commercial property or investment will create additional value for our remaining land within the community, in addition to achieving desired investment returns on such property or investment on a stand-alone basis, (3) existing entitlements and our ability to change them, (4) compatibility of the physical site with our proposed uses, and (5) environmental considerations, traffic patterns and access to the site.
Biggest changeFactors we consider in determining whether or not to proceed with a particular commercial investment include (1) our existing knowledge of the mixed-use planned communities we are currently developing and understanding their respective needs, (2) whether, in our judgment, a particular commercial property or investment will create additional value for our remaining land within the community, in addition to achieving desired investment returns on such property or investment on a stand-alone basis, (3) existing entitlements and our ability to change them, (4) compatibility of the physical site with our proposed uses, and (5) environmental considerations, traffic patterns and access to the site. 4 Table of Contents In August 2017, the Gateway Commercial Venture, in which we own a 75% interest, acquired the Five Point Gateway Campus, consisting of approximately 73 acres of commercial land in the Great Park Neighborhoods that the Great Park Venture previously sold to a third party.
Other Properties We own approximately 16,000 acres adjacent to our Valencia community in Ventura County that are primarily used for agriculture and energy operations. We also own approximately 500 acres of remnant commercial, residential and open space land in Los Angeles County that is planned to be sold or deeded to third parties as we develop our Valencia community.
Other Properties We own approximately 16,000 acres adjacent to our Valencia community in Ventura County that are primarily used for agriculture and energy operations. We also own remnant commercial, residential and open space land in Los Angeles County that is planned to be sold or deeded to third parties as we develop our Valencia community.
Our operations relating to these segments are discussed in more detail below in the sections titled “Our Communities” and “Commercial.” Our Communities Valencia Valencia is a mixed-use planned community in Los Angeles County that spans approximately 15,000 acres and is designed to include approximately 21,500 homesites, approximately 11.5 million square feet of commercial space, approximately 50 miles of trails, approximately 275 acres of community parks and approximately 10,000 acres of protected open space.
Our operations relating to these segments are discussed in more detail below in the sections titled “Our Communities” and “Commercial.” Our Communities Valencia Valencia is a mixed-use planned community in Los Angeles County that spans approximately 15,000 acres and can include up to approximately 21,500 homesites, approximately 11.5 million square feet of commercial space, approximately 50 miles of trails, approximately 275 acres of community parks and approximately 10,000 acres of protected open space.
Additionally, all Department of Defense installations (such as The San Francisco Shipyard and the El Toro Base) selected for 6 Table of Contents closure or realignment pursuant to the Base Closure and Realignment Acts of 1988 or 1990 and being considered for transfer by deed, and where a release or disposal of hazardous substances or petroleum products has occurred, are subject to an environmental review process and may not be transferred until a finding of suitability for transfer (“FOST”) is documented.
Additionally, all Department of Defense installations (such as The San Francisco Shipyard and the El Toro Base) selected for closure or realignment pursuant to the Base Closure and Realignment Acts of 1988 or 1990 and being considered for transfer by deed, and where a release or disposal of hazardous substances or petroleum products has occurred, are subject to an environmental review process and may not be transferred until a finding of suitability for transfer (“FOST”) is documented.
All of our associates must adhere to a code of business conduct and ethics that sets standards for appropriate behavior and participate in required training on preventing and identifying harassment and discrimination. We believe that diversity within our employee base helps us to incorporate a wide range of perspectives into the development of our communities.
All of our associates must adhere to a code of business conduct and ethics that sets standards for appropriate behavior and participate in required training on preventing and identifying harassment and discrimination. 8 Table of Contents We believe that diversity within our employee base helps us to incorporate a wide range of perspectives into the development of our communities.
Great Park Neighborhoods is designed to include approximately 10,500 homesites (including up to 1,056 affordable homesites), approximately 4.9 million square feet of commercial space, approximately 61 acres of parks and approximately 138 acres of trails and open space. The actual commercial square footage and number of homesites are subject to change based on ultimate use and land planning.
Great Park Neighborhoods can include up to approximately 10,500 homesites (including up to 1,056 affordable homesites), approximately 4.9 million square feet of commercial space, approximately 61 acres of parks and approximately 138 acres of trails and open space. The actual commercial square footage and number of homesites are subject to change based on ultimate use and land planning.
Such ordinances, regulations or codes typically divide uses of land into two categories—permitted uses and discretionary uses. Permitted uses are presumptively permitted, while discretionary uses are subject to a discretionary approval process, usually involving an application, an environmental review and a public hearing with input from other locally affected 5 Table of Contents property owners and stake holders.
Such ordinances, regulations or codes typically divide uses of land into two categories—permitted uses and discretionary uses. Permitted uses are presumptively permitted, while discretionary uses are subject to a discretionary approval process, usually involving an application, an environmental review and a public hearing with input from other locally affected property owners and stake holders.
All of our development sites and projects have either been or continue to be investigated, remediated or reviewed (with documented EISs, FOSTs and EIRs, as applicable) in accordance with the above-described and other applicable environmental laws to determine the suitability of their proposed uses and to protect human health and the environment.
All of our development sites and projects have 6 Table of Contents either been or continue to be investigated, remediated or reviewed (with documented EISs, FOSTs and EIRs, as applicable) in accordance with the above-described and other applicable environmental laws to determine the suitability of their proposed uses and to protect human health and the environment.
In addition, you may obtain the documents that we file with the SEC from the SEC’s website at www.sec.gov. 9 Table of Contents We use our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
In addition, you may obtain the documents that we file with the SEC from the SEC’s website at www.sec.gov. We use our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
The remedial investigation also includes preparation of a Human Health Risk Assessment and an Ecological Risk Assessment, as appropriate. The Human Health Risk Assessment identifies the contaminants that could pose a health risk under different exposure scenarios and identifies potential numeric remediation goals. 7 Table of Contents Feasibility study.
The remedial investigation also includes preparation of a Human Health Risk Assessment and an Ecological Risk Assessment, as appropriate. The Human Health Risk Assessment identifies the contaminants that could pose a health risk under different exposure scenarios and identifies potential numeric remediation goals. Feasibility study.
The information contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this annual report on Form 10-K.
The information contained in, or that can be accessed through, our website is not incorporated by reference and is not a part of this annual report on Form 10-K. 9 Table of Contents
Candlestick and The San Francisco Shipyard Candlestick and The San Francisco Shipyard, located on approximately 800 acres of bayfront property in the City of San Francisco, is designed to include approximately 12,000 homesites, approximately 6.3 million square feet of commercial space, 3 Table of Contents approximately 100,000 square feet of community space, artist studios and approximately 355 acres of parks and open space.
Candlestick and The San Francisco Shipyard Candlestick and The San Francisco Shipyard, located on approximately 800 acres of bayfront property in the City of San Francisco, can include up to approximately 12,000 homesites, approximately 6.3 million square feet of commercial space, 3 Table of Contents approximately 100,000 square feet of community space, artist studios and approximately 355 acres of parks and open space.
The diagram below presents a simplified depiction of our current organizational structure. (1) Through a wholly owned subsidiary, we serve as sole managing general partner of the operating company, and as of December 31, 2022, we owned approximately 62.5% of the outstanding Class A units of the operating company.
The diagram below presents a simplified depiction of our current organizational structure. (1) Through a wholly owned subsidiary, we serve as sole managing general partner of the operating company, and as of December 31, 2023, we owned approximately 62.6% of the outstanding Class A units of the operating company.
Class A units of the San Francisco Venture can be exchanged, on a one-for-one basis, for Class A units of the operating company. Until exchanged or redeemed through the operating company, the capital associated with Class A units of the San Francisco Venture is presented within "noncontrolling interests" on our consolidated balance sheet.
Class A units of the San Francisco Venture can be exchanged, on a one-for-one basis, for Class A units of the operating company. Until exchanged or redeemed through the operating company, the capital associated with Class A units of the San Francisco Venture is presented within “noncontrolling interests” on our consolidated balance sheet.
As of December 31, 2022, builder sales totaled 5,748 market rate homes at the Great Park Neighborhoods (including 38 homes under a fee build arrangement). The Great Park Venture reacquired the development rights equivalent to approximately one million square feet that had been previously sold with the Five Point Gateway Campus.
As of December 31, 2023, builder sales totaled 6,376 market rate homes at the Great Park Neighborhoods (including 38 homes under a fee build arrangement). The Great Park Venture reacquired the development rights equivalent to approximately one million square feet that had been previously sold with the Five Point Gateway Campus.
Until Class A units of the operating company are exchanged or redeemed, the capital associated with Class A units of the operating company not held by us is presented within "noncontrolling interests" on our consolidated balance sheet.
Until Class A units of the operating company are exchanged or redeemed, the capital associated with Class A units of the operating company not held by us is presented within “noncontrolling interests” on our consolidated balance sheet.
We feel that the many cultures that live in our communities reflect the diverse mix of our associates. At December 31, 2022, women constituted approximately 47% of our workforce, and ethnic and racial minorities constituted approximately 44% of our workforce. We have designed our compensation and benefits programs to attract, retain and engage talented individuals.
We feel that the many cultures that live in our communities reflect the diverse mix of our associates. At December 31, 2023, women constituted approximately 46% of our workforce, and ethnic and racial minorities constituted approximately 45% of our workforce. We have designed our compensation and benefits programs to attract, retain and engage talented individuals.
Prior to his appointment, Mr. Hedigan served as President of Land Sales and Home Building for the Irvine Company from 2013 to 2021, where he oversaw the design, building and sales of new homes in the master-planned villages of the Irvine Ranch in Orange County, California. Michael Alvarado . Mr.
Hedigan has been our Chief Executive Officer since February 2022. Prior to his appointment, Mr. Hedigan served as President of Land Sales and Home Building for the Irvine Company from 2013 to 2021, where he oversaw the design, building and sales of new homes in the master-planned villages of the Irvine Ranch in Orange County, California. Michael Alvarado . Mr.
The first homesites at the Great Park Neighborhoods were sold in April 2013 and, as of December 31, 2022, the Great Park Venture had sold 7,326 homesites (including 853 affordable homesites) and 115 acres of commercial land, including the Five Point Gateway Campus, allowing for development of up to approximately 2.8 million square feet of commercial office and research and development space.
The first homesites at the Great Park Neighborhoods were sold in April 2013, and as of December 31, 2023, the Great Park Venture had sold 8,124 homesites (including 853 affordable homesites) and 153 acres of commercial land, including the Five Point Gateway Campus, allowing for development of up to approximately 3.5 million square feet of commercial office and research and development space.
Holders of legacy interests in the Great Park Venture were entitled to receive priority distributions up to an aggregate amount of $565.0 million, of which $498.7 million has been distributed as of February 28, 2023. We are the administrative member of the Great Park Venture.
Holders of legacy interests in the Great Park Venture were entitled to receive priority distributions up to an aggregate amount of $565.0 million, of which $546.9 million has been distributed as of February 29, 2024. We are the administrative member of the Great Park Venture.
As of December 31, 2022, we had sold 1,866 homesites, and builders had sold 940 homes to homebuyers since home sales commenced in May 2021.
As of December 31, 2023, we had sold 2,595 homesites, and builders had sold 1,244 homes to homebuyers since home sales commenced in May 2021.
Based on the closing price of our Class A common shares on February 28, 2023 ($2.19), our market capitalization on a fully exchanged basis was approximately $324.6 million. (2) The operating company owns all of the outstanding Class B units of the San Francisco Venture.
Based on the closing price of our Class A common shares on February 29, 2024 ($3.27), our market capitalization on a fully exchanged basis was approximately $485.0 million. (2) The operating company owns all of the outstanding Class B units of the San Francisco Venture.
Our associates are eligible for medical, dental and vision insurance, a 401(k) plan with matching contributions, health savings and flexible spending accounts, paid time off, life and disability insurance, various wellness programs, paid parental leave and employee assistance programs. The compensation committee of our board of directors annually reviews the terms of our benefits programs made available to our associates.
Our associates are eligible for medical, dental and vision insurance, a 401(k) plan with matching contributions, health savings and flexible spending accounts, paid time off, life and disability insurance, various wellness programs, paid parental leave and employee assistance programs.
