Five Point Holdings LLC

NYSE:FPH

Earnings Call Analysis

Earnings Call Transcript 2024-Q3

[Operator]

Greetings, and welcome to the Five Point Holdings LLC Third Quarter 2024 Conference Call. As a reminder, this call is being recorded.

Today's call may include forward-looking statements regarding Five Point's business, financial condition, operations, cash flow, strategy and prospects. Forward-looking statements represent Five Point's estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to the matters that have not yet occurred, these statements are inherently subject to uncertainties. Many of these could affect the 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 the 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 would like to turn the call over to Dan 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 Operating Officer and Chief Legal Officer; and Leo Kij, our Senior Vice President of Finance and Reporting; Stuart Miller, our Executive Chairman, is joining us remotely.

On today's call, I'll update you on our Q3 results on our team's focus during the quarter and the steps we are taking to implement our strategic priorities. Next, Kim will give an overview of the company's financial performance and condition with some updated guidance for the rest of the year. We'll then open the line for questions to our management team. So let us begin.

I'm pleased to report another very successful quarter for Five Point as we continue to do a program with consistent profitability with a defined pathway to growth for our future. In the third quarter, we generated stronger-than-expected net income of $12.3 million, which is our sixth consecutive quarter reporting net income as we remain focused on generating revenue, controlling our expenses and managing our capital spend. Consistent with last quarter, most of our revenue and bottom line was driven by operational focus and execution in our Great Park community. This community has become both to drive current performance as well as our model for future growth.

During the 3 months ended September 30, 2024, our management team closed 2 retail land sales in a Great Park totaling 12.8 acres for an aggregate purchase price of $25.4 million. Great Park Venture also recognized additional revenue of approximately $36 million which is derived from our strong price and participation programs that benefit from housing revenue increases for builders in the Great Park. The result of these partnership revenues, Five Point received $38.9 million in distributions from the Great Park Venture during the quarter, representing in part a return on invested capital and also received $10.5 million of incentive compensation payments promote pursuant to our Great Park development management agreement.

We also received approximately $3 million in base management fees in the quarter under the management agreement. Given our strong performance over the past years, Great Park partners have agreed to extend this agreement through the end of 2026. The amended agreement includes an increased base management fee while maintaining incentive compensation at existing levels. This extension reflects the strength of the relationship between our management team and our partners. It reflects how the Great Park Venture development management model is one that we believe can repeat it in new communities as we grow Five Point into a best-in-class asset lighter, land and community partnership manager. We expect to demonstrate growth in coming quarters.

I'd also like to note that the Great Park Venture reached another milestone this quarter. Until now, the [ debenture ] has had a legacy interest that initially had a priority over all distributions and more recently required 10% of all distributions be paid to the legacy interest holders. This legacy interest has now been satisfied. So 100% of all distributions will go to the Great Park percentage interest holders, Five Point owns 37.5% of the percentage interest.

While Great Park Venture will continue to drive the most significant bottom line earnings for Five Point, our planned fourth quarter closings at both the Great Park and Valencia are on track. If these sales close as schedule, we'll likely exceed our prior guidance that we expected to finish the year with over $100 million in annual net income and cash in excess of $300 million. Kim will update our guidance based on how we currently anticipate finishing the year.

Looking ahead, our Great Park Venture is currently finalizing contracts to sell an additional 407 home sites on approximately 28 acres in our next development area at pricing levels that reflect sustained high levels demand for land at the Great Park. These sales are anticipated to close in the first half of 2025. We also began marketing for sale additional residential land and another development area in Great Park that we anticipate closing in late 2025. We continue to see strong builder interest in these home sites. With the potential for sustained strong per acre land values, which we believe is driven in part by allowing our shareholders to design the home programs in our communities. We're also continuing to manage program segmentation in order to maintain an appropriate velocity in each community.

In addition to strong revenues, we have remained focused on reducing overhead and holding down costs. Even with increased performance, we have remained disciplined in our overall SG&A to $11.9 million, which is flat year-over-year and slightly down compared to the second quarter of this year. Remain vigilant about managing an excellent business with tightly controlled overhead.

