Five Point Holdings LLC

NYSE:FPH

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Operator]

Greetings, and welcome to the Five Point Holdings, LLC Third Quarter 2023 Conference Call. As a reminder, this call is being recorded. Today's conference may include forward-looking statements regarding Five Point's business, financial condition, operations, cash flow, strategy and perspectives. Forward-looking statements represent Five Point's estimates on the date of this conference call and are not intended to give any assurance as the actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could affect future results and may cause Five Point's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described in today's press release and Five Point's SEC filings, including those in the Risk Factor section of Five Point's most recent annual report on Form 10-K filed with the SEC. Please note that Five Point assumes no obligation to update any forward-looking statements.

Now I'd like to turn the call over to Daniel Hedigan, Chief Executive Officer.

[Daniel Hedigan, executive]

Thank you. Good afternoon, and thank you for joining our call. I have with me today, Kim Tobler, our Chief Financial Officer; Mike Alvarado, our Chief Legal Officer; and Leo Kij, our former Interim Chief Financial Officer, who is now our Senior Vice President of Finance and Reporting. Stuart Miller, our Executive Chairman, is joining us remotely.

Before we get into the quarterly update, I'd like to mention some positive news on the recent management changes. Since our last call, Kim Tobler was promoted from a position as Vice President of Treasury and Tax to his new role as Chief Financial Officer. Kim brings a great deal of valuable background and experience to this position and is well suited to help us navigate the current economic environment and execute on our business priorities. Congratulations, Kim. We are all very appreciative of the great job Leo Kij did as interim CFO, and I personally very much appreciated his assistance as we focus our attention on rightsizing our SG&A to position us to achieve our long-term goals. Thank you, Leo.

Now let me turn to our Q3 results and update you on the progress of the company through the third quarter. I'll also update you on our team's focus during the quarter and the steps we are taking to implement our strategic priorities for the balance of the year. Next, Kim will give an overview of the company's financial performance and condition. We will then open the line for questions to our management team.

To begin with, I'd like to congratulate our team for remaining focused this quarter on both controlling our business and executing on our three main priorities: generating positive cash flow and earnings, establishing appropriate levels of SG&A and managing and limiting our capital spend, matching those expenditures to near-term revenue events. We ended the quarter with consolidated net income of $14.2 million, added $25.1 million to our cash balance. Our balance sheet at the end of the third quarter reflects $218.3 million of cash on hand with a $0 drawn on our $125 million revolver. We have total liquidity of $343.6 million, and we have no principal debt repayment obligations on our senior notes for over 2 years.

Reflecting our considerable progress in cash and revenue generation, I'm pleased to report on the extension of our revolving credit facility with our bank group, which extends its maturity until April 2026. This allows us to focus our attention on our senior notes that are due in November 2025. While our senior notes don't mature for another 2 years, with our growing profitability and cash position, we are focused on repositioning and extending this debt, and we are confident that we'll be able to provide for the long-term capital needs of the company as we manage the upcoming maturity of our notes.

Our SG&A and capital spend continue to be in line with our recent trends. Kim will provide additional detail on these numbers during his remarks. The macroeconomic environment for most of this year has been constructed to homebuilding, but there are challenges that we and our guest builders are facing. While we have entered a phase of more major interest rate adjustment side of that, 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.

Notwithstanding these headwinds, we still see demand for new homes as home buyers are dealing with the reality of higher interest rates. Homebuilders have also assisted in stabilizing demand by offering mortgage products with reduced interest rates that have allowed new home sales to continue even as the resale market slows. Additionally, as you may recall from my comments last quarter, as a consequence of increased interest rates, recent home inventory remains very low, helping to support the new home market. Overall, affordability continues to be a challenge in California as housing continues to be in short supply. This supply constraint has allowed homebuilders and our communities to continue to sell homes at consistent price levels, albeit at a slightly reduced pace due to the combination of elevated interest rates and limited builder inventory in our communities.

