Five Point Holdings, LLC (NYSE:FPH) Q4 2022 Earnings Conference Call January 19, 2023 5:30 PM ET
Company Participants
Dan Hedigan – CEO
Leo Kij – Interim CFO
Mike Alvarado – Chief Legal Officer
Kim Tobler – VP Treasurer and Tax
Stuart Miller – Executive Chairman
Conference Call Participants
Alan Ratner – Zelman & Associates
Robert Heimowitz – Concise Capital
Operator
Greetings and welcome to the Five Point Holdings LLC Fourth Quarter and Year-End 2022 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 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 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 included those described in today’s press release and Five Point’s SEC filings, including those in the Risk Factors 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.
And now, I would like to turn the call over to Mr. Dan Hedigan, Chief Executive Officer.
Dan Hedigan
Thank you, Joe. Good afternoon, everyone, and thank you for joining our call. I have with me today Leo Kij, our Interim Chief Financial Officer; Mike Alvarado, our Chief Legal Officer; and Kim Tobler, our Vice President Treasurer and Tax. Stuart Miller, our Executive Chairman is joining us remotely.
I’m pleased to update you today on the progress of the Company through the fourth quarter and for the full year of 2022. I will also update you on our team’s focus as we move through the current real estate market down cycle and our strategies for 2023. Next, Leo will give an overview of the company’s financial performance and condition. We’ll then open the line for questions to our management team.
It is notable for the first time we’re reporting our earnings within three weeks of the close of our quarter. We are in control of our business. As I wrap up my first year as CEO of Five Point, I’d like to recognize the extraordinary efforts of our team and to say I’m very proud of them. 2022 was a year of organizational transition, operating through the impacts resulting from the Federal Reserve’s aggressive increase in interest rates. Through it all, the team has remained focused on our operational priorities.
Turning to our financial results, consolidated net income in our fourth quarter was $22.5 million, and our SG&A was $13.1 million, a $4.5 million reduction in SG&A compared to Q4 2021. Consolidated SG&A for the year was $54.6 million a 29% reduction from 2021. We ended the year with cash and cash equivalents of $131.8 million.
Two key successes contributed our fourth quarter positive results. The first was our execution on our commercial land sales strategy where the Great Park Venture closed on a very strong sale of approximately 42 acres of commercial land for $240 million or $5.7 million per acre. As a result of this sale and the strong cash position of the Great Park Venture, we received distributions and incentive compensation payments from the Great Park Venture of approximately $67 million.
Our second key success during the quarter was renewal of our development management agreement with Great Park Venture which is now extended through the end of 2024. This extension reflects a strong value add that our management team brings to the partnership.
As we start the New Year and being well aware that increased interest rates have changed the market dynamics, we will be focused on three main priorities: generating revenue, managing our capital spend and managing SG&A. Execution on these priorities should generate net positive cash flow for 2023 and provide the liquidity to allow us to capitalize on the opportunities that we expect to be available when the market stabilizes.
With the establishment of our commercial land business, we now have two potential source of meaningful revenue, residential and commercial. During 2023, we anticipate that the Fed interest rate tightening cycle will end and the housing market will adjust the new interest rate environment, expanding buyer demand as the year progresses. Although we see 2023 as a transition year in residential, the one reality that cannot be denied is that in our California markets, housing is still in short supply and there is still demand for well-located homes in master planned communities. We will remain patient and manage our business to realities of the current market.
To that end, we’ll be looking to work with the builders to sell land at prices that reflect the balance between current market conditions and a scarcity of entitlement inventory in our markets. Following the successful commercial land sale at the Great Park last quarter, we remain optimistic in moving forward our unique commercial land offerings at the Great Park and Valencia, both of which are positioned with land constrained positioned with and land constrained markets. Additionally, we continue to have historic low vacancy rates in the industrial market, coupled with continued rent growth which we expect will continue to drive demand in this preferred asset class.
With over half of land in our initial commercial offering that Great Park already sold, and continued interest in negotiations on remaining sites remain confident in the continued demand in the commercial markets for not only industrial uses, but for other uses as well. In many instances, we have the only entitled and ready developed commercial and industrial land of its kind in the market.
Our desirable communities, our unique assets are complemented by a balance sheet that enables us to maximize value with patient offerings. At quarter end, our balance sheet reflected a $131.8 million of cash on hand and $0 drawn on $125 million revolver giving us available liquidity of $256.8 million and a debt to capitalization ratio of 25.1%. We also have no principal debt repayment obligations on our senior notes in 2023 or 2024.
