Investment In Unconsolidated Entities

12 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Entities

INVESTMENT IN UNCONSOLIDATED ENTITIES

Great Park Venture

The Great Park Venture has two classes of interests—“Percentage Interests” and “Legacy Interests.” Legacy Interest holders are entitled to receive priority distributions in an aggregate amount equal to $476.0 million and up to an additional $89.0 million from participation in subsequent distributions of cash depending on the performance of the Great Park Venture. The holders of the Percentage Interests will receive all other distributions. The Operating Company owns 37.5% of the Great Park Venture’s Percentage Interests as of December 31, 2019. The Great Park Venture has made distributions to the holders of Legacy Interests in the aggregate amount of $355.0 million as of December 31, 2019. In January 2020, the Great Park Venture made distributions to the holders of Legacy Interests in the aggregate amount of $76.3 million.

The Great Park Venture is the owner of Great Park Neighborhoods, a mixed-use, master-planned community located in Orange County, California. The Company, through the A&R DMA, manages the planning, development and sale of the Great Park Neighborhoods and supervises the day-to-day affairs of the Great Park Venture. The Great Park Venture is managed by an executive committee of representatives appointed by only the holders of Percentage Interests. The Company serves as the administrative member but does not control the actions of the executive committee. During the year ended December 31, 2019, the Great Park Venture recognized $133.3 million in land sale revenues to a related party of the Company and $137.7 million in land sale revenues to third parties, of which $31.0 million relates to homesites sold to a land banking entity whereby a related party of the Company has retained the option to acquire these homesites in the future from the land banking entity. During the years ended December 31, 2018 and 2017, the Great Park Venture recognized $3.9 million and $7.7 million, respectively in related party land sale revenues.

The cost of the Company’s investment in the Great Park Venture is higher than the Company’s underlying equity in the carrying value of net assets of the Great Park Venture (basis difference). The Company’s earnings from the equity method investment are adjusted by amortization and accretion of the basis differences as the assets (mainly inventory) and liabilities that gave rise to the basis difference are sold, settled or amortized.

The following table summarizes the statement of operations of the Great Park Venture for the years ended December 31, 2019, 2018 and 2017 (in thousands):

	2019			2018			2017
Land sale revenues	$	270,970		$	175,689		$	480,934
Cost of land sales	(179,836		)	(118,115		)	(339,100		)
Other costs and expenses	(56,248		)	(54,506		)	(105,772		)
Net income of Great Park Venture	$	34,886		$	3,068		$	36,062
The Company’s share of net income	$	13,082		$	1,151		$	13,523
Basis difference amortization	(6,900		)	(2,057		)	(7,763		)
Equity in earnings (loss) from Great Park Venture	$	6,182		$	(906	)	$	5,760

The following table summarizes the balance sheet data of the Great Park Venture and the Company’s investment balance as of December 31, 2019 and 2018 (in thousands):

	2019		2018
Inventories	$	870,861	$	1,059,717
Cash and cash equivalents	293,002		60,663
Receivable and other assets	32,395		33,836
Total assets	$	1,196,258	$	1,154,216
Accounts payable and other liabilities	$	159,965	$	152,809
Distribution payable to Legacy Interests	76,272		—
Redeemable Legacy Interests	133,695		209,967
Capital (Percentage Interest)	826,326		791,440
Total liabilities and capital	$	1,196,258	$	1,154,216
The Company’s share of capital in Great Park Venture	$	309,872	$	296,790
Unamortized basis difference	121,963		128,863
The Company’s investment in the Great Park Venture	$	431,835	$	425,653

Gateway Commercial Venture

On August 4, 2017, the Company entered into the Limited Liability Company Agreement of Five Point Office Venture Holdings I, LLC, a Delaware limited liability company (the “Gateway Commercial Venture”), made a capital contribution of $106.5 million to the Gateway Commercial Venture, and received a 75% interest in the venture. The Gateway Commercial Venture is governed by an executive committee in which the Company is entitled to appoint two individuals. One of the other members of the Gateway Commercial Venture is also entitled to appoint two individuals to the executive committee. The unanimous approval of the executive committee is required for certain matters, which limits the Company’s ability to control the Gateway Commercial Venture, however, the Company is able to exercise significant influence and therefore accounts for its investment in the Gateway Commercial Venture using the equity method. The Company is the manager of the Gateway Commercial Venture, with responsibility to manage and administer its day-to-day affairs and implement a business plan approved by the executive committee.

The Gateway Commercial Venture owns the Five Point Gateway Campus located in Irvine, California and acquired the Five Point Gateway Campus through debt and capital funding. The debt obtained by the Gateway Commercial Venture is non-recourse to the Company other than in the case of customary “bad act” exceptions or bankruptcy or insolvency events.

The Company and a related party of the Company separately lease office space at the Five Point Gateway Campus, and during the years ended December 31, 2019 and 2018, the Gateway Commercial Venture recognized $8.3 million and $1.1 million in rental revenues from those leasing arrangements.

The following table summarizes the statement of operations of the Gateway Commercial Venture for the years ended December 31, 2019, 2018 and from August 4, 2017 (the date of our initial investment) to December 31, 2017 (in thousands):

	2019			2018			2017
Rental revenues	$	34,157		$	26,580		$	9,245
Rental operating and other expenses	(7,304		)	(4,963		)	(1,091		)
Depreciation and amortization	(15,101		)	(11,730		)	(4,504		)
Interest expense	(16,892		)	(11,563		)	(3,629		)
Net (loss) income of Gateway Commercial Venture	$	(5,140	)	$	(1,676	)	$	21
Equity in (loss) earnings from Gateway Commercial Venture	$	(3,855	)	$	(1,257	)	$	16

The following table summarizes the balance sheet data of the Gateway Commercial Venture and the Company’s investment balance as of December 31, 2019 and 2018 (in thousands):

	2019		2018
Real estate and related intangible assets, net	$	451,988	$	464,123
Other assets	21,410		14,833
Total assets	$	473,398	$	478,956
Notes payable, net	$	302,344	$	295,440
Other liabilities, net	35,848		40,521
Members’ capital	135,206		142,995
Total liabilities and capital	$	473,398	$	478,956
The Company’s investment in the Gateway Commercial Venture	$	101,404	$	107,246