On the commercial land side of our business, we are seeing interest in our unique and limited commercial land offerings. While capital market has slowed for spec of commercial development of our communities, we're still seeing interest from the user market as users have limited options if they want to own and control their own facilities on a long-term basis. We expect this user interest will continue to support demand in this preferred asset class, notwithstanding adjustments in the capital markets.

Finally, I would be remiss I did not note the emerging geopolitical risks that could impact the economy and our industry, which we will continue to monitor. Let me pivot now and provide you with some updates on our communities, starting first with Great Park neighborhood. During the third quarter, builders in our Great Park community sold 113 homes. Solis Park is currently our only actively selling neighborhood and is nearing its maturity with approximately 100 homes remaining to sell. Sales pace during the quarter was impacted by a combination of factors, including limited releases and product offerings, rising home prices and climbing interest rates. Despite these challenges, we're encouraged by the sustained interest in traffic in the community, affirming the ongoing appeal of our home for prospective buyers.

During the quarter, Solis averaged a sales pace of 0.9 homes per week and four collections sold out. Our next major neighborhood Luna Park debut with 798 homes across 13 collections is projected to open in phases from February through December next year. There remains strong homebuilder interest in acquiring homesites at Great Park due to the continuing home sales pace.

To support underlying land prices, we are carefully monitoring builder inventory by product segment, which allows us to work with our builder partners to identify product offerings that will optimize our land sale revenues. The two land sale contracts we entered into during the third quarter were executed using builder selected product. On top of the ongoing residential opportunities at Great Park, we continue to market and sell our commercial land. While there has been a reduction in speculative building in relevant Southern California markets that have slowed the pace of offers and pricing being offered for our land. Our location in the heart of Orange County has supported continued interest in our commercial land. We offer one of the few opportunities in our market for large parcels entitled land with flexible zoning that allows a multitude of uses.

As we mentioned last quarter, we're still on track to close approximately 40 acres of commercial land slated for industrial and distribution uses, either by the end of this year or early next year. In Valencia, new home sales totaled 75 homes for the quarter, and overall sales pace of 0.7 homes per week. As of the end of September, 1,156 homes from our initial offering of 1,268 homes have been sold with only 112 homes remaining. Our newest neighborhood is opened with two detached counter products and has experienced strong interest, average of sales pace of 0.8 homes per week. Each new phase release has seen gradual increases in price reflecting strong demand for our Valencia community.

Looking ahead, we anticipate remaining five neighborhoods open throughout the rest of this year and into 2024. These offerings will augment our current lineup and result in increased sales. Builders remain engaged with us in Valencia, and we closed two land sales in the third quarter for a total of $60.7 million. Additionally, we anticipate closing the sale of a number of finished home sites by year-end. As we move forward with monetizing our [launch] of land holdings, we feel they are ideally positioned for expanding on our strategy of capital management, both by tying our capital expenditures and near-term revenue events and by structuring land sales with our homebuilding partners to shift certain land improvement costs to the builders, which helps reduce our capital spending.

We also continue to market a prime 35-acre mixed-use commercial site in the community. We expect to have more to report on that next year. In San Francisco, we are happy to report that we completed an important step necessary to extend the existing tax increment financing program. when the State of California passed legislation that, among other things, allowed for the extension of the time lines to reflect tax increment generated by the project and issue bonds secured by this tax increments. This is an important first step in extending the public financing program that remains integral to the development of both Candlestick and the shipyard. We're also progressing in efforts to establish Candlestick as a stand-alone project separate from the complement to the ultimate development of the shipyard site, which will be developed once the Navy has completed its remediation activities.

Our rebalancing efforts include working with city and county agencies to adjust the current development entitlements between the two areas. With the state's legislation benefiting the public financing program, we believe that we are building momentum to move forward with the stand-alone development of Candlestick as the first phase is larger mixed-use community located on irreplaceable land along the San Francisco Bay.

In closing, while there is uncertainty in this market, we have positive momentum and remain optimistic about our future. Land development is a long game, and we are just at the beginning of the game at some of our communities, but they're not making any more land and there will never be an abundance in title land in California. Our efforts today are ensuring we are well positioned for that long game, are recognizing the importance of focusing on creating and maintaining shareholder value.