Finally, we have also continued to focus on our balance sheet. We ended our third quarter with a very healthy liquidity position with $224.5 million in cash and $0 drawn on our $125 million revolver as we have carefully managed capital deployed as we develop our properties. By driving the bottom line, carefully managing overhead and limiting development dollars to just-in-time deployment, we ended the third quarter with total liquidity of $349.5 million. Kim will cover more details on our financials during his comments.

Now let me move to a brief market update. We're particularly pleased that we've been able to post consistent results even as the macroeconomic environment has remained somewhat challenging. Although Federal Reserve announced a meaningful rate cut during the quarter, the news regarding interest rates and inflation continued to send mixed signals with key mortgage interest rates initially moving down, but then rebounding higher. While interest rates are a key data point in the housing market, California generally and our community specifically remaining chronically undersupplied residential land markets and this undersupply continues to support land sales even as interest rates fluctuate. The land shortage is primarily driven by California's challenging land use approval process. We expect shortages of entitled land and existing home inventory will continue to drive strong demand from builders.

The continued lack of existing home inventory, coupled with low unemployment and fairly strong consumer confidence, has helped sustain demand for land in our communities. While we are mindful of the potential impact to affordability created by mortgage rates, most of our gift builders have been able to mitigate the impacts of higher rates through the use of a variety of incentive structures. The commercial land side of our business has proven to be more rate sensitive than residential. Although we reported 2 retail sales at Great Park this quarter, we do not expect to maximize value through commercial transactions in the near future.

Accordingly, we are currently looking at opportunities to repurpose certain commercial sites for residential use given the depth of demand and values being driven by residential uses, much like what we did with the 35-acre commercial site in Valencia that we converted to a residential use. We'll have more to report on this in the coming quarters.

Let me now provide you with some updates on our communities, starting first with the Great Park Neighborhood. As a reminder, the Great Park is the most mature of our communities and its ongoing contribution to our financial results reflects the benefits that we and our Great Park Venture partners are receiving from the investments made in this community in prior years.

During the third quarter, builders in our Great Park community sold 166 homes versus 63 in Q2. This increase in sales is primarily attributable to Luna Park, our newest neighborhood, which now has substantially all home offerings open for sale, and we are once again able to offer a wide variety of housing options in Great Park Neighborhoods. In addition to high levels of home buyer interest, we're still seeing strong demand from builders for our land at the Great Park. As I mentioned earlier, we are currently finalizing contracts with 3 builders for 5 different residential programs insisting 407 home sites. We also completed the bidding process for a group of 9 new residential programs totaling [ 572 ] homes. We received strong interest in all 9 programs and are currently working on finalizing purchase and sale agreements and due diligence with 6 different builders. We'll have more report on these programs in the future.

During the quarter, the City of Irvine completed its state mandated arena, general plan and zoning updates for the Great Park planning area. This update will provide the Great Park Venture with the opportunity to convert some or substantial portions of its remaining commercial land holdings to residential uses. We're continuing to study these options and the requirements to make these changes consistent with the arena program adopted by the city.

Next, I'll move to Valencia, our other active community. As a reminder, Valencia is in the early stage of its development and still has many future phases of land delivery ahead of it, which will enable us to provide much-needed housing in the Los Angeles market. During the second quarter, home sales remained steady as our gift builders sold 89 new homes versus 84 in Q2. In our current bunch of development areas, we have 8 builder programs open and actively selling. Additionally, from the land we sold at the end of last year, there are 6 programs we will stay open in late 2024 and early '25, offering a greater diversity of home offerings for prospective home buyers. Projected land sales for the fourth quarter are proceeding as anticipated. We have completed the conversion of a 35-acre commercial site to residential use and the sale of those 179 home sites is expected to close in December. We have also completed the bidding and are finalizing contracts for 4 additional programs consisting of 314 home sites, which are currently expected to close either in December or the first quarter of 2025. We continue to work with Los Angeles County and other agencies on approvals that will allow us to deliver thousands of additional home sites and account severely undersupplied market. We expect our next active residential village will be in [ TrotoSouth ] which is expected to assist of approximately 116 net acres of residential land, over 1,300 market rate home sites and approximately 44 net acres of commercial land.

We also expect to have additional commercial land available at the [ Blanche ] Commerce Center, which is expected to include approximately 139 net acres and will cater towards industrial-focused uses. We remain fully committed to obtaining the approvals necessary to unlock additional housing supply and remain focused on balancing expediency with feasible conditions.

