Five Point Holdings, LLC Class A (FPH) Q1 2021 Earnings Call Transcript

Five Point Holdings, LLC Class A (FPH)
Q1 2021 Earnings Call
May 10, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Five Point Holdings, LLC first-quarter 2021 conference call. Currently Alain listen-only mode. As a reminder, this call is being recorded. Today's conference may include forward-looking statements regarding Five Point's business, financial conditions, 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 include those described in today's press release and Five Point's SEC filings, including those in the risk factors section of the most recent annual report included in 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. Emile Haddad, chairman and CEO.

Emile Haddad -- Chairman and Chief Executive Officer

Thank you, Jenny. Good afternoon, everyone, and thank you for joining us today. As you know by now, we are not a quarterly business. The timing of our residential land sales is driven by the velocity of home sales by our guest builders.

We time our delivery of specific home size to builders to dovetail with the build-out of similar products that they are building and selling. The new homesites are designed to accommodate replacement for the size of type or type of homes that have been sold out. This is one of the mechanisms we use to control supply, thus maintaining the integrity of home pricing and protecting our builders. This is why our sales in each of our communities happen once, or sometimes, twice a year.

As such, our quarterly reports do not necessarily provide an ability to monitor market conditions or the performance of the company. We use the pace of home sales by our builders as a way to measure the strength of the market, and we view the number of cancellations as a change in buyer sentiment or difficulty in mortgage qualifications. To that end, the rate of sales has been over 2x year-to-date through April as compared to the same period last year, and the number of cancellations is very low compared to historical averages. More specifically, in the same period last year, our builders had approximately 162 net sales after 55 cancellations, versus 339 net sales after just 16 cancellations.

The feedback we are getting from our builders is that homebuyers are attracted to the quality of the public schools in our community, the safety of our neighborhoods and the exceptional quality and number of amenities. Our fee build program with a new home company is doing great. The rate of sales is approximately 300% from our underwriting and prices are above underwriting as well. We are nearing completion of the selection of builders for the next neighborhoods to be sold at the Great Park and currently anticipate completing the transaction in the second quarter of this year.

The total number of homesites in this space is expected to be approximately 850, with a mix of products like we typically sell. In Valencia, after over 17 years, since the approval of the specific plan for the project by the Los Angeles County Board of Supervisors, last week, our builders reported their first sales of the first phase, with starting prices coming in above underwriting and a growing interest list in the hundreds. The first phase includes 1,268 homesites and is segmented into 18 products being built by five builders. This year, buyers will be able to visit over 60 models to choose their preferred home.

As a net zero energy and net zero greenhouse gas community, Valencia is being pointed to as the model of an environmentally responsible community. The wide range of market rate homes, coupled with the future affordable rate housing and the quality of public education, provide a balance of social equity to this environmentally responsible community. A lot is being said about ESG these days. And every company is looking for ways to set goals in the areas of environmental responsibility, social equity and governance.

For us, ESG is in our DNA. Soon, we will be publishing our ESG report that highlights all of the environmental and social responsibility initiatives we have been pursuing for many years at our communities as well as other information about our company. We are very excited to share with you all that has been accomplished and know that more is to come. In San Francisco, we are seeing activity by the Navy in its resampling of areas within Hunters Point.

The Navy recently updated the schedule showing estimated dates for the completion of its regulatory assessment process and for the transfer of the balance of the parcels. We are cautiously optimistic that the reevaluation process that the Navy must undertake will proceed now without further delays. To that end, we will continue to work with the city of San Francisco and other agencies to more clearly establish the timing of these land transfers and the phasing of the project. On our last call, we shared with you that the issue of housing has moved up to the top of the priority list in the State of California and every city and county within it.

As one of the largest owners of entitled residential land in the state, we have started engaging with some of our public partners about ways to help with housing requirements by potentially adding more homes in our communities. On the non-residential front, almost three years ago, we made a decision to designate a significant amount of our non-residential entitlements to healthcare and life science-focused uses. Our partnership with the City of Hope has laid the foundation for that. The $1 billion cancer center is under construction at the Great Park and is anticipated to open next year.

The three markets we have a major presence in, San Francisco, Los Angeles and Orange County, are non among the top markets targeted by healthcare and life science companies and capital providers. This reinforces the decision we made; and we believe that with the proximity of housing, public education, open space and quality and number of amenities in our communities, we are positioned to be the location of choice to build the campus for these users. Last quarter, we talked about holding an investor meeting which we had postponed last year due to the pandemic. Our original thinking was to have it virtually in June.