Now let me turn it over to Kim, who will report on our financial results and will provide some limited guidance for the fourth quarter and year-end.

[Kim Tobler, executive]

Thanks, Dan. A summary of our financial results was included in the earnings release issued earlier today. And as Dan mentioned, we reported consolidated net income of $14.2 million for the quarter. We recognized $65.9 million in revenue, which was primarily generated by the sale of 25.8 acres of land entitled for 146 home sites for cash proceeds of $60.7 million before our traditional profit participation. Two separate homebuilders purchased Rose Parcels. We -- At the Valencia project, we recognized a 34.2% gross margin on these sales. In addition, we recognized $4.5 million in management services revenue and other revenue of $700,000. Selling, general and administrative expenses were $11.9 million, which is slightly lower than our projected average quarterly range of $12 million to $13 million. This reflects our efforts to hold the line on administrative costs. We expect the fourth quarter SG&A to be within the projected range.

The cost of management services was $2.4 million which includes $600,000 for intangible asset amortization expense at our Great Park segment. We also earned $2.4 million in interest income on our cash and cash equivalents for the quarter. Equity and earnings from our unconsolidated entities for the quarter was a loss of $600,000. This includes small amounts of income or loss from the Great Park Venture, the Gateway Venture and our Valencia Land Bank venture. Although the Great Park Venture didn't have any land sales during the quarter, it did recognize profit participation revenue, which together with interest income, offset most of its operating expenses.

Before I talk about our inventory changes, I'd like to take a moment to review the role of CFDs and TIF play in our business. Since our last call, we've received numerous questions regarding our CFD and TIF reimbursements. So I thought it would be helpful to provide some additional information on these funding sources. In California, community facilities districts, also known as CFDs or Mello-Roos, provide public financing through the sale of bonds for the purpose of financing public improvements and services. These improvements may include streets, water, sewage and drainage infrastructure parks and fire stations, to name a few things, to newly developing areas. We use this financing to construct such improvements within all of our communities.

In addition to CFD financing, in San Francisco, the Candlestick and shipyard projects also benefit from tax increment financing also known as TIF. TIF is another mechanism used to fund and finance public facilities and other improvements often in infill locations where upfront investments are needed to enable real estate redevelopment. TIF captures the incremental growth in tax revenues. In our case, property taxes above and beyond what taxing entities currently receive within a designated geographic area. With that background, I'd like to emphasize that the Great Park is a mature community and there have been multiple bond issuances due to the large number of existing homes in the community. Therefore, when we make expenditures for qualifying improvements, we can receive reimbursements within a reasonably short period of time.

Valencia, on the other hand, is a newer community with not as many residents as of yet. So it could take longer for the CFD to have adequate bond proceeds to be in a position to immediately reimburse qualifying costs. Likewise, the San Francisco projects are in the early stages of the development where we haven't started receiving CFD reimbursements yet and are in the very early stages of participating in TIF reimbursements. I hope you find this useful in understanding the role of public financing to our business.

Now I'd like to talk about our changes in inventory. During the quarter, the Great Park Venture inventory increased by $17 million before a reduction for CFD and other reimbursements received of $17.4 million, resulting in a net decrease in inventory of $400,000. It is unusual for CFD reimbursements to exceed our capital expenditures and you shouldn't expect that going forward on a recurring quarterly basis. At the Valencia segment for the quarter, our inventory increased by $26 million before a reduction for cost of sales of $13.9 million resulting in a net reduction of $13.9 million. Of the increase, $2.5 million was attributable to capitalized interest and approximately $4 million was attributable to fees, which are paid when homes are built. We had no CFD reimbursements this quarter in Valencia. During the quarter, our San Francisco segment's inventory increased by $11.7 million. The majority of this increase was attributable to capitalized interest of $7.6 million. We also received a TIF reimbursement of $570,000.