Turning to San Francisco. The city, county and other applicable regulatory agencies are continuing to advance the public approval process to rebalance the entitlements between our 2 San Francisco communities, Candlestick and the shipyard. We're excited about the near-term possibility to Candlestick. And we hope to have more report on our next call. Once the rebalancing is approved, we anticipate working promptly with the city to initiate our infrastructure plans for the first phase at Candlestick in order to unlock the value of this Bayfront land in the city of San Francisco.

Let me conclude by saying, I've never been more optimistic about the future of Five Point. We have remained focused on driving consistent quarterly earnings carefully controlling our overhead and carefully manage our land development spend. Accordingly, our balance sheet continues to strengthen and our liquidity continues to grow. This focus will enable us to turn our attention to growth for our future as we continue to validate our asset-lighter land partnership model that's reflected in our Great Park Venture.

Some additional items have evolved over this quarter that paved the way for our future growth. Recent rotations in Five Point stock should enable future investment without unusual cell pressure on our stock. Castlelake recently disclosed the sale of a sizable equity interest in the company and its subsidiaries to fund owned by [ Flikfamily ] investments. There have also been additional publicly disclosed rotations of our shares in the hands of longer-term investors.

In connection with the Castlelake sale, we announced yesterday at Sam Levinson, Chief Investment Officer at Flik has joined our Board. We are very pleased to welcome Sam for the Board as he brings a history of success and extensive experience in real estate investment that will enhance our efforts to maximize value for our shareholders and to grow our business.

At the same time, we also announced that Evan Carruthers will be stepping down as a member of the Board following completion of the sale of Castlelake's equity interest to Glick. Castlelake has been an investor in Five Point since the business combination and Evan's insight and guidance have been incredibly valuable in building the foundation and shaping the direction of Five Point. We are great for Evan's leadership and wish him all the best.

Let me reiterate that our third quarter represents continuing progress on 3 main priorities: generating revenue and positive cash flow and following SG&A costs and managing capital spend to match near-term revenue opportunities, advancing entitlements for our next neighborhoods in Valencia and finalizing the Candlestick rebalancing process remain critical operational objectives. We believe that the underlying environment in California has not materially changed, and we are focused on ensuring that we are positioned to deliver the home sites that have been so severely lacking.

As you can see, we have been continuously improving our financial condition, which allows us to not only focus on exiting our current projects, but also the plan for the growth of Five Point beyond our existing communities.

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

[Kim Tobler, executive]

Thank you, Dan. First, let me provide a background around the improvement we experienced in our third quarter net income compared to what I shared with you last quarter. As you may recall, I had indicated that we were expecting to report a $5 million to $10 million net loss for the quarter, owing to the fact that we didn't expect any residential land sales during the quarter. While we did not have any residential land sales, as Dan mentioned in his comments, the Great Park Venture recognized approximately $36 million of price and profit participation revenue from earlier residential land sales. The home sale velocity and pricing achieved by our builders during the third quarter exceeded our earlier expectations, which increased revenues at the Great Park. This recognition of revenue at the Great Park improved our third quarter results through higher-than-expected equity and earnings from the venture.

Therefore, for the third quarter, we reported consolidated net income of $12.3 million, which was generated primarily from $12.9 million of revenue from incentive management compensation and $12.1 million of equity in earnings from our investment in the Great Park Venture. The Great Park Venture's income for the quarter was largely generated by the sale of an 11.1 acre retail site with a sales price of $21.1 million and a childcare use parcel on 1.7 acres for a sales price of $4.3 million. Both sales have a profit margin of 72.5% before closing costs.

You will note that at roughly $2 million per acre, the price per acre for the retail and child care sites is significantly less than the value we have been achieving for the residential and other commercial parcels in the project, but is reflective of the market for such uses. This is consistent with, but on the higher end of similar use properties in the market and is in line with what we have been projecting. Additionally, as I mentioned at the beginning, the Great Park Venture had an additional price participation revenue because the Luna Park home sales and collection openings were stronger than expected, and therefore, we determined that the expected price participation consideration should be increased by an additional $30 million as well as profit participation of approximately $6 million from the ventures other active residential programs.