We do not currently have an investment policy; however, our board of directors may adopt one in the future. We expect to pursue our investment objectives primarily through the ownership, development, operation and disposition of our communities: (1) Valencia; (2) Candlestick and The San Francisco Shipyard; and (3) Great Park Neighborhoods.
We expect to pursue our investment objectives primarily through the ownership, development, operation and disposition of our communities: (1) Valencia; (2) Candlestick and The San Francisco Shipyard; and (3) Great Park Neighborhoods. Although we currently have no definitive agreements to acquire other properties, we may do so in the future.
Alvarado has been our Chief Legal Officer, Vice President and Secretary since May 2016. From 2011 until May 2016, Mr. Alvarado served as General Counsel for the management company. Greg McWilliams . Mr. McWilliams was named our Chief Policy Officer in March 2018. From May 2016 until his appointment as Chief Policy Officer, Mr.
Alvarado was appointed our Chief Operating Officer in February 2024 and has been our Chief Legal Officer, Vice President and Secretary since May 2016. From 2011 until May 2016, Mr. Alvarado served as General Counsel for the management company. Prior to joining the management company, Mr.
The remedial design sets forth details of how the remedies identified in the record of decision will be carried out. The remedial design includes a detailed engineering design for implementing, operating and maintaining the selected cleanup alternative. The U.S. Navy also distributes a fact sheet to the public before beginning work on the cleanup. Remedial action work plan/remedial action implementation.
Navy documents and publishes the decision in the record of decision, which responds to all comments on the proposed plan. Remedial design. The remedial design sets forth details of how the remedies identified in the record of decision will be carried out. The remedial design includes a detailed engineering design for implementing, operating and maintaining the selected cleanup alternative.
We have incurred significant costs and expenses over the last 10 to 15 years in order to obtain the primary entitlements (general plan and zoning approvals) for our communities. Once these primary entitlements are obtained, we continue to refine the mixed-use plan for each community by planning specific development areas and obtaining the necessary governmental approvals for a development area.
Once these primary entitlements are obtained, we continue to refine the mixed-use plan for each community by planning specific development areas and obtaining the necessary governmental approvals for a development area.
We also typically obtain all discretionary entitlements and approvals that the homebuilder or commercial builder will need to build homes or commercial buildings on our lots, although we may from time to time allocate responsibility for obtaining certain discretionary entitlements to a homebuilder or commercial builder.
We also typically obtain all discretionary entitlements and approvals that the homebuilder or commercial builder will need to build homes or commercial buildings on our lots, although we may from time to time allocate responsibility for obtaining certain discretionary entitlements to a homebuilder or commercial builder. 5 Table of Contents We have incurred significant costs and expenses over the last 10 to 15 years in order to obtain the primary entitlements (general plan and zoning approvals) for our communities.
Investments in Other Securities Other than as described above and for short-term securities pending long-term commitment, we do not currently intend to invest in any additional securities such as bonds, preferred shares or common shares. 8 Table of Contents Human Capital We are innovators and collaborators in the evolution of cities in coastal California, and our associates are the force behind the success of our communities.
Investments in Other Securities Other than as described above and for short-term securities pending long-term commitment, we do not currently intend to invest in any additional securities such as bonds, preferred shares or common shares.
We believe in cultivating a work environment that fosters inclusion, diversity of thought, professional development and opportunities to grow and share innovative ideas across all our community elements. Our associates are expected to exhibit and promote honest, ethical and respectful conduct in the workplace.
Human Capital We are innovators and collaborators in the evolution of cities in coastal California, and our associates are the force behind the success of our communities. We believe in cultivating a work environment that fosters inclusion, diversity of thought, professional development and opportunities to grow and share innovative ideas across all our community elements.
The proposed plan summarizes the findings of the remedial investigation and proposes a preferred remedial approach for each area of concern in the parcel based on the options evaluated in the feasibility study. This step includes a public meeting to provide the public with relevant information and an opportunity to comment on the preferred cleanup alternative. Record of decision.
The proposed plan summarizes the findings of the remedial investigation and proposes a preferred remedial approach for each area of concern in the parcel based on the options evaluated in the feasibility study.
Information about our Executive Officers The following individuals are our executive officers: Name Age Position Daniel Hedigan 69 Chief Executive Officer Michael Alvarado 57 Chief Legal Officer, Vice President and Secretary Greg McWilliams 71 Chief Policy Officer Leo Kij 59 Interim Chief Financial Officer Daniel Hedigan. Mr. Hedigan was appointed our Chief Executive Officer in February 2022.
Information about our Executive Officers The following individuals are our executive officers: Name Age Position Daniel Hedigan 70 Chief Executive Officer Michael Alvarado 58 Chief Operating Officer, Chief Legal Officer, Vice President and Secretary Greg McWilliams 72 Chief Policy Officer Kim Tobler 64 Chief Financial Officer, Treasurer and Vice President Daniel Hedigan. Mr.
We may also participate with third parties in property ownership, development and operation, through joint ventures, private equity real estate funds or other types of co-ownership.
Our future investment or development activities will not necessarily be limited to any geographic area, product type or to a specified percentage of our assets. We may also participate with third parties in property ownership, development and operation, through joint ventures, private equity real estate funds or other types of co-ownership.
The U.S. Navy conducts remedial action in accordance with an approved remedial action work plan, which is based on the remedial design. Remedial action completion report. Once complete, the cleanup is documented in a remedial action completion report. FOST. Prior to conveyance of real property, CERCLA requires the U.S.
The U.S. Navy also distributes a fact sheet to the public before beginning work on the cleanup. Remedial action work plan/remedial action implementation. The U.S. Navy conducts remedial action in accordance with an approved remedial action work plan, which is based on the remedial design. Remedial action completion report.
Navy to remediate hazardous substances to a level consistent with the protection of human health and the environment. Following the completion and approval of the remedial action completion report, the U.S. Navy documents its findings that such remediation has occurred and that the property is suitable for transfer, consistent with all applicable laws and authorities, in a FOST.
Once complete, the cleanup is documented in a remedial action completion report. FOST. Prior to conveyance of real property, CERCLA requires the U.S. Navy to remediate hazardous substances to a level consistent with the protection of human health and the environment. Following the completion and approval of the remedial action completion report, the U.S.
Investment Policies Investments in Real Estate or Interests in Real Estate We are a real estate development and operating company that specializes in the development and operation of mixed-use planned communities. Our goal is to create sustainable, long-term growth and value for our shareholders.
Navy documents its findings that such remediation has occurred and that the property is suitable for transfer, consistent with all applicable laws and authorities, in a FOST. Investment Policies Investments in Real Estate or Interests in Real Estate We are a real estate development and operating company that specializes in the development and operation of mixed-use planned communities.
McWilliams served as our Regional President-Southern California. From 2004 until May 2016, Mr. McWilliams was President of Newhall Land & Farming. Leo Kij . Mr. Kij was appointed our Interim Chief Financial Officer in March 2022. Prior to his appointment, Mr. Kij served as our Vice President and Corporate Controller since 2016.
McWilliams was President of Newhall Land & Farming. Kim Tobler . Mr. Tobler was appointed our Chief Financial Officer in September 2023. Mr. Tobler joined us in 2016, and prior to his appointment as Chief Financial Officer, he most recently served as our Vice President – Treasury and Tax.
When working remotely, our associates have access to necessary systems and resources to ensure business continuity. At December 31, 2022, we had approximately 105 employees, all of whom were working full-time.
At December 31, 2023, we had approximately 90 employees, all of whom were working full-time.
Once the U.S. Navy, the USEPA and the State of California select and approve the remedy for the parcel, the U.S. Navy documents and publishes the decision in the record of decision, which responds to all comments on the proposed plan. Remedial design.
This step includes a public meeting to provide the public with relevant information and an opportunity to comment on the preferred cleanup alternative. 7 Table of Contents Record of decision. Once the U.S. Navy, the USEPA and the State of California select and approve the remedy for the parcel, the U.S.
Removed
In August 2017, the Gateway Commercial Venture, in which we own a 75% interest, acquired the Five Point Gateway Campus, consisting of approximately 73 acres of commercial land in the Great Park Neighborhoods that the Great Park Venture previously sold to a third party.
Added
We may develop and operate these properties on our own, or we may choose from time to time to develop and/or operate a particular property or properties in a strategic joint venture or other financing or entity structure with a third-party.
Removed
Although we currently have no definitive agreements to acquire other properties, we may do so in the future. Our future investment or development activities will not necessarily be limited to any geographic area, product type or to a specified percentage of our assets.
Added
Our goal is to create sustainable, long-term growth and value for our shareholders. We do not currently have an investment policy; however, our board of directors may adopt one in the future.
Removed
In response to the COVID-19 pandemic, we took immediate steps to protect the health and well-being of our associates and to preserve the financial strength of the company. Beginning in April 2022, the substantial majority of our associates returned back to our offices on a hybrid schedule.
Added
Our associates are expected to exhibit and promote honest, ethical and respectful conduct in the workplace.
Removed
From 2009 to 2016, he served as Controller of our subsidiary, Five Point Communities Management, Inc. Available Information Our website is www.fivepoint.com.
Added
In order to support the mental health and wellness of our associates, we also offer programming on self-care, nutrition, and financial well-being. We also conduct annual performance reviews for all associates. The compensation committee of our board of directors annually reviews the terms of our benefits programs made available to our associates.
Added
Alvarado spent nearly 20 years at Allen Matkins Leck Gamble Mallory & Natsis LLP, a California-based law firm. Greg McWilliams . Mr. McWilliams has been our Chief Policy Officer since March 2018. From May 2016 until his appointment as Chief Policy Officer, Mr. McWilliams served as our Regional President-Southern California. From 2004 until May 2016, Mr.
Added
He was a tax partner at Ernst & Young LLP from 2008 to 2016, and from 2003 to 2008, he worked at the Irvine Company as Senior Vice President – Finance and Reporting. Available Information Our website is www.fivepoint.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

51 edited+4 added−13 removed177 unchanged
Biggest changeIf we need to obtain additional financing, and such financing is not available in a timely manner or on terms substantially similar to our existing financing, it could increase our cost of capital and we may experience delays or increases in costs, and our financial condition and results of operations could be adversely affected.
Biggest changeOur ability to obtain funds from tax increment financing is dependent on the value of developed property in the specific district, the collection of general property taxes from property owners in the specific district, the time it takes the tax assessor to update the tax rolls and market interest rates at the time the tax increment bonds are issued. 17 Table of Contents If we need to obtain additional financing, and such financing is not available in a timely manner or on terms substantially similar to our existing financing, it could increase our cost of capital and we may experience delays or increases in costs, and our financial condition and results of operations could be adversely affected.
Until such time as we can service our indebtedness with cash flow from operations, we intend to service our indebtedness, including interest on the senior notes and the revolving credit facility, from cash on hand.
Until such time as we can service our indebtedness with cash flow from operations, we intend to service our indebtedness, including interest on our senior notes and the revolving credit facility, from cash on hand.
If we cannot make scheduled payments on our indebtedness, we will be in default and holders of the senior notes could declare all outstanding principal and interest to be due and payable, the lenders under the revolving credit facility could terminate their commitments to loan money, other indebtedness could be accelerated and we could be forced into bankruptcy or liquidation.
If we cannot make scheduled payments on our indebtedness, we will be in default and holders of our senior notes could declare all outstanding principal and interest to be due and payable, the lenders under the revolving credit facility could terminate their commitments to loan money, other indebtedness could be accelerated and we could be forced into bankruptcy or liquidation.
The credit agreement governing the revolving credit facility and the indenture relating to the senior notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise indebtedness or equity capital to be used to repay other indebtedness when it becomes due.
The credit agreement governing the revolving credit facility and the indenture relating to the senior notes due 2028 restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise indebtedness or equity capital to be used to repay other indebtedness when it becomes due.
Our ability to make scheduled payments on or refinance our debt obligations, including the senior notes, depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control.
Our ability to make scheduled payments on or refinance our debt obligations, including our senior notes, depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control.