Now I'd like to emphasize our liquidity. As Dan mentioned, our total liquidity was $343.3 million at quarter end and was comprised of $218.3 million of cash and cash equivalents and $125 million of available borrowing capacity on our revolving credit facility. No borrowings or letters of credit were outstanding against the revolver as of September 30. And I want to take a moment to thank our banks -- the banks in our revolving credit facility for working with us to extend our facility for 2 years in these challenging credit markets. They have shown their commitment to Five Point and our ability to deliver housing in California's supply-constrained market. Our debt to total capitalization ratio is stable and slightly down at 24.5% and our net debt to capitalization ratio after taking into account our cash balance was 17.5%. For more information regarding our four reporting segments, Valencia, San Francisco, Great Park and Commercial, I recommend that you review our earnings release or the 10-Q when it's filed.

As Dan mentioned, I will now provide an update on our year-end guidance. On our last call, we stated that we expected the second half of the year to produce an additional $50 million to $70 million of net income and that we expected to end the year with a cash balance of between $250 million to $300 million. We currently have expected sales in our pipeline in both Valencia and in the Great Park, that continue to support that expectation. With that said, it is always possible that one or more sales that are expected to close in the fourth quarter drift into the beginning of the year.

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

[Operator]

[Operator Instructions] Our first question comes from the line of Arun Seshadri with BNP.

[Arun Seshadri, analyst]

You have done a good job in a difficult environment. Just wanted to first talk a little bit about Great Park. I know I think the last time you talked about interest in both the residential as well as the commercial land in marketing. I think you talked about 40 acres as being the expectation. Just wanted to see if there's any update there and maybe start with that.

[Daniel Hedigan, executive]

Thank you. The 40 acres is still progressing. We still anticipate it to be closed at the end of this year. It does take some actions by the city, which means it could slip a little bit. But right now, we're still on track with that. We still also have another 100 acres of commercial land that we are only marketing on a kind of a lot-by-lot basis. It's not all on the market. But we're actually looking at as we close on this last 40 acres of moving another group -- another section of land into the market.

[Arun Seshadri, analyst]

Got it. And then can you also talk a little bit about -- I think in your prepared comments, you had mentioned the headwinds created by the interest rate environment. Can you talk a little bit broadly about your expectations in terms of maybe modest slippage in the in the sort of year-end cash guidance. Do you still sort of expect that maybe to be instead of end of the year, maybe like early next year? Is that sort of the thought process? And are there any additional sort of details you can provide in terms of what -- where exactly you're seeing the impact of high interest rates?

[Daniel Hedigan, executive]

Well, first, on the year-end guidance, we actually are on track, consistent with that guidance. And so at this point, we're feeling very good about that based on various transactions that are in escrow or very close to being finalized. On the issue of interest rates, that's a very kind of very interesting question. Home buyers kind of went through a shock of very quickly rising rates and adjust it to what is the new normal and they have been buying homes at our communities. Now in many instances, the homebuilders are buying down interest rates to support those sales. And we think builders will keep doing that. We're in a market now where rates are ticking back up again which will drive towards another new normal. But we believe demand will find its way over these increases. And the thing we're facing in California is just a terrible shortage of housing. And with interest rates, the resale market is very limited. So -- and affordability will always be an issue, so I don't want to make [ light ] of that. But to the extent a buyer can afford a new home, there is going to be -- we feel there is going to be demand.

[Arun Seshadri, analyst]

Got it. One last question, and then maybe this is for Kim, which by the way, Kim, congratulations on your elevation. Just wanted to maybe talk a little bit about the revolver extension, a great job in getting that done. Just a sense any terms around the revolver extension and sort of any details you could provide around the terms and whether there's any conditionality on the bond maturity. That's all for me.