Turning back to Five Point's consolidated results. For the first 9 months of the year, we have recognized net income of $56.6 million. These results included $78.1 million of total revenue made up largely of management services revenues from the Great Park Venture and equity and earnings from the Great Park Venture of $45.2 million. Consistent with our continued focus on managing our costs, as Dan mentioned, our third quarter SG&A expense was $11.9 million compared to the prior year third quarter of $11.9 million and $12.2 million in the second quarter of this year.

Now let me turn to liquidity and cash. As Dan mentioned, we ended the quarter with $224.5 million of cash as well as [ $125 ] million of availability on our revolving credit facility, resulting in total liquidity of $349.5 million. At the end of the quarter, our debt to total capitalization was 20.5%.

For the quarter, we had positive cash flow of $7.1 million. No interest payments on our senior notes were due in the third quarter with the next scheduled interest payment of $27.5 million to be made in November. The significant sources of cash have been equity distributions from the Great Park Venture of $38.9 million for the quarter and $86.2 million year-to-date. The incentive management compensation of $10.5 million for the quarter and $23.3 million year-to-date. The significant uses of cash other than SG&A and debt service have been development costs at Valencia of $29.3 million for the quarter and $60.7 million year-to-date which is largely related to entitlement activities and preparing for the sales expected to close at the end of the year.

In addition, we incurred development costs at San Francisco of $5.3 million for the quarter and $13.7 million for the year-to-date that are largely associated with the rebalancing efforts and our litigation against Tetra Tech in the Navy.

As Dan mentioned, we have extended our contract to manage the Great Park Venture's development activity for 2 more years. From January 2025 through December 2026, we increased our annual base fee from $12 million a year to $13.5 million per year, and we will continue to receive 9% of each distribution made by the venture to the partners as an incentive management fee.

As I noted last quarter, we are carrying a related party contract asset which relates to the revenue we have recognized for the incentive management fee that we expect to be paid from the future distributions from the venture. As of September 30, that contract asset is carried at $106.7 million.

Dan also mentioned another achievement that the Great Park Venture completed during the quarter. As you may recall, when Five Point was formed in a roll-up of our 3 assets, Five Point's interest in the Great Park Venture was 37.5 percentage interest. That was subordinate to $565 million of distributions to the legacy interests, which generally didn't include Five Point.

The $565 million was divided into 2 tiers. $476 million that was paid before any distributions would be paid to the common percentage interests. And $89 million that was to be paid from 10% of any equity distributions until it was fully retired. In June of 2021, the venture completed paying the first tier and Five Point started participating in the equity distributions and the legacy interest continued to receive 10% of such distributions. This quarter, with the distributions made by venture, the legacy interest have been fully distributed. And from this point forward, the common percentage interest will receive distributions equal to their percentage interest.

Now for some limited guidance. We are pleased with the third quarter performance, which continues to be attributable to the strong activity at the Great Park Venture and our consistent focus on SG&A and development costs. As Dan noted in his remarks, we have a number of residential land sales scheduled to close at Valencia and the Great Park in the fourth quarter, assuming that most or all of these sales closed in December, we will expect to end the year with annual net income of between $120 million and $140 million and a cash balance of between $320 million and $350 million. Any sales that don't close in the fourth quarter would be expected to close in the first quarter of 2025. It remains critical for us to stay focused on our strategic priorities of generating revenue, controlling our expenses and carefully managing our capital spend to match near-term revenues, and we are committed to those priorities.

With that, let me turn it back to the operator, who will now open it up for questions.

[Operator]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. And our first question comes from Alan Ratner with Zelman & Associates.

[Alan Ratner, analyst]

Congrats on the continued improvement here. So it's great to see the consistency of results from quarter-to-quarter. Dan, you mentioned a few times kind of looking into the future a little bit, maybe for the next stage of growth for Five Point. And I know this is something that even going back to your IPO days, there were a lot of discussion, strategies, plans on how the company would evolve. And I'm just curious if there's anything you might be willing to share with us at this point, either specific deals or just conceptually kind of what the next pillar of growth for Five Point might look like, especially with Great Park, kind of maybe not at the end of its life cycle, but certainly closer to the end than the beginning at this point.