If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business, financial condition, results of operations and stock price.
If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business, financial condition, results of operations and stock price. ITEM 1B.
As of December 31, 2022, Lennar owned Class A common shares and Class B common shares representing approximately 39% of our outstanding voting interests. One of our directors is the Executive Chairman of Lennar. Lennar is one of the nation’s largest homebuilders and has in the past purchased properties from us.
As of December 31, 2023, Lennar owned Class A common shares and Class B common shares representing approximately 39% of our outstanding voting interests. One of our directors is the Executive Chairman of Lennar. Lennar is one of the nation’s largest homebuilders and has in the past purchased properties from us.
Although the indenture relating to our senior notes limits our ability to incur additional indebtedness, our operating agreement does not limit the amount of debt we may incur, and our board of directors may change our target debt levels at any time without the approval of our shareholders.
Although the indenture relating to our senior notes due 2028 limits our ability to incur additional indebtedness, our operating agreement does not limit the amount of debt we may incur, and our board of directors may change our target debt levels at any time without the approval of our shareholders.
The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of exchanges of Class A units of the operating company, the price of our Class A common shares at the time of such 16 Table of Contents exchanges, the extent to which such exchanges are taxable and our ability to use the potential tax benefits, which will depend on the amount and timing of our taxable income and the rate at which we pay income tax.
The actual amount and timing of any payments under the TRA will vary depending upon a number of factors, including the timing of exchanges of Class A units of the operating company, the price of our Class A common shares at the time of such exchanges, the extent to which such exchanges are taxable and our ability to use the potential tax benefits, which will depend on the amount and timing of our taxable income and the rate at which we pay income tax.
As of December 31, 2022, Lennar and Castlelake and their respective affiliates beneficially owned, in the aggregate, Class A common shares and Class B common shares representing approximately 39% and 17%, respectively, of the voting power of our outstanding common shares.
As of December 31, 2023, Lennar and Castlelake and their respective affiliates beneficially owned, in the aggregate, Class A common shares and Class B common shares representing approximately 39% and 17%, respectively, of the voting power of our outstanding common shares.
In addition, adverse decisions or publicity arising from any litigation could increase the cost and length of time to obtain 14 Table of Contents ultimate approval of a project, could require us to abandon all or portions of a project and could adversely affect the design, scope, plans and profitability of a project, any of which could negatively affect our financial condition and results of operations.
In addition, adverse decisions or publicity arising from any litigation could increase the cost and length of time to obtain ultimate approval of a project, could require us to abandon all or portions of a project and could adversely affect the design, scope, plans and profitability of a project, any of which could negatively affect our financial condition and results of operations.
Future changes in the insurance industry’s risk assessment approach and pricing structure could increase the cost of insuring our properties and operations or decrease the scope of insurance coverage, either of which could adversely affect our financial condition and results of operations. Moreover, we carry several different lines of insurance, placed with several large insurance carriers.
Future changes in the insurance industry’s risk assessment approach and pricing structure could increase the cost of insuring our properties and operations or decrease the scope of insurance coverage, either of which could adversely affect our financial condition and results of operations. 14 Table of Contents Moreover, we carry several different lines of insurance, placed with several large insurance carriers.
Our board of directors will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including 18 Table of Contents the estimated market value of our assets and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service.
Our board of directors will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the estimated market value of our assets and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service.
New housing and commercial developments are often subject to determinations by the administering governmental authorities as to the adequacy of water and sewage facilities, roads and other local services, and may also be subject to various assessments for schools, parks, streets, affordable 12 Table of Contents housing and other public improvements.
New housing and commercial developments are often subject to determinations by the administering governmental authorities as to the adequacy of water and sewage facilities, roads and other local services, and may also be subject to various assessments for schools, parks, streets, affordable housing and other public improvements.
Navy has been primarily responsible for investigation and cleanup activities at these properties and will continue to have liability for future contamination that is discovered, we also may incur costs for investigation or cleanup of contamination that is discovered or disturbed during the course of our future development activities or otherwise.
Although the U.S. Navy has been primarily responsible for investigation and cleanup activities at these properties and will continue to have liability for future contamination that is discovered, we also may incur costs for investigation or cleanup of contamination that is discovered or disturbed during the course of our future development activities or otherwise.
In addition, future financing arrangements may contain negative covenants limiting the ability of the operating company to make distributions to us. Furthermore, the ability of the operating company’s subsidiaries and the Great Park Venture to 15 Table of Contents pay distributions to the operating company may be limited by their obligations to their respective creditors and other investors.
In addition, future financing arrangements may contain negative covenants limiting the ability of the operating company to make distributions to us. Furthermore, the ability of the operating company’s subsidiaries and the Great Park Venture to pay distributions to the operating company may be limited by their obligations to their respective creditors and other investors.
The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity 20 Table of Contents and sophistication of attempted attacks and intrusions from around the world have increased.
Additionally, if drought conditions continue in California, state and local authorities could enact restrictions or moratoriums on building permits and access to utilities, such as water and sewer taps, which could delay or prevent our construction activities, as well as the construction of homes and commercial buildings, even when we have obtained water rights for our communities.
Additionally, if drought conditions occur within California, state and local authorities could enact restrictions or moratoriums on building permits and access to utilities, such as water and sewer taps, which could delay or prevent our construction activities, as well as the construction of homes and commercial buildings, even when we have obtained water rights for our communities.
Historically, certain of our entitlements, permits and development approvals have been challenged by third parties, such as environmental groups. Future entitlements, permits and development approvals that we will need to obtain for development areas within our communities may be similarly challenged.
Historically, certain of our entitlements, permits and 12 Table of Contents development approvals have been challenged by third parties, such as environmental groups. Future entitlements, permits and development approvals that we will need to obtain for development areas within our communities may be similarly challenged.
Our development and construction activities entail risks that could make our projects less profitable and otherwise adversely impact our financial condition and results of operations, including: • increased construction costs, unavailability of raw materials when needed, and permitting or construction delays; • claims for construction-related injuries, as well as claims for warranty, product liability and construction defects; • labor stoppages or slowdowns and/or disputes with contractors, subcontractors or other third parties on whom we rely; • federal, state and local grants to complete certain highways, interchange, bridge projects or other public improvements may not be available; • unforeseen engineering, environmental or geological problems, including the potential impacts of climate change; • compliance with environmental planning and protection regulations and related legal proceedings, including governmental regulations intended to reduce greenhouse gas emissions or ameliorate projected climate change impacts; • liabilities, expenses or project delays, stoppages or interruptions as a result of challenges by third parties in legal proceedings; • delay or inability to acquire property, rights of way or easements; and • weather-related and geological interference, including landslides, earthquakes, floods, drought, wildfires and other events, including rising sea-levels due to climate change. 10 Table of Contents We cannot assure you that projects will be completed on schedule or that construction costs will not exceed budgeted amounts.
Our development and construction activities entail risks that could make our projects less profitable and otherwise adversely impact our financial condition and results of operations, including: • increased construction costs, unavailability of raw materials when needed, and permitting or construction delays; • claims for construction-related injuries, as well as claims for warranty, product liability and construction defects; • labor stoppages or slowdowns and/or disputes with contractors, subcontractors or other third parties on whom we rely; • federal, state and local grants to complete certain highways, interchange, bridge projects or other public improvements may not be available; • unforeseen engineering, environmental or geological problems, including the potential impacts of climate change; • compliance with environmental planning and protection regulations and related legal proceedings, including governmental regulations intended to reduce greenhouse gas emissions or ameliorate projected climate change impacts; • liabilities, expenses or project delays, stoppages or interruptions as a result of challenges by third parties in legal proceedings; • delay or inability to acquire property, rights of way or easements; and • weather-related and geological interference, including landslides, earthquakes, floods, drought, wildfires and other events, including rising sea-levels due to climate change.
Our substantial indebtedness may have a material adverse effect on our business, our financial condition and results of operations and our ability to secure additional financing in the future. As of December 31, 2022, we had approximately $625.0 million of total indebtedness of our 7.875% senior notes due 2025 (the “senior notes”).
Our substantial indebtedness may have a material adverse effect on our business, our financial condition and results of operations and our ability to secure additional financing in the future. As of December 31, 2023, we had approximately $625.0 million of total indebtedness of our 7.875% senior notes due 2025.
The distributions that we receive from the operating company are based on our ownership interest in it, which was 62.5%, as of December 31, 2022. The operating company is treated as a partnership for U.S. federal income tax purposes and, as such, is generally not subject to U.S. federal income tax.
The distributions that we receive from the operating company are based on our ownership interest in it, which was 62.6%, as of December 31, 2023. The operating company is treated as a partnership for U.S. federal income tax purposes and, as such, is generally not subject to U.S. federal income tax.
Consequently, it is possible in these circumstances that the actual cash tax savings realized by us may be significantly less than the corresponding TRA payments. We will not be able to recover payments made under the tax receivable agreement if the related tax benefits are subsequently disallowed.
Consequently, it is possible in these circumstances that the actual cash tax savings realized by us may be significantly less than the corresponding TRA payments. 16 Table of Contents We will not be able to recover payments made under the tax receivable agreement if the related tax benefits are subsequently disallowed.
The TRA provides that, upon a merger, asset sale or other form of business combination or certain other changes of control or if, at any time, we materially breach any of our obligations under the TRA or elect an early termination, our (or our successor’s) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change of control, early termination or breach) will be based on certain assumptions, including that (1) we will have sufficient taxable income to fully utilize the increased tax deductions and other benefits anticipated by the TRA, (2) all of our properties will be disposed of ratably over a 15 year period for fair market value and (3) any Class A units of the operating company that have not been exchanged will be deemed exchanged for the market value of our Class A common shares at the time of such change of control, early termination or breach.
The TRA provides that, upon a merger, asset sale or other form of business combination or certain other changes of control or if, at any time, we materially breach any of our obligations under the TRA or elect an early termination, our (or our successor’s) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change of control, early termination or breach) will be based on certain assumptions, including that (1) we will have sufficient taxable income to fully utilize the increased tax deductions and other benefits anticipated by the TRA, (2) all of our properties will be disposed of ratably over the period ending on the fifteenth anniversary of the date of the TRA for fair market value and (3) any Class A units of the operating company or any class A units of the San Francisco Venture that have not been exchanged will be deemed exchanged for the market value of our Class A common shares at the time of such change of control, early termination or breach.
While we currently have and may maintain insurance policies from time to time to mitigate some or all of these risks, insurance coverage for such claims may be limited or nonexistent.
While we currently 13 Table of Contents have and may maintain insurance policies from time to time to mitigate some or all of these risks, insurance coverage for such claims may be limited or nonexistent.
We do not intend to pay distributions on our Class A common shares for the foreseeable future. We have no current plans to pay distributions on our Class A common shares in the foreseeable future. We intend to retain our earnings, if any, to use in our ongoing operations.
We have no current plans to pay distributions on our Class A common shares in the foreseeable future. We intend to retain our earnings, if any, to use in our ongoing operations.
Competition from other real estate developers may adversely affect our ability to attract purchasers and sell or lease residential, retail and commercial properties, attract and retain experienced real estate development personnel or obtain construction materials and labor.
Competition from other real estate 11 Table of Contents developers may adversely affect our ability to attract purchasers and sell or lease residential, retail and commercial properties, attract and retain experienced real estate development personnel or obtain construction materials and labor.
We therefore have greater exposure to the risks of natural disasters, which can lead to power shortages, shortages of labor and materials, increased costs, and delays in development. The occurrence of natural disasters may also negatively impact the demand for new homes in affected areas.
We therefore have greater exposure to the risks of natural disasters, which can lead to power shortages, shortages of labor and materials, increased costs, and delays in development. The occurrence of natural disasters may also negatively impact the availability of homeowners insurance and the demand for new homes in 10 Table of Contents affected areas.
There are significant risks associated with our development and construction projects that may prevent completion on budget and on schedule.
Risks Related to Our Business and Industry There are significant risks associated with our development and construction projects that may prevent completion on budget and on schedule.
In the future, we expect that we will sell additional properties to Lennar. Transactions between Lennar and us must be approved by our conflicts committee. Transactions between the Great Park Venture and Lennar must be approved by a majority of the members of the Great Park Venture (excluding us).