[Kim Tobler, executive]

Yes. So as it relates to the revolver, we'll be publish in an 8-K, and you'll be able to read the documents and see there. But largely, it was rolling forward the existing terms. And really the only thing was they raised the cost. So we're going to have to pay more when we draw on the revolver. But beyond that, it stayed pretty close to what we've done. We lost what's known as a term out. So we had a term out, which allowed us to take whatever balance was due with the maturity and pay out over 12 months equally. That's an unusual provision in a revolver like ours. And so the banks came back and said they didn't see how they could continue that in the current market, and we understood that, and we're willing to give that up. But they gave us a 2-year extension, which we were very grateful for and thought we deserved and very glad that the four banks say all together, and we kept the $125 million in place.

As it relates to the senior notes, as Dan said, we're turning our attention to that. I don't want anyone to think that we're not thinking about those. We've been regularly meeting with our Board and together as management reviewing the different options that we think we may have. That's part of the reason why we've been working so hard to increase our cash balances so that we have some things to work with. But we don't have anything really specific that I can talk about right now that we've done. So Arun, it's good to hear you and look forward to talking more in the future.

[Operator]

Our next question comes from the line of Alan Ratner with Zelman & Associates.

[Alan Ratner, analyst]

Congrats on the progress here. First question on the Valencia sale. It looks like the -- I guess, the composition of this particular lot sale was quite different than your prior ones, much lower density, much higher price per lot. I'm just curious if you can give a little bit more detail in terms of how you're thinking about segmentation of product and lot sales in Valencia in the intermediate term? Is this a concerted effort to kind of mix in more move-up product or lower density product. And any kind of guidance you can give on the expected fourth quarter lot sale if it's going to look similar or different would be helpful.

[Daniel Hedigan, executive]

Thanks, Alan. Valencia actually has a broad level of segmentation and its entitlement, it actually has zones that are identified for lower density and higher density and what you're seeing in the two sales that closed this quarter, they're in the area that was by design, set up for lower density. And we are seeing good demand for that move-up buyer in Valencia, very -- we're talking very traditional homes with driveways and backyards and we're definitely seeing buyer demand there. As I think I've commented in the past, I'm really trying to work with the builders to be sure our product is really responding to the market. But some of our product is kind of preset just on where we're at. But both of those were previously identified, and they were just in a lower density area.

As to the fourth quarter land sales they're actually going to be in different sections of the Valencia project. And so that's going to have a mix of product. There's going to be some that is our traditional detached condos. There'll also be a small portion [ will be ] attached, but it will be more diverse than what you're seeing that closed this quarter.

[Alan Ratner, analyst]

Understood. Dan. Second, I know the time line is still uncertain with San Francisco and you haven't given a target there. But my question is when that project does get off the ground, is there any way you can kind of help us think through what the cash flow impact would look like initially? I would imagine you would have to put up some development dollars before the first phase of land would be ready for sale. So any way to think about what that initial outlay might look like, how long that might be before revenues begin to recognize just kind of thinking through the forward look there.

[Daniel Hedigan, executive]

Well, when we think about San Francisco, we really do think of ourselves as the horizontal developer. There will always be the need for vertical development in that site, but we are the horizontal developers. So from a standpoint of revenue events on the land side, they will be pretty much tied to completion of deliverable site. And as part of the conversations we're having right now with the city and county of San Francisco is we are looking at that first phase and how you access that first phase. So -- but there's always going to be kind of a variety of options of how we approach that as far as matching the spend-to-capital and near-term revenue, but the revenue really does -- it does flow from the horizontal development. We're not really going to need the vertical development. That vertical development, as Kim talked about, is going to be a big part of future capital through CFDs and TIF, but the initial revenue is going to be tied to horizontal land sales.

[Alan Ratner, analyst]

Just a follow up on that, Dan, because yes, I think I understood that. But is that kind of like a 12-month horizontal development lead time from shovel and ground to having a parcel ready to sell and begin to recognize revenue on? Is it longer, shorter? What -- Any frame of reference there?

[Daniel Hedigan, executive]

Well, from a standpoint of getting to the first phase, all things always are driven by having the approvals from the city to move forward. But what I think I would say on that, I mean, to get to the first phase, is not going to be extraordinarily long. I don't want to try to put a time frame on it today simply because there are so many variables that we'd be dealing with. But the initial phase once we are positioned and kind of have the rebalancing done, is actually not that hard to get to, especially in Candlestick.