[Daniel Hedigan, executive]

Thanks, Alan. I appreciate the question. The 1 thing if it doesn't come out, I am very optimistic that Five Point's on a good path and has a bright future. And what we have been able to execute on -- at the Great Park is really the model for where we look to go in venture. The one comment I would make is that we're not looking for additional legacy or just I'll call, generational assets. Obviously, you know how long we have been involved with Great Park, we both [ Flenche ] and San Francisco our long-term assets. And while we have those assets, we also know that generally merchant builders are looking for an asset lighter approach. And we think that there is a real opportunity for us to use the experience we have working with partners and managing larger communities to actually build on that platform and look at other land that we can work with and can work with builders on that is -- that is not, as I say, a generational project. We don't need another 25,000 unit project. So I don't have anything I can point you to today, Alan, but I can tell you that we're really optimistic that there's really an opportunity for us there to grow this business. There's always going to be demand for land.

[Alan Ratner, analyst]

Got you. That's helpful. And Dan, again, I know there's no specifics here, but just big picture. Would this be within California, your backyard, your area of expertise? Or do you see an opportunity for Five Point to even kind of take that approach elsewhere in the country? And would you be working primarily with lower in that situation? Or is this something that is open to the old universe of builders given kind of your experience?

[Daniel Hedigan, executive]

Well, so I would start to say that we would, I think, right now focus on California because that's where we're at. Although we won't say we wouldn't look outside of it. And we've definitely look to work with a broad spectrum of builders, not just Luna Park. And what we're looking to do is that we would invest in future land deals in a partnership form with these builders, and we'll have, obviously, our limited investment, but we'll also get management fees and promote for our expertise. So it's really just building on our current model and hopefully expanding that base that we can work with.

And once again, as you think about our company as I look at it today, we are a land company, we're a horizontal company. We're not looking to be vertical, but we think we have a lot of expertise in that horizontal that we want to grow on.

[Alan Ratner, analyst]

Perfect. I appreciate that. If I could ask a second one, just kind of digging through the pricing power that you have in your communities where you're selling lots today. You mentioned rate buydowns and incentives from builders, and we're seeing that obviously in our channels as well that right now, it's a pretty -- it's a healthy demand environment, but one where I would say it's fairly competitive from an incentive standpoint. And I'm curious, as you think about what that means for land residuals and values as we kind of weigh the tight inventory situation from a lot perspective with the seemingly lack of pricing power on the home side, at least for the time being. How do you see that filtering through the land values over the next 12 to 24 months? You've got a lot of deals coming to the market. Do you still feel like you have pricing power, the ability to raise land prices even as home prices on a net basis are pretty steady for the time being?

[Daniel Hedigan, executive]

Well, I think first of all, the comment I would make is because we're in California, a lot of the pricing power we're seeing has really drives some California's acute land shortage and the time it takes to get entitled land. And once again, you actually get a snapshot of a much broader market than we're working in. In Irvine, we still have -- you're right about the builders are helping sales. On the other hand, we still have the builder sell pricing power in Irvine. So we haven't really seen anything that would erode land. And as we are out bidding and talking to builders, we're seeing our land values hold up.

And because of that, we are able to -- that acute shortage of land and home sites, we are able to get some price appreciation in our land from transaction to transaction. Now I would tell you that Irvine is always a unique piece of property, as you know. On Valencia, we don't have quite as strong a push but once again, based upon what we have going on up there, our builders are able to get some price appreciation. So we're not really seeing any downward pressure yet on land prices. And once again, I think a lot of that is just acute shortage land. There's just very few places for builders to get entitled land that's ready to go in California.

[Alan Ratner, analyst]

Got it. I do have one final one, and then I'll get back in the you, but if I could ask it quickly. Thank you, I appreciate the time. You mentioned kind of program segmentation and product segmentation. And obviously, that's so important to these larger communities. Are you seeing any kind of shifts in demand from builders these days as far as prioritizing entry-level versus move-up or active adult or kind of attached versus detached? Any kind of trends you could point to just in terms of what you're seeing and hearing from the builders where there's greater demand or maybe less demand?

[Daniel Hedigan, executive]

I would tell you that it's been pretty constant here, but one of the very -- a real similarity between Irvine and Valencia, they are both very oriented communities. And so it's about schools. It's about family. It's about safety. And both of them have the very similar profile especially around schools. So the product is really kind of remaining consistent. And I think that the builders are always looking at maybe, we'll size it a little bit differently, but we're not really seeing a big movement away from one product segment or another.

[Alan Ratner, analyst]

Great. I appreciate all the time. Thanks a lot.