In the future, we expect that we will sell additional properties to Lennar. Transactions between Lennar and us must be approved by our conflicts committee. Our conflicts committee also reviews transactions between the Great Park Venture and Lennar, which are ultimately subject to approval by a majority of the members of the Great Park Venture (excluding us).
If the TRA had been terminated on December 31, 2022, we estimate that the termination payment would have been approximately $85.3 million, assuming no material changes to the relevant tax law, that the aggregate value of our properties is equal to the value implied by such per share price and that LIBOR is 5.4%.
If the TRA had been terminated on December 31, 2023, we estimate that the termination payment would have been approximately $106.7 million, assuming no material changes to the relevant tax law, that the aggregate value of our properties is equal to the value implied by such per share price and that SOFR is 4.8%.
In addition, 3,122,504 Class A common shares are available for future issuance under our incentive award plan as of December 31, 2022. We cannot predict whether future issuances or sales of our Class A common shares or the availability of shares for resale in the open market will decrease the per share trading price of our Class A common shares.
In addition, 7,582,152 Class A common shares were available for future issuance under our incentive award plan as of December 31, 2023. We cannot predict whether future issuances or sales of our Class A common shares or the availability of shares for resale in the open market will decrease the per share trading price of our Class A common shares.
Those expenditures primarily reflect the costs of developing the infrastructure at our properties, including grading and installing roads, sidewalks, gutters, utility improvements, landscaping and shared amenities and other actions necessary to prepare each residential and commercial lot for construction.
We currently plan to spend material amounts on horizontal development at our communities. Those expenditures primarily reflect the costs of developing the infrastructure at our properties, including grading and installing roads, sidewalks, gutters, utility improvements, landscaping and shared amenities and other actions necessary to prepare each residential and commercial lot for construction.
This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common shares. Any broad market fluctuations may adversely affect the trading price of our Class A common shares.
This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common shares.
We may issue additional Class A common shares in the future in lieu of incurring indebtedness, which may dilute existing shareholders, or we may issue securities that have rights and privileges that are more favorable than the rights and privileges accorded to holders of our Class A common shares.
Any broad market fluctuations may adversely affect the trading price of our Class A common shares. 19 Table of Contents We may issue additional Class A common shares in the future in lieu of incurring indebtedness, which may dilute existing shareholders, or we may issue securities that have rights and privileges that are more favorable than the rights and privileges accorded to holders of our Class A common shares.
Risks Related to Our Business and Industry Our business has been disrupted by the outbreak and worldwide spread of COVID-19 and could be materially and adversely affected by COVID-19 or by a similar epidemic or pandemic, or similar public threat, or fear of such an event, and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it.
Our business could be materially and adversely affected by an epidemic or pandemic, or similar public threat, or fear of such an event, and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it.
Future debt financings, which would rank senior to our Class A common shares upon our bankruptcy or liquidation, and future offerings of equity securities that may be senior to our Class A common shares for the purposes of liquidating or other distributions, may adversely affect the market price of our Class A common shares.
If we do so, the risks related to our indebtedness could intensify. 18 Table of Contents Future debt financings, which would rank senior to our Class A common shares upon our bankruptcy or liquidation, and future offerings of equity securities that may be senior to our Class A common shares for the purposes of liquidating or other distributions, may adversely affect the market price of our Class A common shares.
We compete with other residential, retail and commercial property developers in the development of properties in the Northern and Southern California markets. We compete with a number of residential, retail and commercial developers, some with greater financial resources, in seeking resources for development and prospective purchasers.
Significant competition could have an adverse effect on our business. We compete with other residential, retail and commercial property developers in the development of properties in the Northern and Southern California markets. We compete with a number of residential, retail and commercial developers, some with greater financial resources, in seeking resources for development and prospective purchasers.
Lennar and Castlelake and their respective affiliates control approximately 56% of the voting power of our outstanding common shares and, as a result, are able to exercise significant influence over all matters requiring shareholder approval.
Our operating agreement contains provisions that will permit Lennar to engage in such activities and transactions. Lennar and Castlelake and their respective affiliates control approximately 56% of the voting power of our outstanding common shares and, as a result, are able to exercise significant influence over all matters requiring shareholder approval.
We may incur additional indebtedness from time to time in the future to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our indebtedness could intensify.
We may incur additional indebtedness from time to time in the future to finance working capital, capital expenditures, investments or acquisitions, or for other purposes.
The per share trading price of our Class A 20 Table of Contents common shares may decline significantly when the restrictions on resale by certain of our shareholders lapse or upon the registration of additional Class A common shares pursuant to registration rights granted to certain shareholders.
The per share trading price of our Class A common shares may decline significantly when the restrictions on resale by certain of our shareholders lapse or upon the registration of additional Class A common shares pursuant to registration rights granted to certain shareholders. We do not intend to pay distributions on our Class A common shares for the foreseeable future.
Section 203 of the DGCL may affect the ability of an “interested shareholder” to engage in certain business combinations, including mergers, consolidations or acquisitions of additional shares, for a period of three years following the time that the shareholder becomes an “interested shareholder.” An “interested shareholder” is defined to include persons owning directly or indirectly 15% or more of the outstanding voting shares of a company. 17 Table of Contents Risks Related to Financing and Indebtedness We may need additional capital to execute our development plan, and we may be unable to raise additional capital on favorable terms.
Section 203 of the DGCL may affect the ability of an “interested shareholder” to engage in certain business combinations, including mergers, consolidations or acquisitions of additional shares, for a period of three years following the time that the shareholder becomes an “interested shareholder.” An “interested shareholder” is defined to include persons owning directly or indirectly 15% or more of the outstanding voting shares of a company.
As of December 31, 2022, we had outstanding 69,068,354 Class A common shares.
As of December 31, 2023, we had outstanding 69,199,938 Class A common shares.
Nonetheless, Lennar’s relationship with us could give it an advantage in bidding for properties that we own. Lennar may also compete with us and may in the future bid for, and acquire for itself, properties that we may seek to acquire. Our operating agreement contains provisions that will permit Lennar to engage in such activities and transactions.
Nonetheless, Lennar’s relationship with us could give it an advantage in bidding for properties that we own. 15 Table of Contents Lennar may also compete with us and may in the future bid for, and acquire for itself, properties that we may seek to acquire.
Failure to complete development or construction activities on budget or on schedule may adversely affect our financial condition and results of operations. We will have to make significant investments at our properties before we realize significant revenues. We currently plan to spend material amounts on horizontal development at our communities.
We cannot assure you that projects will be completed on schedule or that construction costs will not exceed budgeted amounts. Failure to complete development or construction activities on budget or on schedule may adversely affect our financial condition and results of operations. We will have to make significant investments at our properties before we realize significant revenues.
In this regard, certain portions of the El Toro Base and The San Francisco Shipyard have been or currently are listed on the USEPA’s National Priorities List as sites requiring cleanup under federal environmental law. Although the U.S.
Some of our properties have been or may be impacted by contamination arising from these or other prior uses of these properties or adjacent properties. In this regard, certain portions of the El Toro Base and The San Francisco Shipyard have been or currently are listed on the USEPA’s National Priorities List as sites requiring cleanup under federal environmental law.
Accordingly, for all of our properties, whether or not we hold title insurance, it is possible that there may be title defects for which we will have no title insurance coverage. 11 Table of Contents In addition, the title insurance policies we do hold may not insure for the current aggregate market value of our properties, and we do not intend to increase our title insurance coverage as the market value of our portfolio increases.
In addition, the title insurance policies we do hold may not insure for the current aggregate market value of our properties, and we do not intend to increase our title insurance coverage as the market value of our portfolio increases.
We may need additional capital to execute our development plan with respect to vertical development.
Risks Related to Financing and Indebtedness We may need additional capital to execute our development plan, and we may be unable to raise additional capital on favorable terms. We may need additional capital to execute our development plan with respect to vertical development.
The U.S. and other countries have experienced, and may experience in the future, outbreaks of contagious diseases that affect public health and public perception of health risk. Federal, state and local governments and private entities in impacted regions have taken, and may continue to take, actions in an effort to slow the spread of COVID-19 and variants of the virus.
The U.S. and other countries have experienced, and may experience in the future, outbreaks of contagious diseases that affect public health and public perception of health risk.
We also had $125.0 million available to be borrowed under our revolving credit facility as of December 31, 2022.
We also had $125.0 million available to be borrowed under our revolving credit facility as of December 31, 2023. In January 2024, we exchanged $623.5 million of our existing 7.875% senior notes due November 2025 for $100.0 million in cash and $523.5 million in new 10.500% initial rate senior notes due January 2028.
Our results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence and consumer confidence. There is significant uncertainty regarding the extent to which and how long the impacts of COVID-19 will continue to disrupt the U.S. economy. Our business could be negatively impacted over the medium-to-longer term if the disruptions related to COVID-19 continue.
Our results of operations are affected by economic conditions, including macroeconomic conditions and levels of business confidence and consumer confidence, and our business could be negatively impacted by disruptions related to any such contagious disease. In addition, these risks and uncertainties may also have the effect of heightening many of the other risks described in this section.
Removed
In response to these steps, we initially shifted a majority of our office functions to work remotely and implemented a COVID-19 Prevention Program, which sets forth COVID-19-related safety protocols and procedures and worksite-specific operational plans for the locations at which associates have returned to work on site.
Added
Accordingly, for all of our properties, whether or not we hold title insurance, it is possible that there may be title defects for which we will have no title insurance coverage.
Removed
Potential impacts could include asset impairments similar to the impairment we recognized in 2020 of $26.9 million attributed to our investment in the Great Park Venture primarily as a result of expected delays in both the timing of land sales to builders and distributions to us causing a decline in the fair value of our investment in the Great Park Venture (see Part II, Item 8 of this report).
Added
While inflation moderated somewhat in the latter half of 2023, interest rates and mortgage rates remain elevated relative to recent rate levels, which can decrease demand by homebuyers for new homes and soften demand by our guest builders for home sites.
Removed
If COVID-19 continues to have a significant negative impact on economic conditions over a prolonged period of time, our results of operations and financial condition could be adversely impacted. COVID-19 also may have the effect of heightening many of the other risks described in the Risk Factors listed below.
Added
Federal, state and local governments and private entities in impacted regions may take actions in an effort to slow the spread of such contagious diseases, including quarantines, restrictions on travel, stay-at-home orders, social distancing measures, restrictions on types of business that may continue to operate and/or restrictions on types of construction projects that may continue, which could adversely affect our ability to operate our business.
Removed
In addition, the current conditions of high inflation and rising interest rates, which caused significant increases in mortgage rates during 2022, have resulted in decreased demand by homebuyers for new homes and a corresponding softening of demand by our guest builders for home sites. Significant competition could have an adverse effect on our business.
Added
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.
Removed
Some of our properties have been or may be impacted by contamination arising from these or other prior 13 Table of Contents uses of these properties or adjacent properties.
Removed
In recent years, we experienced numerous changes in our executive management team, including the appointments of Daniel Hedigan as our Chief Executive Officer in February 2022 and Stuart Miller as our Executive Chairman in 2021, the transitions of our former Chief Executive Officer (Emile Haddad) and our former Chief Operating Officer (Lynn Jochim) to senior advisory roles, and the resignation of our former Chief Financial Officer (Erik Higgins).
Removed
Our ability to obtain funds from tax increment financing is dependent on the value of developed property in the specific district, the collection of general property taxes from property owners in the specific district, the time it takes the tax assessor to update the tax rolls and market interest rates at the time the tax increment bonds are issued.
Removed
Uncertainty about the future of the London Interbank Offer Rate ("LIBOR") may adversely affect our business and financial results. Borrowings under our revolving credit facility bear interest at LIBOR plus an applicable margin. In July 2017, the UK’s Financial Conduct Authority, which regulates LIBOR, announced its intent to phase out LIBOR by the end of 2021.
Removed
The Alternative Reference Rates Committee in the United States has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to U.S. dollar LIBOR for use in derivatives and other financial contracts that are currently indexed to LIBOR. The first publication of SOFR was released in April 2018.
