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FivePoint Holdings Idea Proposal (FPH)

FivePoint Holdings Idea Proposal (FPH)
 

Are FivePoint Holdings’ three major development projects on track to meet their stated timelines and milestones?

 

Report Available: November 8, 2017

 

Blueshift’s initial research showed FPH with three major mixed-use development projects in various states of progress all receiving good news with regard to approvals lining the way closer to project completion. While important hurdles were cleared, however, there are still obstacles that remain in the form of environmental studies, lawsuits, local legislation, and anti-growth sentiment that FPH must contend with as it tries to maintain the timelines for each of its three projects.

 

Observations

  1. FPH, which spun off from LEN to take over management of several of LEN’s joint ventures, is developing three major mixed-use planned communities in California: Great Park Neighborhoods with 9,500 homes in Irvine, Newhall Ranch with 21,500 homes in Valencia, and the 12,000-home Shipyard and Candlestick Point in San Francisco. The company estimates these projects will feature 21 million square feet of commercial space, along with recreational areas, parks, and open spaces.  FPH’s Q2 earnings (its first release since becoming a public company in May) showed a net loss of $24 million and revenue increase of 84% year to year. The jump in revenue came from recognition of profit participation payments, marketing fees, and builder fees associated with previous land sales. FPH also started providing development management services.
  2. The Great Park development is furthest along, with two neighborhoods seeing sales activity. One has 96% of its 1,029 homes sold, while the other has 46% of its 727 homes sold, with expectations of it being completely sold by the first quarter of 2018. Its next neighborhood expects sales to builders to have closed by the end of the third quarter with model homes opening in the spring of 2018. The next planned sale is anticipated for mid-2018 with a late 2018 ground-breaking on retail development. A group called Irvine for Responsible Growth introduced an initiative allowing voters to have a say in development plans of 40 or more housing units and 10,000 square feet of non-residential use – presumed to slow FPH’s development of a 223-acre cultural terrace with plans for an amphitheater, library, and museum. If it gets enough signatures, it would appear on the November 2018 ballot. The Irvine city council approved plans to change the site of a proposed veterans’ cemetery, swapping land with FPH so the company can develop 125-acres on the former El Toro Marine base as part of its Great Park project in exchange for other land FPH owns, with FPH funding the first phase of the cemetery construction. The controversial agreement has its share of dissenters, including the author of the voter-approval initiative, who may look to delay this development with more comprehensive studies.
  3. For the Newhall Ranch project, Los Angeles county re-approved the design of the first two villages (of five), putting the company on track to begin development by the fall of 2018 with first lot deliveries expected in 2020. Commercial work will begin in late 2018 with the first parcels to be sold in 2020. The California Department of Fish and Wildlife re-approved the existing resource management and development plans, while also certifying its conservation efforts centered around FPH’s Net Zero emission plan to offset 100% of the project’s greenhouse gas emissions with solar panels on all homes, an electric school bus system, and electric car charging stations throughout the development. FPH also just reached a $25 million agreement with environmental groups and Native American organizations to protect Native American and other natural resources with sustainable building along the Santa Clara river. Still, two other local environmental groups refuse to drop their lawsuits, which may cause construction delays.
  4. The San Francisco Shipyard is a former Navy base that widens to include Candlestick Point, the home of former baseball and football stadium Candlestick Park, encompassing 750 acres. In the November 2016 election, San Francisco voters narrowly approved Proposition O in favor of exempting the Shipyard project from Measure M, the city’s existing cap on office space that can be developed annually. This provides the opportunity to fully develop its proposed 5 million square feet of office space and gives FPH the flexibility to draw major employers to the space, including FB and GOOG who have both looked at the site. In February, a contractor hired to clean up soil at the former Superfund site that was home to a federal nuclear program admitted submitting fake soil samples. And one of the new contractors brought in to evaluate the radiation data has its own history of mismanaging environmental data at the site. This has caused delays in the land transfer for FPH’s project, and while it is not expected to slow development, it nonetheless puts the Navy’s cleanup efforts further under the microscope and in the crosshairs of environmental groups, with little margin for error. The current plan is for FPH to sell lots to other developers beginning in 2019. Construction on an outlet mall is also slated to begin in 2019 with a mid-2021 grand opening.
  5. AMZN announced plans for a second North American headquarters for 50,000 employees and Irvine officials are throwing their hat in the ring as a potential location with the Great Park Neighborhood likely a central point in its proposal. It is not unreasonable to think FPH may promote its Newhall Ranch site as a factor should Valencia or other nearby cities choose to enter the fray as potential landing spots for AMZN.

 

How on track are these three projects in relation to FPH’s stated timelines? What are the regulatory, local, and municipal issues these projects still face? What are updates on environmental studies, lawsuits, approval processes? What are the most significant roadblocks to development for these three projects? Are timelines accelerating or decelerating? What is FPH doing to move these projects through? What results can FPH expect from these efforts? What are the chances AMZN chooses to put its second headquarters in an FPH location? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Local officials, Real estate developers, Builders and materials suppliers, Environmental groups, Neighborhood citizens’ groups, Legal experts, and Industry specialists.

  

Companies: FivePoint Holdings (FPH), Lennar Corp. (LEN)

 

Research Begins: October 23, 2017