[Operator]

[Operator Instructions] Our next question comes from the line of Myron Kaplan, a private investor.

[Unknown Attendee]

Yes. First of all, I'd like to commend you for timely and ship shape reporting. Congratulations, Kim for your elevation.

[Kim Tobler, executive]

Thanks, Myron. It's good to hear from you.

[Unknown Attendee]

Yes. I wanted to ask, what's the rate of the senior notes that are due in 2025, the coupon?

[Kim Tobler, executive]

[ 7 and 7/8 ].

[Unknown Attendee]

What's the principal amount?

[Kim Tobler, executive]

$625 million.

[Unknown Attendee]

So that's really the elephant in the room, so to speak.

[Kim Tobler, executive]

It is the elephant I look at every day when I get in -- when I wake up.

[Unknown Attendee]

Yes. Right off. The -- I just wanted to ask just an informational question. What -- I didn't understand what's the -- you were talking about a parcel in the Great Park of 40 acres of commercial land.

[Daniel Hedigan, executive]

Yes. Those are actually two pieces -- that's a combination of two pieces of the property that are actually in escrow today. So those would be closing, we anticipate by the end of the year.

[Unknown Attendee]

I see. So those are basically under contract?

[Daniel Hedigan, executive]

Correct.

[Unknown Attendee]

Yes. Just -- and also just an informational question or maybe it's -- at the Great Park, you have builder sales of 113 homes. So those revenues are substantial, but unconsolidated, yes?

[Kim Tobler, executive]

That's correct. Those are the sales that the builders themselves are reporting. They bought the land and they're reporting those sales on their financial.

[Unknown Attendee]

So you've previously sold than the land.

[Kim Tobler, executive]

Yes. We give that guidance, Myron, so that people can understand the pace of sales of homes because that indicates when they'll need more land in the future.

[Unknown Attendee]

Right. So then you said you're releasing some more tranches so that you'll be able to book more revenue. Well, I guess that's pretty much what I -- thank you for taking the questions and it seems like you're doing pretty well in a very tough environment.

[Operator]

Our next question comes from the line of Ben Fader-Rattner with Space Summit Capital.

[Benjamin Fader-Rattner, analyst]

Just going back to the Valencia sale. Unless I'm doing the math wrong, it looks like it was over [ $400,000 ] per home site. And I think in the past, you talked about an average more in the [ $200,000s ]. Was this sale above expectations? I wasn't clear from the answer to the previous question or if this was more of an expected outlier? Or there are some other read-through on this sale?

[Daniel Hedigan, executive]

Well, thanks. It is not an outlier, it really is the different. Most of the homes in our initial phase. We have two phases we talk about the kind of initial first phase of about 1,200 homes. And then we have another phase, which has about 800 homes. And so the -- as part of that overall land plan that was put in place, there are always larger lots in a certain area that actually buy zoning are supposed to be lower density. So they were zoned to be lower density the way have been produced. So all what we're really seeing is that we're actually finally getting to them. The infrastructure is kind of caught up to them. It's kind of followed to them. And so we've had some traditional SFD lots in the market before, but not a not a whole lot of them.

And in particular, Toll had a project up there that's selling right now and selling very well. And they were -- and they basically saw an opportunity to kind of continue that program through lots that were coming available in the due course based on development course that is a larger traditional SFD. So it's kind of all due course. It's just how the land and when we get to the land, how it's been flowing.

[Benjamin Fader-Rattner, analyst]

Well, can you give a sense for -- if you look across the land bank in Valencia, what sales price per home site you would expect or maybe a range. And is this -- am I correct in thinking that this is consistent with your expectations? Is it just a higher value entitlement as compared to perhaps some other acreage that you have in the portfolio?