Removed
In November 2020, the Federal Reserve Board along with various independent groups announced the potential for certain U.S. dollar LIBOR tenors to continue to be published until June 2023. This change would allow most legacy U.S. dollar LIBOR contracts to mature before disruptions occur in the U.S. dollar LIBOR market, without the need to transition those contracts to SOFR.
Removed
Whether or not SOFR or another reference rate attains market traction as a LIBOR replacement remains a question, and the future of LIBOR at this time is uncertain.
Removed
Even with the Federal Reserve Board’s announcement about the extension, if the method for calculation of LIBOR changes, LIBOR is no longer available or lenders have 19 Table of Contents increased costs due to changes in LIBOR, we may suffer from potential increases in interest rates on our revolving credit facility.
Removed
Further, we may need to renegotiate our revolving credit facility or other agreements that reference LIBOR to replace LIBOR with the new standard that is established. These uncertainties or their resolution also could negatively impact our borrowing costs and other aspects of our business and financial results.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changePlease refer to Note 13 of our consolidated financial statements included in Part II, Item 8 of this report, which is incorporated herein by reference, for descriptions of additional legal proceedings to which we are a party. ITEM 4. Mine Safety Disclosures Not applicable. PART II
Biggest changePlease refer to Note 13 of our consolidated financial statements included in Part II, Item 8 of this report, which is incorporated herein by reference, for descriptions of additional legal proceedings to which we are a party. ITEM 4. Mine Safety Disclosures 22 Table of Contents Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed8 unchanged
Biggest changeThere were no repurchases of our shares during the year ended December 31, 2022. 22 Table of Contents Performance Graph The following graph compares the cumulative total return of our Class A common shares with the S&P 500 and the S&P Homebuilders Select Industry Index from December 31, 2017 through December 31, 2022.
Biggest changePerformance Graph The following graph compares the cumulative total return of our Class A common shares with the S&P 500 and the S&P Homebuilders Select Industry Index from December 31, 2018 through December 31, 2023.
The graph assumes $100 was invested at the market close on December 31, 2017 in our Class A common shares, the S&P 500 and the S&P Homebuilders Select Industry Index, and the reinvestment of all dividends. Recent Sale of Unregistered Securities We conduct all of our business in or through our subsidiary, the operating company.
The graph assumes $100 was invested at the market close on December 31, 2018 in our Class A common shares, the S&P 500 and the S&P Homebuilders Select Industry Index, and the reinvestment of all dividends. Recent Sale of Unregistered Securities We conduct all of our business in or through our subsidiary, the operating company.
During the year ended December 31, 2022, no redemption notices were received from Class A Unit Holders. ITEM 6. [Reserved] 23 Table of Contents
During the year ended December 31, 2023, no redemption notices were received from Class A Unit Holders. ITEM 6. [Reserved] 23 Table of Contents
As of February 28, 2023, there were 52 and 8 holders of record of our Class A and Class B common shares, respectively. Our board of directors may, from time to time, in its sole discretion, authorize our company to repurchase our outstanding shares.
As of February 29, 2024, there were 50 and 8 holders of record of our Class A and Class B common shares, respectively. Our board of directors may, from time to time, in its sole discretion, authorize our company to repurchase our outstanding shares. There were no repurchases of our shares during the year ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

99 edited+25 added−30 removed93 unchanged
Biggest changeReimbursement payments may be deferred when our related party receives an extension on the maturity date of the associated EB-5 loan liability. Approximately $49.8 million of the $56.3 million in related party reimbursement obligations that were previously expected to have been paid in 2022 have been deferred to 2023.
Biggest changeIn 2024, we will make aggregate interest payments of $54.1 million on our existing and new senior notes, and $46.1 million in principal payments that were deferred from 2023 and are due under our related party reimbursement obligation. Reimbursement payments may be deferred when our related party receives an extension on the maturity date of the associated EB-5 loan liability.
Major components of operating cash used in both periods consist of our continued investment in horizontal development at our communities, SG&A costs and the payment of $49.2 million in each year for interest due on our senior notes.
Major components of operating cash used in both periods consist of our continued investment in horizontal development at our communities, SG&A costs and the payment of $49.2 million each year for interest due on our senior notes.
Prior to our acquisition, related parties assumed the EB-5 loan liabilities, and the San Francisco Venture entered into reimbursement agreements pursuant to which it agreed to reimburse the related parties for a portion of the EB-5 loan liabilities and related interest. The amounts set forth in the above table include interest based on the weighted average interest rate of 4.5%.
Prior to our acquisition, related parties assumed the EB-5 loan liabilities, and the San Francisco Venture entered into reimbursement agreements pursuant to which it agreed to reimburse the related parties for a portion of the EB-5 loan liabilities and related interest. The amounts set forth in the above table include interest based on the weighted average interest rate of 4.6%.
Additionally, we received total distributions of $8.6 million from the Gateway Commercial Venture, of which $0.4 million is reflected as a return on our investment (operating activity) in the statement of cash flows with the balance reflected as an investing activity.
Additionally, we received total distributions of $8.6 million from the Gateway Commercial Venture, of which $0.4 million is reflected as a return on our investment (operating activity) in the statement of cash flows with the balance reflected as an investing activity. Cash Flows from Investing Activities.
Year Ended December 31, 2022 Valencia San Francisco Great Park Commercial Total reportable segments Corporate and unallocated Total under management Removal of unconsolidated entities (1) Total consolidated REVENUES: Land sales $ 913 $ — $ 270,882 $ — $ 271,795 $ — $ 271,795 $ (270,882) $ 913 Land sales—related party 7,512 — 12,520 — 20,032 — 20,032 (12,520) 7,512 Home sales — — 40,475 — 40,475 — 40,475 (40,475) — Management services—related party (2) — — 31,015 418 31,433 — 31,433 — 31,433 Operating properties 2,146 690 — 8,395 11,231 — 11,231 (8,395) 2,836 Total revenues 10,571 690 354,892 8,813 374,966 — 374,966 (332,272) 42,694 COSTS AND EXPENSES: Land sales (996) — 155,692 — 154,696 — 154,696 (155,692) (996) Home sales — — 29,692 — 29,692 — 29,692 (29,692) — Management services (2) — — 20,261 — 20,261 — 20,261 — 20,261 Operating properties 8,230 — — 2,645 10,875 — 10,875 (2,645) 8,230 Selling, general, and administrative 13,602 4,087 18,127 4,289 40,105 36,902 77,007 (22,416) 54,591 Restructuring — — — — — 19,437 19,437 — 19,437 Management fees—related party — — 53,298 — 53,298 — 53,298 (53,298) — Total costs and expenses 20,836 4,087 277,070 6,934 308,927 56,339 365,266 (263,743) 101,523 OTHER INCOME (EXPENSE): Interest income 1 1 1,532 — 1,534 824 2,358 (1,532) 826 Interest expense — — — (1,541) (1,541) — (1,541) 1,541 — Loss on extinguishment of debt — — — (89) (89) — (89) 89 — Miscellaneous 245 — — — 245 — 245 — 245 Total other income (expense) 246 1 1,532 (1,630) 149 824 973 98 1,071 EQUITY IN EARNINGS FROM UNCONSOLIDATED ENTITIES 1,196 — 354 — 1,550 — 1,550 19,963 21,513 SEGMENT (LOSS) PROFIT/LOSS BEFORE INCOME TAX BENEFIT (8,823) (3,396) 79,708 249 67,738 (55,515) 12,223 (48,468) (36,245) INCOME TAX BENEFIT — — — — — 1,471 1,471 — 1,471 SEGMENT (LOSS) PROFIT/NET LOSS $ (8,823) $ (3,396) $ 79,708 $ 249 $ 67,738 $ (54,044) $ 13,694 $ (48,468) $ (34,774) (1) Represents the removal of the Great Park Venture and Gateway Commercial Venture operating results, which are included in the Great Park segment and Commercial segment operating results at 100% of each venture’s historical basis, respectively, but are not included in our consolidated results as we account for our investment in each venture using the equity method of accounting.
(2) For the Great Park and Commercial segments, represents the revenues and expenses attributable to the management company for providing services to the Great Park Venture and the Gateway Commercial Venture, as applicable. 29 Table of Contents Year Ended December 31, 2022 Valencia San Francisco Great Park Commercial Total reportable segments Corporate and unallocated Total under management Removal of unconsolidated entities (1) Total consolidated REVENUES: Land sales $ 913 $ — $ 270,882 $ — $ 271,795 $ — $ 271,795 $ (270,882) $ 913 Land sales—related party 7,512 — 12,520 — 20,032 — 20,032 (12,520) 7,512 Home sales — — 40,475 — 40,475 — 40,475 (40,475) — Management services—related party (2) — — 31,015 418 31,433 — 31,433 — 31,433 Operating properties 2,146 690 — 8,395 11,231 — 11,231 (8,395) 2,836 Total revenues 10,571 690 354,892 8,813 374,966 — 374,966 (332,272) 42,694 COSTS AND EXPENSES: Land sales (996) — 155,692 — 154,696 — 154,696 (155,692) (996) Home sales — — 29,692 — 29,692 — 29,692 (29,692) — Management services (2) — — 20,261 — 20,261 — 20,261 — 20,261 Operating properties 8,230 — — 2,645 10,875 — 10,875 (2,645) 8,230 Selling, general, and administrative 13,602 4,087 18,127 4,289 40,105 36,902 77,007 (22,416) 54,591 Restructuring — — — — — 19,437 19,437 — 19,437 Management fees—related party — — 53,298 — 53,298 — 53,298 (53,298) — Total costs and expenses 20,836 4,087 277,070 6,934 308,927 56,339 365,266 (263,743) 101,523 OTHER INCOME (EXPENSE): Interest income 1 1 1,532 — 1,534 824 2,358 (1,532) 826 Interest expense — — — (1,541) (1,541) — (1,541) 1,541 — Loss on extinguishment of debt — — — (89) (89) — (89) 89 — Miscellaneous 245 — — — 245 — 245 — 245 Total other income (expense) 246 1 1,532 (1,630) 149 824 973 98 1,071 EQUITY IN EARNINGS FROM UNCONSOLIDATED ENTITIES 1,196 — 354 — 1,550 — 1,550 19,963 21,513 SEGMENT (LOSS) PROFIT/LOSS BEFORE INCOME TAX BENEFIT (8,823) (3,396) 79,708 249 67,738 (55,515) 12,223 (48,468) (36,245) INCOME TAX BENEFIT — — — — — 1,471 1,471 — 1,471 SEGMENT (LOSS) PROFIT/NET LOSS $ (8,823) $ (3,396) $ 79,708 $ 249 $ 67,738 $ (54,044) $ 13,694 $ (48,468) $ (34,774) (1) Represents the removal of the Great Park Venture and Gateway Commercial Venture operating results, which are included in the Great Park segment and Commercial segment operating results at 100% of each venture’s historical basis, respectively, but are not included in our consolidated results as we account for our investment in each venture using the equity method of accounting.
The issuances, settlements and forfeitures resulted in the operating company issuing to us an equal number of Class A units of the operating company or retiring an equal number of Class A units of the operating company that we previously held.
The issuances and settlements resulted in the operating company issuing to us an equal number of Class A units of the operating company or retiring an equal number of Class A units of the operating company that we previously held.
Net loss or income attributable to the noncontrolling interests on the consolidated statement of operations represents the portion of losses or earnings attributable to the interests in our subsidiaries held by the noncontrolling interests. 28 Table of Contents Segment Results and Financial Information The following tables reconcile the results of operations of our segments to our consolidated results for the years ended December 31, 2022 and 2021 (in thousands).
Net income or loss attributable to the noncontrolling interests on the consolidated statement of operations represents the portion of earnings or losses attributable to the interests in our subsidiaries held by the noncontrolling interests. 28 Table of Contents Segment Results and Financial Information The following tables reconcile the results of operations of our segments to our consolidated results for the years ended December 31, 2023 and 2022 (in thousands).