I’ll now provide some updates on each of our communities. The open builder neighborhoods at the Great Park continue to sell homes, but at reduced absorption rates compared to last year. As has been the pattern in prior new home sales slowdowns, coastal California holds up better than in the markets and that is what we’re seeing at our communities.
During the fourth quarter, builders in our Great Park community sold 113 homes, up from 82 homes in Q3 and for the year sold 326 homes. Solis Park, which had its first model complex home in July of 2022, currently has 636 homes remaining sold at the original 849 even though these numbers are small by historic standards, based on the current pace of home sales, and typical time period for builders move from land acquisition to omni model homes, we believe that there will be a need for the builders again buying land again in 2023 to position themselves for new home sales in 2024.
Our next residential community in Great Park District 5-South which is community of 719 homes and 11 neighborhoods, will be our focus in 2023. We previously brought this community market right before the Federal Reserve began its aggressive rate increases and after initial strong interest, new builders paused their land purchases.
We’ve done new conversations with the builders and would anticipate moving forward on some of the sites this year. On top of the ongoing residential opportunities at Great Park, we’re actively engaged in selling the balance of our initial commercial land offering. Our commercial parcels offer to the South County market something that’s not been available for years, large parcels of entitled land of flexible zoning that allows a multitude of uses, including life sciences, R&D, office and industrial among others.
In Valencia, new home sales by builders totaled 49 homes during the fourth quarter, down from 166 homes in the third quarter reflecting the limited available inventory. For the year, builders sold a total of 594 homes with 11 of 18 programs now sold out and currently only 323 remaining homes available from our initial 1,268 home offerings. Builders continue to work on their models for next year at Valencia, which encompasses 18 neighborhoods and 598 homes.
These neighborhoods are expected to open in the second and third quarters this year, creating additional inventory to drive builder sales. While we did not close any home sites in 2022, we’re still engaging with the builders like and currently looking at opportunities to add single family floor rent and multifamily floor rent products to our mix of offerings.
In particular, multifamily is a strong real estate segment that could provide housing options for residents and land revenues for us even during this time when this [per sale] residential market is under pressure.
Finally, we also have commercial opportunities in Valencia and we plan to bring — sign 35-acre sites at market in the first quarter of 2023. San Francisco remains a priority for Five Point and for the city and county of San Francisco. It is irreplaceable land along San Francisco Bay with a broad mix of approved development opportunities. As we start the New Year, we have initiated the process to obtain approvable plan that rebalances the current development entitlements to facilitate Candlestick moving forward ahead of Hunters’ Point Shipyard while still maintaining the overall community development mix.
Concurrently, we’re working with the city to update the existing tax increment financing timelines to account for the navy delays at Hunters Point. 2023 will be a pivotal year for San Francisco as we work through these issues and set the groundwork for the standalone development of Candlestick as the first phase of the larger mixed use community.
In an effort to provide some context to the coming year, I feel it would be helpful to provide some sense of how we see this next year progressing. Clearly, there remains much uncertainty amid these challenging market conditions. Therefore, my comments will be more general in nature.
First, I’d like to reiterate that the positive finish to 2022 gives us confidence in our commercial land strategy. We expect to have commercial land sales at Great Park and Valencia during 2023. Further, as we reengage with our guest builders over the next few months, we expect to be able to find mutually beneficial ways to structure and price our valuable residential land. At this time, we don’t feel it will be prudent to provide estimates of the number of commercial acres or potential home site sales. We expect as majority of 2023 land sales will occur in the third and fourth quarters.
Generally for the first half of 2023, we expect to generate cash from all sources of between $80 million and $100 million offset by total capital expenditures of $45 million to $55 million, debt service payments and other accruals of approximately $45 million and other expenses of $10 million for a cumulative expenditures of between $95 million and $110 million and by anticipated SG&A expenses of between $12 million and $13 million per quarter or approximately $25 million for the first half of the year.
We will continue to look for additional savings opportunities in our SG&A. While our cash flow for the first half of the year is expected to be mildly negative, we continue to make constructive progress to a cash flow positive model, which we believe will be obtained by the second half of the year and into the future.