[Daniel Hedigan, executive]

So I think the best way to answer that, consistent with this density and product type, that is definitely kind of in the ballpark of what we'd expect. On the other hand, as we go -- as we look at what's coming up in the market, I don't think I have anything else that's additional SFDs and part of it is where we're at kind of in the land plan that's out there. So most of them are going to be either detached condominiums are attached. And all of those have higher density and they will definitely have a lower price per unit. And so it really is very product specific. And this was -- and this product is what's driving those numbers you're looking at.

[Benjamin Fader-Rattner, analyst]

I see. Okay. All right. And then just one other question. And I know you haven't given numbers on '24, and I'm not asking for them. But I guess if you could, as you think about now versus the point at which you'd proactively refinanced the bonds, are you comfortable with the cash balance here? Or do you think the cash balance is likely to be higher at the point at which you proactively decide to refinance your bonds?

[Kim Tobler, executive]

Ben, this is Kim. I would tell you that we're monitoring that regularly. And again, given Dan's leadership, we've been focused on increasing our cash balance strategically, and we're going to keep working on that. The moment when we're going to deal with the bonds is going to be based on the market and we're not going to wait for a certain amount of cash. We wanted to have enough as soon as possible so that we had options. So again, we're still optimistic about '24, and we haven't given any guidance on that. But the challenge we've been given and that we've been trying to address is more regular positive cash and earnings each quarter, which is something we're trying to maintain, but can't promise every quarter. But -- so what I would say is we're focused on increasing our cash. And then we'll be watching and working with the market to figure out when we can go into it and deal with our senior notes, if that makes sense?

[Benjamin Fader-Rattner, analyst]

Yes. No, that does. And then just when you say you're optimistic on '24, is it -- am I correct in assuming that you believe that in '24, [land] sale proceeds will be in excess of G&A costs and interest expense and any other fixed obligations?

[Kim Tobler, executive]

If you were to ask me today, that's what our plan is to do.

[Benjamin Fader-Rattner, analyst]

Okay. Obviously, it's uncertain, but that's very helpful.

[Operator]

Our next question comes from the line of Kyle Chung, a private investor.

[Unknown Attendee]

My first question is if I did my math right, it looks like your fourth quarter free cash flow guidance is between $32 million and $82 million, which seems like a relatively wide guidance range and that $50 million range, I'd like to understand why it's so wide. I mean, is it wide because the acreage and the price that you expect to close for fourth quarter is uncertain? Or is it wide because the closing date might slip from fourth quarter into first quarter. And so is it more of a timing issue? Or is it because the amount and the price of the land for sale that's uncertain.

[Kim Tobler, executive]

Thanks, Kyle. This is Kim. Yes, it is a timing issue. We don't control everything as it relates to when we can get something closed. And as we've been saying, something may slip from the fourth quarter into the first quarter because all of the municipal approvals didn't get received in a timely fashion. So we are still expecting those sales. It's not a question of how much is going to be received.

[Unknown Attendee]

So just to be 100% clear, if it turns out that your fourth quarter free cash flow ends up being $32 million, was investors should take from that is that the $50 million that pushed to first quarter. Is that right? Is that the right way to think about it?

[Kim Tobler, executive]

Yes, given that math, yes. And it would add to what we are planning to do in the first quarter.

[Unknown Attendee]

Right. Okay. So that's really helpful. And my second question is, congrats on renewing your revolver and I think the 8-K on the credit agreement has been filed yet, but under the new revolver, do you have enough restricted payment capacity to -- if you elect to do so, buy back the bonds, buy back, the senior notes at a discount.

[Kim Tobler, executive]

Well, it's -- I mean there isn't enough capacity to buy back the senior notes at a discount. Again, the entire revolver is only $125 million. So...

[Unknown Attendee]

What I mean is for you to like do a partial tender or just buy back bonds at a discount in the open market? Do you have restrictive payment capacity under the revolver for that or no?

[Kim Tobler, executive]

We don't have a restriction that would not allow us to do that.

[Operator]

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

[Daniel Hedigan, executive]

Thank you. On behalf of our management team, we thank you for joining us on today's call, and we look forward to speaking with you next quarter.

[Operator]

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.