(2) Prior to our acquisition of the San Francisco Venture, certain subsidiaries of the San Francisco Venture entered into EB-5 loan agreements with lenders that are authorized by the United States Citizenship and Immigration Services to raise capital from foreign nationals who seek to obtain permanent residency in the United States.
(3) Prior to our acquisition of the San Francisco Venture, certain subsidiaries of the San Francisco Venture entered into EB-5 loan agreements with lenders that are authorized by the United States Citizenship and Immigration Services to raise capital from foreign nationals who seek to obtain permanent residency in the United States.
Additionally, we received total distributions of $8.6 million from the Gateway Commercial Venture, of which $8.3 million is reflected as a return of our investment (investing activity) in the statement of cash flows with the balance reflected as an operating activity.
Additionally, we received total distributions of $8.6 million from the Gateway Commercial Venture, of which $8.3 million is reflected as a return of our investment (investing activity) in the statement of cash flows with the balance reflected as an operating activity. Cash Flows from Financing Activities.
The Great Park Venture has a fee build agreement with an unrelated third-party (“Fee Builder”) that the Great Park Venture contracted to build and act as a sales agent for 38 homesites within the Great Park Neighborhoods.
The Great Park Venture had a fee build agreement with an unrelated third-party (“Fee Builder”) that the Great Park Venture contracted to build and act as a sales agent for 38 homesites within the Great Park Neighborhoods.
No third-party customer accounted for more than 10% of our revenue during the year ended December 31, 2022. Other than the third-party home builders and the unaffiliated land bank entity, no third-party customer accounted for more than 10% of our revenue during the year ended December 31, 2021.
Other than the third-party home builders and the unaffiliated land bank entity, no third-party customer accounted for more than 10% of our revenue during the year ended December 31, 2023. No third-party customer accounted for more than 10% of our revenue during the year ended December 31, 2022.
Since this method requires us to estimate future development costs and the expected sales prices for future land sales, the profit margin on subsequent parcels sold will be affected by both changes in the estimated total revenues, as well as any changes in the estimated total cost of the project.
Since this method requires us to estimate future development costs and the expected sales prices for future land sales, the profit margin on subsequent parcels sold will be affected by both changes in the estimated total revenues, as well as any changes in the estimated total cost of the project. Selling, general, and administrative.
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, a metropolitan public park that is under construction. Great Park Neighborhoods is designed to include approximately 10,500 homesites and approximately 4.9 million square feet of commercial space.
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, a metropolitan public park that is under construction. Great Park Neighborhoods can include up to approximately 10,500 homesites and approximately 4.9 million square feet of commercial space.
As of December 31, 2022, no funds had been drawn on and no letters of credit were outstanding on the operating company’s $125.0 million revolving credit facility.
As of December 31, 2023, no funds had been drawn on and no letters of credit were outstanding on the operating company’s $125.0 million revolving credit facility.
We also made payments of $6.5 million and $19.4 million to reduce our related party reimbursement obligation during the years ended December 31, 2022 and 2021, respectively. We used $2.7 million and $2.0 million during the years ended December 31, 2022 and 2021, respectively, to net settle certain share-based compensation awards with employees for tax withholding purposes.
We also made payments of $4.3 million and $6.5 million to reduce our related party reimbursement obligation during the years ended December 31, 2023 and 2022, respectively. We used $0.2 million and $2.7 million during the years ended December 31, 2023 and 2022, respectively, to net settle certain share-based compensation awards with employees for tax withholding purposes.
The table below reconciles the Commercial segment results for the years ended December 31, 2022 and 2021 to the equity in (loss) earnings from our investment in the Gateway Commercial Venture that is reflected in the consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively.
The table below reconciles the Commercial segment results for the years ended December 31, 2023 and 2022 to the equity in loss from our investment in the Gateway Commercial Venture that is reflected in the consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively.
See “Cautionary Statement Regarding Forward-Looking Statements.” Overview Our Company We conduct all of our business in or through our operating company, Five Point Operating Company, LP (the “operating company”). We are, through a wholly owned subsidiary, the sole managing general partner and owned, as of December 31, 2022, approximately 62.5% of the operating company.
See “Cautionary Statement Regarding Forward-Looking Statements.” Overview Our Company We conduct all of our business in or through our operating company, Five Point Operating Company, LP (the “operating company”). We are, through a wholly owned subsidiary, the sole managing general partner and owned, as of December 31, 2023, approximately 62.6% of the operating company.
Our long-term cash needs relate primarily to future horizontal development expenditures and investments in or vertical construction costs for properties that we may acquire or develop for our income-producing portfolio, along with debt service and general and administrative expenses. We budget our cash development costs on an annual basis.
Our long-term cash needs relate primarily to future horizontal development expenditures and investments in or vertical construction costs for properties that we may acquire or develop for an income-producing portfolio, along with debt service and 34 Table of Contents general and administrative expenses. We budget our cash development costs on an annual basis.
The initial term of our development management agreement with the Great Park Venture expired on December 31, 2021 but had been extended by mutual agreement of the parties through December 31, 2022 (the "2022 extension") and further renewed by mutual agreement of the parties through December 31, 2024.
The initial term of our development management agreement with the Great Park Venture expired on December 31, 2021 but had been extended by mutual agreement of the parties through December 31, 2022 (the “2022 extension”) and further renewed by mutual agreement of the parties through December 31, 2024.
However, because of the relationship between the management company and the Great Park Venture, we assess our investment in the Great Park Venture based on the financial information for the Great Park Venture in its entirety, and not just our equity interest in it.
However, because of the relationship between the management company and the Great Park Venture, we assess 31 Table of Contents our investment in the Great Park Venture based on the financial information for the Great Park Venture in its entirety, and not just our equity interest in it.
The remaining $66.3 million legacy interest will be paid on a pro-rata basis, with approximately 10% of future distributions paid to the holders of legacy interests and approximately 90% of such distributions paid to the holders of the percentage interests, until such time as the remaining balance has been fully paid. Land sales and related party land sales revenues.
The remaining $18.1 million legacy interest will be paid on a pro-rata basis, with approximately 10% of future distributions paid to the holders of legacy interests and approximately 90% of such distributions paid to the holders of the percentage interests, until such time as the remaining balance has been fully paid. Land sales and related party land sales revenues.
Our development plans were designed with the flexibility to adjust for potential land transfer delays, and we have the ability to shift the phasing of our development 31 Table of Contents activities to account for potential delays caused by U.S.
Our development plans were designed with the flexibility to adjust for potential land transfer delays, and we have the ability to shift the phasing of our development activities to account for potential delays caused by U.S.
Results of Operations The following tables and related discussions on the results of operations are for the fiscal years ended December 31, 2022 and 2021.
Results of Operations The following tables and related discussions on the results of operations are for the fiscal years ended December 31, 2023 and 2022.
Cash flows from operating activities are primarily comprised of cash inflows from land sales, management services and operating property results. Cash outflows are comprised primarily of cash outlays for horizontal development costs, employee compensation, and SG&A costs.
Cash flows from operating activities are primarily comprised of cash inflows from land sales, management services and operating property results. Cash outflows are comprised primarily of cash outlays for horizontal development costs, net of reimbursements and recoveries, employee compensation, and SG&A costs.
San Francisco Segment 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.
San Francisco Segment 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 can include up to approximately 12,000 homesites and approximately 6.3 million square feet of commercial space.
For the year ended December 31, 2022, we recognized $12.0 million in revenues attributable to the revised base fee, and as a result of changes in estimates of the amount of variable incentive compensation, we recognized $19.0 million in additional revenue.
For the year ended December 31, 2022, we recognized $12.0 million in revenues attributable to the revised base fee, and as a result of changes in estimates of the amount of variable incentive compensation, we recognized $19.0 million in additional revenue. Management services costs and expenses.
We typically estimate the fair value of our investments using a discounted cash flow of distributions we expect to receive from the venture. Significant input assumptions used in estimating the distributions we expect to receive from the venture include revenue appreciation rates and cost appreciation rates.
We typically estimate the fair value of our investments using a discounted cash flow of distributions we expect to receive from the venture. Significant input assumptions used in estimating the distributions we expect to receive from the venture include revenue and development cost estimates.
We assessed the realization of the net deferred tax asset and the need for a valuation allowance, based on positive and negative evidence, and determined that at December 31, 2021 it was more likely than not that such net deferred tax assets would not be realized.
We assessed the realization of the net deferred tax asset and the need for a valuation allowance, based on positive and negative evidence, and determined that at December 31, 2023, it was more likely than not that such net deferred tax assets would be fully realized, and our valuation allowance was released.
We may seek to raise additional capital by accessing the debt or equity capital markets or with one or more revolving or term loan facilities or other public or private financing alternatives. These financings may not be available on attractive terms, or at all.
We may seek to raise additional capital by accessing the debt or equity capital markets or with one or more revolving or term loan facilities or other public or private financing alternatives, including entering into joint ventures. These financings may not be available on attractive terms, or at all.
Equity in earnings for the years ended December 31, 2022 and 2021 was primarily a result of recognizing our share of the net income of the Great Park Venture generated from land and home sales during each period. Income taxes.
Equity in earnings for the years ended December 31, 2023 and 2022 was primarily a result of recognizing our share of the net income of the Great Park Venture generated from land sales in 2023 and land and home sales in 2022. Income taxes.
Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the fiscal year ended December 31, 2021 for financial data and related comparative discussions on results of operations for the fiscal years ended December 31, 2021 and 2020. 26 Table of Contents The Company The following table summarizes our consolidated historical results of operations for the years ended December 31, 2022 and 2021.
Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the fiscal year ended December 31, 2022 for financial data and related comparative discussions on results of operations for the fiscal years ended December 31, 2022 and 2021, which is incorporated herein by reference. 26 Table of Contents The Company The following table summarizes our consolidated historical results of operations for the years ended December 31, 2023 and 2022.
The Great Park Venture sold the first homesites in April 2013 and, as of December 31, 2022, had sold 7,326 homesites (including 853 affordable homesites) and 115 acres of commercial land, including the Five Point Gateway Campus, allowing for development of up to approximately 2.8 million square feet of commercial office and research and development space for aggregate consideration of approximately $3.3 billion.
The Great Park Venture sold the first homesites in April 2013 and, as of December 31, 2023, had sold 8,124 homesites (including 853 affordable homesites) and 153 acres of commercial land, including the Five Point Gateway Campus, allowing for development of up to approximately 3.5 million square feet of commercial office and research and development space for aggregate consideration of approximately $3.8 billion.
In 2020, the Gateway Commercial Venture sold three of the buildings and approximately 11 acres of land at the campus, generating $463.0 million in gross proceeds. Our corporate headquarters are located in the fourth building, which remains owned by the Gateway Commercial Venture.
In 2020, the Gateway Commercial Venture sold three of the buildings and approximately 11 acres of land at the campus. Our corporate headquarters are located in the fourth building, which remains owned by the Gateway Commercial Venture.
As of December 31, 2021, the Great Park Venture had fully satisfied the $476.0 million priority distribution rights, and the remaining maximum participating legacy interest distribution rights at December 31, 2022 were $66.3 million.
As of December 31, 2021, the Great Park Venture had fully satisfied the $476.0 million priority distribution rights, and the remaining maximum participating legacy interest distribution rights at December 31, 2023 were $18.1 million.
During the years ended December 31, 2022 and 2021, we made tax distributions of $0.4 million and $4.4 million (net of amounts distributable to us as a partner of the operating company), respectively, to noncontrolling interests in accordance with the operating company's Limited Partnership Agreement (“LPA”). The tax distribution is treated as an advance distribution under the LPA.
During the years ended December 31, 2023 and 2022, we made tax distributions of $4.0 million and $0.4 million, respectively, to noncontrolling interests in accordance with the operating company's Limited Partnership Agreement (“LPA”). The tax distribution is treated as an advance distribution under the LPA.
Net cash used in financing activities was $9.7 million for the year ended December 31, 2022, compared to net cash used in financing activities of $26.6 million for the year ended December 31, 2021.
Net cash used in financing activities was $9.2 million for the year ended December 31, 2023, compared to net cash used in financing activities of $9.7 million for the year ended December 31, 2022.