In summary, our last half of 2022 was challenging for the entire industry and we are well aware of the headwinds we are still facing. We are cautiously optimistic about the opportunities available to us in 2023 and we’re confident in our ability to capitalize on them. With a focus on accountability, we’re looking to drive bottom line performance, create positive cash flow and fortify our balance sheet while building shareholder value.
We will continue to monitor the impact of rising interest rates and inflation on buyer demand for housing and we’ll adjust our plans proactively to preserve and maximize the value of our master plan communities. Despite the recent challenges created by market conditions, we have positive momentum and are feeling ever more optimistic about our future.
Now let me turn over to Leo who will report on our financial results.
Leo Kij
Thanks, Dan.
A summary of our financial results was included in the earnings release issued earlier today in which we reported consolidated net income of $22.5 million for the quarter. We recognized $17 million in revenue that was mostly generated by our Valencia and management company segments.
Selling, general and administrative expenses were $13.1 million which represents a reduction of 25.5% compared to the same quarter last year. The decrease reflects our reduction in headcount as previously reported during our first quarter earnings call. Equity and earnings from our unconsolidated entities was $26.2 million and was primarily a result of recognizing our share of the net income generated from the commercial land sale at the Great Park Venture that Dan described earlier.
Turning to the balance sheet and liquidity, our net increased inventory for the quarter was $9.6 million. This increase includes accrued capitalized interest on our senior notes of $12.3 million and a decrease of $27.7 million for reimbursement from the Communities Facilities District or CFT for certain public infrastructure costs that have been incurred as part of the development process at our Valencia segment. This is the first CFT reimbursement we have received since we started the current development in Valencia. As a community grows, and the qualifying costs are incurred, we expect to receive more reimbursement.
We paid semiannual interest of $24.6 million on our senior notes and we paid $4.1 million including $700,000 of interest against our related party EB-5 reimbursement obligation. Distributions and incentive compensation of $66.9 million was received from our interest in the Great Park Venture and we also received a distribution from our interest in the Gateway Venture of $8.6 million.
As recently reported on an 8-K filing, our development management agreement with the Great Park Venture was renewed through 12/31/2024. The compensation payable to our management company during the renewal term remains unchanged and includes a monthly base — which includes a monthly base fee payment and incentive compensation payments equal to 9% of any distributions made by the Great Park Venture to holders of percent interest.
Total liquidity was $256.8 million at quarter end. This is comprised of $131.8 million of cash and cash equivalents and $125 million of available borrowing capacity under our revolving credit facility. No borrowings or letters of credit were outstanding as of December 31.
Our debt-to-total capitalization ratio was stable at 25.1% and our net debt to capitalization ratio after taking into account our cash balance was 20.9%. The company has four reporting segments Valencia, San Francisco, Great Park and Commercial.
Segment results for the fourth quarter are as follows. The Valencia segment recognized a $509,000 loss for the quarter. There were no land sale closings in Valencia. However, the segment did report revenue of $3.8 million. Most of this revenue related to changes in estimates of variable consideration from the amounts previously recorded on prior land sales including profit participation that we collect from our homebuilders.
Segment revenue was offset by selling, general and administrative costs of $3.1 million that were mostly comprised of employee compensation, as well as selling and marketing costs in support of our active development areas. The San Francisco segment recognized a $1.2 million loss for the quarter. This loss is comprised of general and administrative costs incurred to support the segment’s continued focus on reassessing the development plan and the approval process for our San Francisco assets.
Our Great Park segment reported net income of $93.7 million for the quarter, which is comprised of $5.1 million and net income generated by our management company and net income of $88.6 million from the venture’s operations.
As it relates to the management company, Five Point recognized $13 million in management fee revenue during the quarter, $3 million of which was from monthly base fee payments and $10 million of which was from non-cash revenue recognized for changes in estimated incentive compensation payments expected when the venture makes future distributions.
Offsetting these revenues were expenses of $7.9 million comprised of $2.2 million for the cost of providing management services primarily the project team compensation, as well as $5.7 million of amortization expense associated with our development management intangible asset.
The venture’s operations recognized revenue of $244.4 million during the quarter. This is mostly comprised of the sale of approximately 42 acres of commercial land for a purchase price of $240 million. Offsetting these revenues were cost of land sales of $140.6 million, SG&A of $2.5 million and related party management fee expense of $14.7 million. Management fee expense is comprised of $3 million of monthly base fee payments and $11.7 million increase in accrued incentive compensation resulting from a change in estimate of aggregate payments probable of being made as the venture makes future distributions.
