Five Point Holdings LLC (NYSE: FPH) began its third quarter during a rocky time for the homebuilding industry.
“We have entered a phase of more major interest rate adjustments by the Fed,” CEO Dan Hedigan told analysts during a recent conference call. “Homebuyers are feeling the effects of higher interest rates and the market appears to expect rates to stay at elevated levels for longer than originally anticipated.”
Still, the Irvine-based master developer has seen signs of optimism despite the financial headwinds. The company last month reported climbing year-over-year homebuilder sales, thanks to a new neighborhood opening in August 2022, continuing commercial land interest and a rising cash position coupled with decreasing debt.
At press time, shares in FivePoint were $2.50, giving it a $375 million market cap.
Great Park Sales
Homebuilders that have purchased land at FivePoint’s Great Park Neighborhoods in Irvine are selling homes at a faster clip than the year prior.
Great Park saw the sale of 113 homes last quarter, following 177 in the second quarter.
Year-to-date, builders have sold 545 homes, more than double the number from the same period a year ago. FivePoint reported 326 home sales on its Irvine land in 2022, down 50% from 2021.
“Notwithstanding the headwinds created by the interest rate environment, we are seeing consistent home sales in our communities and continued interest from homebuilders in our land,” Hedigan said.
Builders are selling homes at Solis Park—“our only actually selling neighborhood”—with approximately 100 homes remaining to sell.
Solis Park, with 849 homes planned in total, opened at the end of August 2022.
During the second quarter, FivePoint sold 798 homesites to builders. That forthcoming neighborhood, called Luna Park, will include 13 collections to open in phases next year, starting in February.
Credit Facility Extension
FivePoint ended the third quarter with $218 million of cash on hand, an increase in its cash position of over $25 million. The company also had a borrowing availability of $125 million under its unsecured revolving credit facility, according to officials.
The company’s liquidity last quarter totaled nearly $364 million, with no principal debt repayment obligations on its senior notes for over two years.
FivePoint also secured an extension of its revolving credit facility, which lasts until April 2026, officials told analysts.
“With our growing profitability and cash position, we are focused on repositioning and extending this debt, and we are confident that we will be able to provide for the long-term capital needs of the company as we manage the upcoming maturity of our notes,” Hedigan told analysts.
Commercial Moves
FivePoint’s commercial land business is also gaining traction, with the company in escrow on the sale of roughly 40 acres of land fitted for industrial uses. It expects to close on the deal by the end of the year.
That land comprises of two parcels in Irvine, one that spans 6 acres and another that runs almost 32 acres.