Outstanding LOCs totaled $1.0 million and $1.3 million at December 31, 2022 and 2021, respectively. At both December 31, 2022 and 2021, we had $1.0 million in restricted cash and certificates of deposit securing certain of our LOCs. Additionally, under our revolving credit facility, we are able to utilize undrawn capacity to support the issuance of LOCs.
At both December 31, 2023 and 2022, we had $1.0 million in restricted cash and certificates of deposit securing certain of our LOCs. Additionally, under our revolving credit facility, we are able to utilize undrawn capacity to support the issuance of LOCs. As of December 31, 2023, no capacity under the revolving credit facility was used to support LOCs.
The table below summarizes outstanding Class A units of the operating company and Class A units of the San Francisco Venture, which are redeemable on a one-for-one basis for Class A units of the operating company, at December 31, 2022 and 2021 held by us and those held by noncontrolling interest members. 2022 2021 Class A units of the operating company: Held by us 69,068,354 70,107,552 Held by noncontrolling interest members 41,363,271 41,363,271 110,431,625 111,470,823 Class A units of the San Francisco Venture held by noncontrolling interest members 37,870,273 37,870,273 148,301,898 149,341,096 At December 31, 2022, we had 79,233,544 Class B common shares outstanding that were held by the noncontrolling interest members of the operating company and the Class A unitholders of the San Francisco Venture.
The table below summarizes outstanding Class A units of the operating company and Class A units of the San Francisco Venture, which are redeemable on a one-for-one basis for Class A units of the operating company, at December 31, 2023 and 2022 held by us and those held by noncontrolling interest members. 2023 2022 Class A units of the operating company: Held by us 69,199,938 69,068,354 Held by noncontrolling interest members 41,363,271 41,363,271 110,563,209 110,431,625 Class A units of the San Francisco Venture held by noncontrolling interest members 37,870,273 37,870,273 148,433,482 148,301,898 At December 31, 2023, we had 79,233,544 Class B common shares outstanding that were held by the noncontrolling interest members of the operating company and the Class A unitholders of the San Francisco Venture.
The decrease in revenues was primarily due to a decrease in management services revenue at our Great Park segment in 2022 and land sales revenues recognized at our Valencia segment in 2021 compared to no land sales in 2022. Cost of land sales.
The increase in revenues was primarily due to land sales at our Valencia segment in 2023 compared to no land sales in 2022 and an increase in management services revenue at our Great Park segment in 2023. Cost of land sales.
Our operating cash flows may vary significantly each year due to the timing of land sales and the development efforts related to our mixed-use planned communities. Net cash used in operating activities increased by $106.9 million for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Our operating cash flows may vary significantly each year due to the timing of land sales and the development efforts related to our mixed-use planned communities. Net cash provided by operating activities was $154.1 million for the year ended December 31, 2023, compared to $188.3 million net cash used in operating activities for the year ended December 31, 2022.
Our effective tax rate, before changes in valuation allowance, for the year ended December 31, 2022 decreased from the year ended December 31, 2021 due to changes in permanent differences, including executive compensation subject to limitations, relative to the change to pre-tax loss from pre-tax income in 2021. Net (loss) income attributable to noncontrolling interests.
Our effective tax rate for the year ended December 31, 2023 decreased from the year ended December 31, 2022 due to the release of the valuation allowance in the current period, net of changes in permanent differences, including executive compensation subject to limitations. Net income (loss) attributable to noncontrolling interests.
During the years ended December 31, 2022 and 2021, revenues also included changes in estimates of variable consideration, including profit participation, from those amounts previously recorded by the Great Park Venture. During the years ended 32 Table of Contents December 31, 2022 and 2021, the Great Park Venture recognized $19.6 million and $6.7 million in profit participation revenue, respectively.
During the years ended December 31, 2023 and 2022, revenues also included changes in estimates of variable consideration, including profit participation, from those amounts previously recorded by the Great Park Venture. During the years ended December 31, 2023 and 2022, the Great Park Venture recognized $21.0 million and $19.6 million in profit participation revenue, respectively. Cost of land sales.
During the year ended December 31, 2022, the Great Park Venture closed the sales of 22 homes to homebuyers generating $40.5 million in home sale revenues. With the 22 home sales that closed in the year ended December 31, 2022, all 38 homes subject to the fee build agreement have been sold and closed.
All homes subject to the fee build agreement had been sold and closed escrow as of December 31, 2022. During the year ended December 31, 2022, the Great Park Venture closed the sales of 22 homes to homebuyers generating $40.5 million in home sale revenues. 32 Table of Contents Cost of home sales.
We manage our development activities and expenditures to coincide with projected demand for homesites by our guest builders with the objective of maintaining an appropriate level of liquidity.
We manage our development activities and expenditures to coincide with projected demand for our residential and commercial land with the objective of maintaining an appropriate level of liquidity.
Changes in Capital Structure During the year ended December 31, 2022, our ownership percentage in the operating company decreased slightly to 62.5%, primarily due to our reacquisition of approximately 0.4 million restricted Class A common shares from employees for income tax withholding purposes upon vesting and the forfeiture of approximately 0.8 million restricted Class A common shares held by employees that did not vest, partially offset by our issuance of shared-based compensation in the form of 0.2 million restricted Class A common shares.
Changes in Capital Structure During the year ended December 31, 2023, our ownership percentage in the operating company increased slightly to 62.6%, primarily due to our issuance of shared-based compensation in the form of 0.2 million restricted Class A common shares, partially offset by our reacquisition of approximately 0.1 million restricted Class A common shares from employees for income tax withholding purposes upon vesting.
Equity in earnings for the year ended December 31, 2022 was primarily as a result of recognition of our pro-rata share of profits from land sold by the Valencia Landbank Venture to third-party homebuilders.
Equity in earnings from the Valencia Landbank Venture of $0.6 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively, was primarily a result of recognition of our pro-rata share of profits from land sold by the Valencia Landbank Venture to third-party homebuilders.
We are responsible for income taxes on our allocable share of the operating company's income or gain. Pre-tax loss of $36.2 million for the year ended December 31, 2022 resulted in a tax benefit of $1.5 million.
We are responsible for income taxes on our allocable share of the operating company's income or gain. Pre-tax income of $109.3 million for the year ended December 31, 2023 resulted in a tax benefit of $4.4 million.
During the year ended December 31, 2022, the Great Park Venture made aggregate distributions of $16.5 million to holders of legacy interests and $140.5 million to holders of percentage interests. The Company received $52.7 million for its 37.5% percentage interest.
During the year ended December 31, 2023, the Great Park Venture made aggregate distributions of $48.2 million to holders of legacy interests and $411.2 million to holders of percentage interests. The Company received $154.2 million for its 37.5% percentage interest.
The lower expense during the year ended December 31, 2022 was mainly attributable to a decrease in marketing expenses and the elimination of the variable cost reimbursement component under the development management agreement. Management fees—related party.
The lower expense during the year ended December 31, 2023 was mainly attributable to a decrease in marketing expenses and property maintenance expenses and the elimination of the variable cost reimbursement component under the development management agreement that became effective in the second quarter of 2022.
The Fee Builder initially incurs all costs to build, market and sell the residential homes, and the Great Park Venture reimburses the Fee Builder as construction progresses and pays the Fee Builder certain fees during the construction phase of the homes and when homes are sold to homebuyers.
The Fee Builder initially incurred all costs to build, market and sell the residential homes, and the Great Park Venture reimbursed the Fee Builder as construction progressed and paid the Fee Builder certain fees during the construction phase of the homes and when homes were sold to homebuyers.
Other than the Valencia Landbank Venture and the Great Park Venture, no related party customer accounted for more than 10% of our revenue during the year ended December 31, 2021.
Other than the Great Park Venture, no related party customer accounted for more than 10% of our 37 Table of Contents revenue during the year ended December 31, 2023. Other than Lennar and the Great Park Venture, no related party customer accounted for more than 10% of our revenue during the year ended December 31, 2022.
Summary of Cash Flows The following table outlines the primary components of net cash (used in) provided by operating, investing and financing activities (in thousands): Year Ended December 31, 2022 2021 Operating activities $ (188,302) $ (81,420) Investing activities 63,990 75,315 Financing activities (9,717) (26,577) Cash Flows from Operating Activities.
Summary of Cash Flows The following table outlines the primary components of net cash provided by (used in) operating, investing and financing activities (in thousands): Year Ended December 31, 2023 2022 Operating activities $ 154,123 $ (188,302) Investing activities 77,111 63,990 Financing activities (9,204) (9,717) Cash Flows from Operating Activities.
Year Ended December 31, 2022 2021 (in thousands) Segment profit from operations $ 249 $ 1,284 Less net income of management company attributed to the Commercial segment 418 406 Net (loss) income of Gateway Commercial Venture (169) 878 Equity in (loss) earnings from Gateway Commercial Venture $ (127) $ 659 Liquidity and Capital Resources At December 31, 2022, we had $131.8 million of consolidated cash and cash equivalents, compared to $265.5 million at December 31, 2021.
Year Ended December 31, 2023 2022 (in thousands) Segment (loss) profit from operations $ (3,454) $ 249 Less net income of management company attributed to the Commercial segment 431 418 Net loss of Gateway Commercial Venture (3,885) (169) Equity in loss from Gateway Commercial Venture $ (2,914) $ (127) Liquidity and Capital Resources At December 31, 2023, we had $353.8 million of consolidated cash and cash equivalents, compared to $131.8 million at December 31, 2022.
Equity in earnings from unconsolidated entities increased by $15.3 million, to $21.5 million for the year ended December 31, 2022, from $6.2 million for the year ended December 31, 2021.
Equity in earnings from unconsolidated entities increased by $55.1 million, to $76.6 million for the year ended December 31, 2023, from $21.5 million for the year ended December 31, 2022.
Net cash provided by investing activities was $64.0 million for the year ended December 31, 2022, compared to the net cash provided by investing activities of $75.3 million for the year ended December 31, 2021. 36 Table of Contents During the year ended December 31, 2022 we received distributions of $52.7 million and $3.3 million from the Great Park Venture and Valencia Landbank Venture, respectively, which is reflected as a return of our investment (investing activity) in the statement of cash flows.
For the year ended December 31, 2022, we received distributions of $52.7 million and $3.3 million from the Great Park Venture and Valencia Landbank Venture, respectively, which is reflected as a return of our investment (investing activity) in the statement of cash flows.
The tax benefit was primarily the result of the increase in net deferred tax assets exceeding the net increase in deferred tax liabilities after changes in our valuation allowance.
The tax benefit was primarily the result of the increase in net deferred tax assets exceeding the net increase in deferred tax liabilities including the $17.6 million release of our valuation allowance.
We did not sell homesites directly to Lennar during the years ended December 31, 2022, 2021, and 2020 but did recognize revenues related to certain fees or profit participation associated with homes sold by Lennar to homebuyers at Valencia. For the year ended December 31, 2022, we recognized $7.5 million of revenue from Lennar, which primarily consisted of profit participation.
We did not sell homesites directly to Lennar during the years ended December 31, 2023, 2022, and 2021 but did recognize revenues related to certain fees or profit participation associated with homes sold by Lennar to homebuyers at Valencia.
Cost of home sales includes an allocation of land basis for each home sold in addition to home construction costs the Great Park Venture reimburses to the Fee Builder and fees paid to the Fee Builder for the services provided.
Cost of home sales includes an allocation of land basis for each home sold in addition to home construction costs the Great Park Venture reimbursed to the Fee Builder and fees paid to the Fee Builder for the services provided. During the year ended December 31, 2022, the Great Park Venture recognized $29.7 million in cost of home sales.
Cost of land sales. Cost of land sales during the years ended December 31, 2022 and 2021 were $155.7 million and $301.2 million, or 54.9% and 73.6% of total land sales revenues, respectively. The cost of land sales includes both actual and estimated future capitalized costs allocated based upon relative sales values.
Cost of land sales during the years ended December 31, 2023 and 2022 were $237.1 million and $155.7 million, respectively. The cost of land sales includes both actual and estimated future capitalized costs allocated based upon relative sales values.
SG&A costs decreased by $12.5 million, or 40.9%, to $18.1 million for the year ended December 31, 2022, from $30.7 million for the year ended December 31, 2021.