We own 37.5% interest of the Great Park Venture and 100% of the management company. Although the Great Park segment reports to full results of the Great Park Venture, our investment is reported under the equity method of accounting and therefore the assets, liabilities, results of operations and cash flows of the venture are not consolidated within our financial statements. The company’s equity and earnings from the Great Park Venture after adjusting for investment basis difference of $7.2 million is $26.1 million for the quarter. The Great Park Venture is a self-funding operation with no debt and had a cash balance of $149 million at the end of the quarter.
Moving to our Commercial segment, we had a net loss of $192,000 for the quarter. This included a $300,000 loss from the operations of the Gateway Commercial Venture and $100,000 in income from the services provided by our management company. The venture is a self-funding operation and had a cash balance of $5 million at the end of the quarter. We own 75% of the Gateway Commercial Venture and 100% of the management company. Our investment in the venture is reported under the equity method of accounting and therefore the assets, liabilities cash flows and results of operations of the venture are not consolidated in our financial statements. Five Point’s equity and loss for the quarter from the Gateway Commercial Venture was $224,000.
With that, I’ll turn it over to the operator for questions.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Alan Ratner with Zelman & Associates. Please proceed.
Alan Ratner
Hi, guys. Good afternoon. How are you, Dan? Good to hear you. Thanks for all the information. Very helpful, especially kind of the cash flow buildup for 2023. I think that’s hopefully helpful for people. I know it’s more information than you’ve provided in the past. So appreciate that. I guess before we drill into some of the details on that, just in terms of the builder appetite for land. Clearly, the fourth quarter was a pretty challenging environment and I think last quarter you had kind of signaled maybe you would get some residential lot sales in the quarter and obviously that didn’t happen. But it seems like the news flow is getting a little bit better here over the last handful of weeks. Builder sentiment improving, rates continuing to move lower, kind of the normal seasonal uptick is starting to kick in here ahead of the selling season.
So I’m curious if you’ve had any more recent conversations with builders since the New Year? Has there been any indication that the builders are looking to maybe dabble back into the land market after kind of moving into the sidelines in the back half of last year or do you feel like they’re still in wait-and-see mode kind of trying to figure out how the selling season unfolds?
Dan Hedigan
Alan, that’s a real good question. And the answer is that we actually all of the builders that were engaged prior and we call D5 South, we’ve already had conversations with them this month. A number of them are sharpening pencils and starting underwriting again. We actually have one sale that we were in negotiations last year that actually is still in process, it’s kind of kicked over this year that we’re still actively trying to wrap up the final pieces of that.
But the – what isn’t doesn’t jump out of these numbers, especially if you think about Great Park in particular. We had 18 sales last week at Great Park. The available inventory at Solis that’s all was left in the Great Park. It will be sold out by year end. So all the builders we’re talking to are all thinking about their 2024 having a product available in 2024. And as you know, it’s not too early to start working on that. So, long answer to your question, but we have four or five builders actively re-underwriting right now. And so we expect to do well there.
Alan Ratner
Great, and that’s really helpful. I mean, I didn’t quite – sorry, go ahead —
Dan Hedigan
Alan, I’d just say, the signs are positive. I mean, so I would say the early signs very positive. But obviously, we’re going to wait-and-see hopefully next quarter and tell you more, but early signs are positive.
Alan Ratner
Great. I do have a couple of quick housekeeping questions, I’ll just ask quickly, hopefully we can check through them. Number one, I might have missed it. Did you give the cash balance number in Great Park at year end? I think that’s the number you’ve provided in the past?
Dan Hedigan
You mean in the Great Park partnership in the venture?
Alan Ratner
Yes, after the distributions, how much is remaining?
Leo Kij
$149 million.
Dan Hedigan
Yes, $149 million Alan.
Alan Ratner
And should we think about the cadence of the distributions kind of like the last few years? I think it’s been more in the back half of the year or maybe after a lot of land sale. So should we think about that similarly in 2023 if you have a land sale in the back half of this year that should coincide with another distribution?
Dan Hedigan
Alan I don’t have to – yes I mean, certainly as we have the year-end land sales, we would anticipate additional distributions. But it is necessarily all tied to that because the partnership is very conservative and made a conscious decision at the end of the year to hold on to additional cash as they see how this year sorts out. So I think we were – are not necessarily tied to land sales as much as we’re tied just like everyone else, a little bit of clarity on how the market is moving forward.