[Operator]

Our next question comes from Andrew Racon, private investor.

[Unknown Shareholder]

I have 2 questions. One, I believe the City Council of San Francisco. Vote next week on Candlestick. And I am wondering whether you guys would be willing to break out the book value of the San Francisco venture, during Hunter's point and Candlestick. It's not recorded acquired under segment operating accounting rules, but I think it would be helpful as investors to understand the book value of each one separately.

And second of all, going back to your pros up from 2016, you guys mentioned that the tax basis of your land exceeded the accounting book value by $0.5 billion. I'm wondering, is that something that Five Point would benefit from? Or is that really covered in all agreements by the parties that have contributed more of it?

[Daniel Hedigan, executive]

Andrew, thank you for the question. I think what I'd like to do is kick that one to Kim and see if there's some more information he can share with you.

[Kim Tobler, executive]

Yes, Andrew, thank you. Just first, with respect to your first question about breaking out Hunters Point from Candlestick. Again, that was originally visualized. That was a single project. Everything we've done up to this point has presented it that way. You've been up a good point of something that we often think about and consider, and so we'll take that under consideration and the like. But for the time being, we don't have a way to do that right now. And because the project is so closely related to each other, with respect to the requirements under the DDA, we are inclined to do that at this time. But I recognize your question regarding that, and we'll provide some additional information going forward. to help investors with that.

With respect to the tax basis, since that tax basis is associated with the Valencia project, where we have that additional tax basis. And that project is owned 100% by the company. Therefore, it will all go to the benefit of the company and isn't really reflected in the tax receivable agreement. The tax receivable agreement had more to do with built-in gains. That reduces the built-in gains that were potentially on those -- on that asset, but it doesn't -- it's not directly related to it. Does that make sense?

[Unknown Shareholder]

Yes, that does. So you guys will be able to benefit from the additional basis in Valencia. And have been...

[Kim Tobler, executive]

Yes. We have been benefiting from it. Yes.

[Unknown Shareholder]

And you guys are doing a great job. Glad to see the stock moving.

[Operator]

[Operator Instructions]. And our next question comes from Myron Kaplan, Private Investor.

[Myron Kaplan, analyst]

So overall, things are looking up, I guess.

[Daniel Hedigan, executive]

Well, I would say -- I'd like to say better than that. I think we're on a great, to a bright future.

[Myron Kaplan, analyst]

But what I wanted to ask about this management agreement that emphasize the renewal is so important that you could use it as a template for future deals and so forth. I don't quite understand its importance. I mean I understand that maintaining it is important financially, but as far as for future deals, maybe you could elaborate.

[Daniel Hedigan, executive]

Well, I think, Listen, we're very optimistic about the program and what we've been working on here. But there, it's a great structure. It's a template we look at. It's been very successful here. We look at it as a really strong template as we move forward. So it's kind of a model for future deals. It won't be necessarily always by the deal. But we just think it's a really good way to start for -- to help you think about the company and where we're going with future deals.

[Myron Kaplan, analyst]

Right. And nothing is contemplated as you emphasized it already.

[Daniel Hedigan, executive]

Correct.

[Myron Kaplan, analyst]

I guess you've got a better tranche of land for sale. In Valencia coming up, we hope, starting next year.

[Daniel Hedigan, executive]

Yes. Yes. Everything is progressing as anticipated.

[Myron Kaplan, analyst]

And how is the selection realignment the new Board of Directors, how does that affect operations?

[Daniel Hedigan, executive]

I don't think -- we don't look at it as impacting operations at all. So we're -- I think once again, we're on a great path. So we do appreciate your questions, but we think we're just in a good spot and heading in the right direction.

[Myron Kaplan, analyst]

And in Candlestick, you're optimistic that you'll be able to have some kind of development activity begin and maybe in a year or so?

[Daniel Hedigan, executive]

Yes. I mean, once again, we're very optimistic on how that is progressing with the city and county.

[Myron Kaplan, analyst]

So that you're succeeding in rebalancing the entitlements and so forth?

[Daniel Hedigan, executive]

Yes, it's moving in a very positive direction.

[Operator]

Thank you. There are no further questions at this time. I would like to turn the floor back to Dan Hedigan for closing remarks.

[Daniel Hedigan, executive]

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

[Operator]

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.