SG&A costs decreased by $7.2 million, or 39.7%, to $10.9 million for the year ended December 31, 2023, from $18.1 million for the year ended December 31, 2022.
Year Ended December 31, 2022 2021 (in thousands) Segment profit from operations $ 79,708 $ 64,134 Less net income of management company attributed to the Great Park segment 10,754 7,216 Net income of Great Park Venture 68,954 56,918 The Company’s share of net income of the Great Park Venture 25,858 21,344 Basis difference amortization (5,414) (14,912) Equity in earnings from Great Park Venture $ 20,444 $ 6,432 Commercial Segment We have a 75% interest in the Gateway Commercial Venture that is held through a wholly owned subsidiary of the operating company, and we serve as the manager of the Gateway Commercial Venture.
Year Ended December 31, 2023 2022 (in thousands) Segment profit from operations $ 275,630 $ 79,708 Less net income of management company attributed to the Great Park segment 25,020 10,754 Net income of Great Park Venture 250,610 68,954 The Company’s share of net income of the Great Park Venture 93,979 25,858 Basis difference amortization, net (15,032) (5,414) Equity in earnings from Great Park Venture $ 78,947 $ 20,444 33 Table of Contents Commercial Segment We have a 75% interest in the Gateway Commercial Venture that is held through a wholly owned subsidiary of the operating company, and we serve as the manager of the Gateway Commercial Venture.
The decrease in total land sales revenues was attributable to the recognition of revenue from the sale of land entitled for an aggregate of 643 homesites on approximately 57 acres during the year ended December 31, 2021 compared to no land sales during the year ended December 31, 2022. The base purchase price was $167.3 million for the 2021 sales.
The increase in total land sales revenues was attributable to the recognition of revenue from the sale of land entitled for an aggregate of 729 homesites on approximately 72 acres during the year ended December 31, 2023 compared to no land sales during the year ended December 31, 2022.
In addition to the related party revenues, during the year ended December 31, 2021, we also sold homesites to two third-party home builders and recognized $30.3 million and $22.5 million of revenue, respectively, which separately accounted for more than 10% of total consolidated revenues.
In addition to the related party revenues, during the year ended December 31, 2023, we recognized an aggregate of $21.7 million and $39.4 million of revenue from two third-party home builders, respectively, which primarily consisted of homesites sold to the two third-party home builders and which separately accounted for more than 10% of total consolidated revenues.
The Great Park Venture recognized expense of $44.0 million and $19.1 million for incentive compensation fees during the years ended December 31, 2022 and 2021, respectively. 33 Table of Contents The table below reconciles the Great Park segment results for the years ended December 31, 2022 and 2021 to the equity in earnings from our investment in the Great Park Venture that is reflected in the consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively.
The table below reconciles the Great Park segment results for the years ended December 31, 2023 and 2022 to the equity in earnings from our investment in the Great Park Venture that is reflected in the consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively.
We had outstanding performance bonds of $315.0 million as of December 31, 2022 predominantly related to our Valencia community. At December 31, 2022, the San Francisco Venture had outstanding guarantees benefiting a municipal agency for infrastructure and construction of certain park and open space obligations with aggregate maximum obligations of $198.3 million.
At December 31, 2023, the San Francisco Venture had outstanding guarantees benefiting a municipal agency for infrastructure and construction of certain park and open space obligations with aggregate maximum obligations of $198.3 million. Outstanding LOCs totaled $1.0 million at each of December 31, 2023 and 2022.
Previously, the management company received a fixed base fee, reimbursement for certain variable costs and the right to receive certain variable incentive compensation.
Management fee revenues. Management fee revenues are revenues generated by the management company from development management services provided to the Great Park Venture. Previously, the management company received a fixed base fee, reimbursement for certain variable costs and the right to receive certain variable incentive compensation.
Cost of management services. Cost of management services decreased by $11.2 million, or 35.6%, to $20.3 million for the year ended December 31, 2022, from $31.5 million for the year ended December 31, 2021. The decrease was primarily due to a decrease in project team expenses and intangible asset amortization expense at our Great Park segment. Selling, general, and administrative.
The increase was primarily due to an increase in intangible asset amortization expense at our Great Park segment. Selling, general, and administrative. SG&A expenses decreased by $3.1 million, or 5.7%, to $51.5 million for the year ended December 31, 2023, from $54.6 million for the year ended December 31, 2022.
Land sales and related party land sales revenues decreased by $126.2 million to $283.4 million for the year ended December 31, 2022, from $409.6 million for the year ended December 31, 2021. In 2022, the Great Park Venture sold approximately 42 acres of commercial land and land entitled for an aggregate of 61 homesites on approximately three acres.
Land sales and related party land sales revenues increased by $271.4 million to $554.8 million for the year ended December 31, 2023, from $283.4 million for the year ended December 31, 2022. In 2023, the Great Park Venture closed 38 acres of commercial land and land entitled for an aggregate of 798 homesites on approximately 84 acres.
Selling, general, and administrative. SG&A expenses decreased by $4.7 million, or 25.8%, to $13.6 million for the year ended December 31, 2022, from $18.3 million for the year ended December 31, 2021. The decrease was mainly attributable to a decrease in community related selling and marketing expenses and a decrease in employee related expenses.
SG&A expenses decreased by $2.0 million, or 14.9%, to $11.6 million for the year ended December 31, 2023, from $13.6 million for the year ended December 31, 2022. The decrease was mainly attributable to a decrease in community related selling and marketing expenses and a decrease in employee related expenses. Equity in earnings from unconsolidated entity.
In general, incentive compensation fees will be paid as a percentage of distributions made to holders of the Great Park Venture’s percentage interests. When payments are deemed probable of being made, the Great Park Venture recognizes the expense ratably over the period services are expected to be provided.
When payments are deemed probable of being made, the Great Park Venture recognizes the expense ratably over the period services are expected to be provided. When estimates of the amount of incentive compensation probable of being paid change, the Great Park Venture records a cumulative adjustment in the period in which the estimate changes.
As of December 31, 2022, there were no amounts currently payable under the TRA. We are committed under various performance bonds and letters of credit (“LOCs”) to perform certain development activities and provide certain guarantees in the normal course of the entitlement and development process.
We are committed under various performance bonds and letters of credit (“LOCs”) to perform certain development activities and provide certain guarantees in the normal course of the entitlement and development process. We had outstanding performance bonds of $306.9 million as of December 31, 2023 predominantly related to our Valencia community.
Year Ended December 31, 2022 2021 (in thousands) Statement of Operations Data REVENUES: Land sales $ 913 $ 139,500 Land sales—related party 7,512 43,286 Management services—related party 31,433 39,081 Operating properties 2,836 2,527 Total revenues 42,694 224,394 COSTS AND EXPENSES: Land sales (996) 106,012 Management services 20,261 31,459 Operating properties 8,230 6,822 Selling, general, and administrative 54,591 77,118 Restructuring 19,437 — Total costs and expenses 101,523 221,411 OTHER INCOME: Interest income 826 94 Miscellaneous 245 3,720 Total other income 1,071 3,814 EQUITY IN EARNINGS FROM UNCONSOLIDATED ENTITIES 21,513 6,188 (LOSS) INCOME BEFORE INCOME TAX BENEFIT (36,245) 12,985 INCOME TAX BENEFIT 1,471 325 NET (LOSS) INCOME (34,774) 13,310 LESS NET (LOSS) INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (19,371) 6,742 NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY $ (15,403) $ 6,568 Revenues.
Year Ended December 31, 2023 2022 (in thousands) Statement of Operations Data REVENUES: Land sales $ 160,796 $ 913 Land sales—related party 595 7,512 Management services—related party 47,621 31,433 Operating properties 2,720 2,836 Total revenues 211,732 42,694 COSTS AND EXPENSES: Land sales 105,651 (996) Management services 22,170 20,261 Operating properties 6,167 8,230 Selling, general, and administrative 51,495 54,591 Restructuring — 19,437 Total costs and expenses 185,483 101,523 OTHER INCOME (EXPENSE): Interest income 7,230 826 Miscellaneous (776) 245 Total other income 6,454 1,071 EQUITY IN EARNINGS FROM UNCONSOLIDATED ENTITIES 76,595 21,513 INCOME (LOSS) BEFORE INCOME TAX BENEFIT 109,298 (36,245) INCOME TAX BENEFIT 4,418 1,471 NET INCOME (LOSS) 113,716 (34,774) LESS NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 58,322 (19,371) NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY $ 55,394 $ (15,403) Revenues.
Cost of land sales during the year ended December 31, 2021 was $106.0 million, or 58.0% of total land sale revenues and land sales—related party revenues. The cost of land sales includes both actual and estimated future capitalized costs allocated based upon relative sales values.
Cost of land sales during the year ended December 31, 2023 was $105.7 million, compared to a credit of $1.0 million to cost of land sales during year ended December 31, 2022. The cost of land sales includes both actual and estimated future capitalized costs allocated based upon relative sales values.
Additionally, in 2021, 328 of the homesites were sold to an unaffiliated land banking entity whereby a related party retained the option to acquire the homesites in the future from the land bank entity. Cost of land sales.
The aggregate base purchase price was $162.4 million for the 2023 sales. In 2023, 583 of the homesites were sold to an 30 Table of Contents unaffiliated land banking entity whereby a related party retained the option to acquire the homesites in the future from the land bank entity. Cost of land sales.
Revenues decreased by $181.7 million, to $42.7 million for the year ended December 31, 2022, from $224.4 million for the year ended December 31, 2021.
Revenues increased by $169.0 million, to $211.7 million for the year ended December 31, 2023, from $42.7 million for the year ended December 31, 2022.
By the end of 2022, our guest builders had opened our initial 18 neighborhoods and sold 594 homes during 2022, for a total of 940 homes sold since sales began in May 2021. Homes in our initial neighborhoods consist of a wide mix of attached and detached single family homes that are attracting first time buyers along with trade-up buyers.
By the end of 2023, 12 of our initial 18 neighborhoods had sold out, and our guest homebuilders had also opened three additional neighborhoods at our newest development area. Homes in these neighborhoods consist of a wide mix of attached and detached single family homes that are attracting first time buyers along with trade-up buyers.
In 2021, the Great Park Venture sold land entitled for an aggregate of 887 homesites on approximately 72 acres. The purchase price was $240.0 million for the 2022 commercial land sale.
In 2022, the Great Park Venture sold approximately 42 acres of commercial land and land entitled for an aggregate of 61 homesites on approximately three acres.
Land sales and related party land sales revenues. Total land sales revenues decreased by $174.4 million, or 95.4%, to $8.4 million for the year ended December 31, 2022, from $182.8 million for the year ended December 31, 2021.
Total land sales revenues increased by $153.0 million to $161.4 million for the year ended December 31, 2023, from $8.4 million for the year ended December 31, 2022.
For the year ended December 31, 2021, we received a distribution of $76.6 million from the Great Park Venture, which is reflected as a return of our investment (investing activity) in the statement of cash flows. Additionally, we received a distribution of $1.0 million from our indirect legacy interest in the Great Park Venture. Cash Flows from Financing Activities.
During the year ended December 31, 2023, we received total distributions of $154.2 million from the Great Park Venture, of which $76.0 million is reflected as a return of our investment (investing activity) in the statement of cash flows with the balance 36 Table of Contents reflected as an operating activity.
The agreement has an initial 35-year term, which expires in 2039 with an option for a second 35-year term.
(2) We are subject to a water purchase agreement requiring annual payments in exchange for the delivery of water for our exclusive use. The agreement has an initial 35-year term, which expires in 2039 with an option for a second 35-year term.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022, we had outstanding consolidated indebtedness of $620.7 million, none of which bears interest based on floating interest rates. We have not entered into any transactions using derivative financial instruments or derivative commodity instruments. 39 Table of Contents
Biggest changeAs of December 31, 2023, we had outstanding consolidated indebtedness of $622.2 million, none of which bears interest based on floating interest rates. We have not entered into any transactions using derivative financial instruments or derivative commodity instruments. 39 Table of Contents

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