Alan Ratner
Got it, that makes sense. Another question here so you mentioned the plan for San Francisco sounds like looking to move forward with Candlestick there. Just thinking through the cash flow, I’m assuming once you guys get that plan approved or we get to move forward with it, there’s going to be some development expenses that need to occur obviously before you book any revenue. Is that contemplated at all on your 2023 expectation for cash flow to have any development expenses there? And if not, what do you expect those expenses to look like once they do begin to kick in?
Dan Hedigan
Well, the first part of your question, we are not expecting any of those expenses in 2023. And you know the – what it’s going to take to kind of kick that off obviously, we’ll have a lot more clarity as we get closer to that point in time, but getting to the first commercial pad because of Candlesticks relationship to the 101, if you remember, it used to be an active ballpark, people could get off 101 and go there.
It’s actually compared to a lot of projects not that extraordinary. It’s real money. I don’t want to mislead you at all. But I – to try to estimate what that would be right this moment, just be a little bit early, but the first pad is very accessible from the 101 Freeway.
Alan Ratner
Got it, okay. That’s helpful. And then final question, I think you said in that cash buildup that you expect about $80 million to $90 million coming in the door in the first half of the year. Can you kind of just break that up a little bit? Is that – are those commercial land sales, is it apartment sales, residential distribution to any additional guidance you can give on that?
Dan Hedigan
Yes, it’s a combination and really – I’ll start at the bottom, actually we finished. I mean, we are expecting an interim distribution in the first half of the year based on our view of the market. So it’s really a combination, it’s combination of operating revenue, CFT reimbursements and recoveries, sales that we are currently working on and then obviously the distributions I just mentioned.
And so within that basket of opportunities, we see – we have visibility $80 million to $100 million in the first half of the year kind of in that basket and how it finally settles out, I can’t tell you right this second. But we’re feeling very good about that kind of basket of opportunities.
Alan Ratner
Perfect, all right. Well, thank you for taking all of my questions here. I appreciate the time and best luck with everything.
Dan Hedigan
Thanks Alan.
Operator
Our next question comes from the line of [Ben Johnson with Intact Asset Management]. Please proceed.
Unidentified Analyst
Hi thanks for taking my questions today.
Dan Hedigan
Sure. Hi, Ben.
Unidentified Analyst
Can you hear me?
Dan Hedigan
Yes, Ben we can. Thank you.
Unidentified Analyst
Great, I was just wondering if you could talk a little bit more about the management agreement and what material changes there besides the economic side? And can you talk a little bit about why there’s change control added to that? Thanks.
Dan Hedigan
So from the economic side of it, it really is when we did the one year extension last year, we kind of changed the economics from a standpoint of kind of reimbursement cost to kind of just a set monthly management fee. And so that part has remained exactly the same. That’s just rollover exactly as it is. And we added basically two years and there’s been no change to our preferred return earning in connection with that.
So that it’s really the big – the one change was really that adding those – actually just adding the time. On your question about the change in control, our partners in that are obviously very senior folks and we have spent a year and I’ve spent my year working with them and really working on that relationship and they actually really like the management team in place today.
And so one of the things that they’ve kind of said is, hey, we really like how everything is working today and we want to be sure that if you Dan or Mike or Stewart aren’t engaged that we have an opportunity to speak into that because we’ve got a very good operating relationship today – going together.
So it’s really kind of more around kind of that keyman question. And the change in control is – and that’s going to also – it’s also a continuity issue for them. They really want continuity because of what we’ve been able to achieve the past year.
Unidentified Analyst
That makes a lot of sense. Really appreciate all that color. And can you talk a little bit about extra access to liquidity if you guys have a more prolonged slowdown and maybe if rates don’t really move and building kind of freezes up for a little bit longer?
Dan Hedigan
Well, obviously, we have the $125 million line that has zero drawn on it. As we kind of project out the market where we’re going, we don’t have the thoughts that additional liquidity will be needed. And certainly, if the market doesn’t recover we will be reducing costs materially. Right now, we’ve got capital for revenue communities later this year and into 2024, there is some capital, although we’re being very careful about it that needs to be spent. If we really believe there wasn’t an opportunity to generate revenue, we would stop all of that, which would clearly help liquidity.
