Five Point Holdings - Hedigan for 3
Five Point Holdings Q4 Update
Cue the Mike Breen “BANG” call—Five Point (FPH) delivered results and issued 2025 guidance far exceeding expectations. Management continues to impress by consistently delivering record results, reducing net leverage, and making significant progress on their San Francisco property. Congratulations to Bob Robotti and the Glick Family Office for perfectly timing their entry points (and Third Avenue Funds re-entry!). Five Point’s properties were fortunately unaffected by the California fires.
Q4 2024 Results
Great Park: Sold 372 properties on 32 acres for $309.3 million, equating to $831,000 per property and $9.6 million per acre (the more relevant metric). $9.6 million per acre reflects a $1.8 million (23%) increase from Q2 2024 sales. Land development costs of $77.8 million, representing a 75% gross margin.
Valencia: Sold 493 properties on 54 acres for $137.9 million, translating to $280,000 per property and $2.5 million per acre. Valencia is less developed and located in a less desirable area than Great Park, resulting in a lower price/acre.
Gateway Commercial Venture: Sold the last remaining property in the corporate campus, including an 189,000 SF office building and approximately 50 acres of commercial land, for $88.5 million. The sale comprised $45 million in cash paid at closing and a $43.5 million note maturing in December 2026. After retiring Gateway Commercial Venture’s outstanding debt, it distributed $17.2 million to members (FPH owned 75% of the Gateway Ventures). While the venture will remain part of the corporate structure for now, it will dissolve once the City of Hope pays off the note, simplifying the structure—a positive development.
2025 Outlook
Great Park: Though nuances exist, management plans to rezone commercial land into residential. Commercial land does not require schools to expand capacity (or have existing room) for new students, while residential does. Other factors will likely influence whether the county approves rezoning (I expect it will be approved). In Q3 2024, Five Point sold 13 acres for $2 million per acre; in Q4 2023, 38 acres sold for $4.6 million per acre. Management’s expectation of stable or increasing residential land values implies a $6 million per acre uplift for every acre converted from commercial to residential. With 100 commercial acres remaining, this equates to a $600 million uplift, with 37.5% ownership; this is a $225m increase in value, likely to be recognized in the near term.
Contracts have been finalized with three builders for five residential programs, four are expected to close in Q1. These sales are consistent with or higher than recent sales. Nine additional parcels are undergoing due diligence, with closings anticipated in Q4 2025.
Valencia: A 200-property sale is expected to close by year-end 2025. Management continues working with the county to increase housing density to address the housing shortage.
San Francisco: Rezoning and separation from Hunters Point are complete, and construction is expected to begin in 2026. Just a year or two ago, San Francisco was considered an afterthought, yet it now represents the largest asset on the balance sheet, with significant progress finally underway.
Debt Reduction: Management plans to reduce debt by $100–$200 million during the year, coinciding with a likely refinancing of existing debt. Net debt is $51.5 million (including the note receivable from the City of Hope).
2025 Guidance: Management expects to generate ~$200 million in net income, putting the company in a net cash position and enabling the pursuit of growth opportunities.
Thoughts
The stock’s reaction today says it all. Expectations for the company were incredibly low, even though management has hinted at much of this progress over the past few quarters. With the balance sheet deleveraged and interest expenses set to decline (a significant tailwind for equity holders, given the current 10.5% interest rate rising to 11% in November 2025), management can now focus on San Francisco, Valencia, and other growth opportunities.
Over the past 15+ years, the homebuilding business model has evolved. Homebuilders, who once owned land, now primarily purchase options on lots or outsource land development to companies like Five Point. Land doesn’t flatten itself, and roads don’t appear out of nowhere—this requires work. With fewer land developers in the market, Five Point likely sees increased opportunities, perhaps even outside California, given the limited land inventory.
Future growth opportunities will operate under a “land-light” model, similar to Great Park’s structure. At Great Park, Five Point functions as a general partner, making an equity investment, providing management services, and receiving performance-based incentives. Management fees should roughly cover annual SG&A costs, limiting Five Point’s required capital outlay. These future projects will likely be smaller in scale compared to the current portfolio.
One thought I keep returning to is Lennar’s upcoming Millrose Property (ticker MRP), which is expected to start trading on February 5th. This will serve as the most directly comparable company to Five Point and may act as a useful comp. I also wonder if a partnership or acquisition could be on the horizon, given Lennar’s 39% ownership of Five Point and their shared history.
Conclusion
Business at Five Point is clearly picking up. Even after today’s stock move, the company remains significantly undervalued. Bankruptcy was a serious concern two years ago, but that risk has evaporated. Once written off as a zero, San Francisco is now a major contributor to the company’s future, and progress is finally visible.
I continue to believe fair value is north of $8 per share, with upside likely exceeding $10 as San Francisco’s value becomes clearer. We remain long on the stock and have no plans to sell. This party is just getting started.