Unidentified Analyst
Very good. Thank you very much for answering all my questions.
Dan Hedigan
You’re welcome. Thanks Ben.
Operator
[Operator Instructions] And our next question comes from the line of Robert Heimowitz with Concise Capital. Please proceed.
Robert Heimowitz
Hi. I just wanted to start by saying this through it, I started my career in IR at Lennar and I learned so much there and you really have the hardest working in world class treasury and accounting teams. So now on to Dan, can we expect that you guys might build more homes through a fee build program. This was a very successful program when you guys did it. And it would emphasize to your guest builders that there — that you guys are working with scarce resources that if they don’t prioritize, you will.
Dan Hedigan
Robert, help me on what is your last comment? I’m not quite followed. If we don’t prioritize they will, what are you thinking there?
Robert Heimowitz
Like you guys had a fee build program where you guys were able to recognize good profits on and so you guys could go ahead and do that again if your guest builders don’t purchase the land from you.
Dan Hedigan
Okay. All right. Thank you. I understand. That’s a good question. It is certainly, I take nothing off the table. And in my career, I have done fee builder extensively use it at a different life to come out of ’08, ’09. And so it’s a model I’m extremely familiar with.
We haven’t seen the need right now based on the conversations we’re having with builders, but it’s certainly something that I’m familiar with and it’s something that we could definitely move to quite easily that’s really where the market moves us.
Robert Heimowitz
Okay, great. Next question on the related party tax liability. S&P is including this debt in their calculations. Can you speak to any potential overhang here?
Dan Hedigan
I’m sorry, I think are you referring to the TRA, the Tax Receivable Agreement?
Robert Heimowitz
Yes.
Dan Hedigan
Yes. I think — yes, I’m sorry, we have [indiscernible] can I think can probably address that question by the time, but you want to repeat the question to make sure that we answer it correctly?
Robert Heimowitz
Yes. S&P is treating this as debt now on their calculations, they’re saying they don’t know if you’ll recognize the tax savings and you’ll still have a liability associated with it. So just like how should we think about this.
Leo Kij
Yes Robert, we’ve actually had conversations with the rating agencies about that and clarified that the TRA is a projected obligation based on our ability to use it. And our expectation today is that those payments would occur after the bonds expire. So it doesn’t affect the collect – and our ability to pay the bonds and I want to reiterate the obligation only arises if we benefit from saving taxes. So to-date, the partners, the prior partners have been paying taxes that we would have otherwise paid, but because of the way the calculation is made, we haven’t yet benefited. So just if that – did that help you?
Robert Heimowitz
Absolutely, I just got one more, which is can we talk about the stages of completion of the various home sites that you own? It seems like a lot of them were slated to close this year, they should all be close to completion or ready to be sold. So if we had how many were completely finished or how many were close to being finished, like work in process, we could kind of know the liquidity of the lots whether they could go to land banks or spec builders should custom builders have dropped out. So that’s my last question? Thank you.
Dan Hedigan
So Robert, let me first talk about Great Park. We had D5 South moving right along last year and once again being prudent when the sales weren’t materializing, we’ve got the black top down and we’ve got all the wet sand and we [stopped that dry]. So we can complete those lots quite easily. So we’re kind of in – we’re kind of in a good place there and it will be the next place that we – next community we open in Great Park and it’s in, as you say, it’s in very good shape to move forward – about a lot of additional capital but just to remind everyone all that is self-funded through the partnership. And we’ve got substantial liquidity to do what we need to do on those, but that’s actually in very good shape.
And then when you get to Valencia. Valencia we have actually some sites that are – I kind of call them really more of infill sites that were in the early parts of the Mission Village, which is what we kind of call the first area there. They’re actually ready to go. They’re [mass grading] all of them structures in them and everything is stubbed. And then we have some other areas that we need to go back that are still mass grading streets cut. The storm drains are in but we’re going to need to go back in and pay them out and put in wets and dries.
But once again, we’re – the next areas we go into there, that’s kind of where we’re at. The mass grading, let’s say, streets are gutted. Storm drains are in. So we’re in pretty good shape there also, but it will take a little more capital there as we move forward.
Robert Heimowitz
Okay. Thank you.
Operator
Thank you. Ladies and gentlemen, this concludes the question-and-answer session. I’d like to turn the call back to Dan Hedigan for closing remarks.
Dan Hedigan
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. Thanks everyone.
Operator
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
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