However, in light of the announcement by the state to allow for everything to be open as early as mid-June, we have decided to hold the meeting in person and have targeted it for September 15. Bob Wetenhall will coordinate with you shortly in order to avoid any major time conflict, and we will confirm that date with everyone shortly. Of course, we will give those who still want to participate virtually the option to do so, but we think that you all will be more informed by being able to see our communities in person. As we commented previously, the goal is to share more information in order to assist your understanding of the real value of the company.

We believe that for a company like ours with elongated assets, the best way to look at valuation is the net asset value. We plan to share our calculation of the NAV at the meeting. With approximately 2,300 remaining buildable acres in Valencia, where our current residential land sales are in the mid $2 million per acre and approximately 500 buildable acres at the Great Park, where our current residential land sales are in the mid $5 million per acre, we are confident when we finish our investor meeting in September, you will share our excitement about the real value of the company. There's a lot of noise today about the State of California and the number of people leaving the state.

I came to California over 35 years ago, and I have been hearing about the demise of the state since then. Sure the state has a lot of issues to address. As a partner of the state and the communities in which we work, we will always bring perspective and help any way we can. California is the fifth largest economy in the world with a very diversified population.

It is the epicenter of innovation and the birthplace of many of the ideas that have changed the way the world lives and works today. For us, we know California, and California knows us. Finally, let me conclude by thanking all of our associates for all their contributions despite the tough remote working conditions, we are still operating under. It appears that we'll be ending shortly, and I think we are all looking forward to seeing each other in person soon.

Now, let me turn it over to Erik, who will report on our 2021 Q1 financials, and we'll be happy to take your questions afterwards.

Erik Higgins -- Five Point Holdings LLC -- Analyst

Thanks, Emile. A summary of our financial results was included in the earnings release issued earlier today, and our 10-Q has been filed with the SEC and is available for review on our website. The consolidated results for the first quarter are as follows. Revenues for the quarter were 13.2 million, which were primarily generated from management fees.

The net loss for the quarter was 21 million after 19.5 million in SG&A expenses and 3.6 million in losses from our unconsolidated entities. While there were no land sales during the quarter, we continued to invest in inventory, which increased by 52.5 million during the quarter, primarily related to land development expenditures in Valencia. Our cash balance at the end of the quarter was $230 million, and we had no outstandings against our $125 million unsecured revolving line of credit. Our debt to total capital ratio was stable at 25.1%, and our net debt to capitalization ratio, when taking into account our cash balance, was 17.5%.

In April, the maturity date on our 125 million revolver was extended another two years to April 2024. Moving to the segment results. The company has four reporting segments: Valencia, San Francisco, Great Park, and commercial. The segment results for the first quarter are as follows: The Valencia segment is consolidated for accounting purposes.

The segment loss was 4.9 million for the quarter, and there were no land sales in Valencia during the quarter. The San Francisco segment is consolidated for accounting purposes and recognized 94,000 in income for the quarter. The Great Park segment includes operations of the Great Park venture, the owner of the Great Park neighborhoods, as well as the management services provided by the management company to the Great Park venture. We own 37.5% of the percentage interest of the Great Park venture and 100% of the management company.

The operations of the Great Park venture are accounted for under the equity method of accounting, and therefore, the assets and the liabilities of the Great Park venture are not included in our consolidated financial statements. The Great Park venture is a self-funding operation with no debt and had a cash balance of approximately $155 million at the end of the quarter, which is not included in Five Point's consolidated cash balance. The net loss for the Great Park segment was 10.9 million for the first quarter, which was comprised of approximately 1.6 million in income from the management company and a $12.5 million loss from the Great Park venture operations. The company's equity and loss from the Great Park venture, after adjusting for a difference in investment basis, was 3.9 million for the quarter.

We are currently working on our next round of land sales at Great Park neighborhoods, which we anticipate will close later this year. We expect the cash proceeds from these sales and the venture's existing cash balance to result in distributions to the venture's partners, sufficient to clear out the remaining 45 million priority distribution to the legacy interests, and to commence distribution to Five Point's 37.5 percentage interest. Our commercial segment includes operations of the Gateway Commercial Venture and management services provided by the management company to the Gateway Commercial Venture. We own 75% of the Gateway Commercial Venture and 100% of the management company.

The operations of the Gateway Commercial Venture are accounted for. The assets and the liabilities of the Gateway Commercial Venture are not included in our consolidated financial statements. Commercial segment income was 579,000 for the quarter, which included approximately 99,000 from the management company, and 480,000 from the operations of the Gateway Commercial Venture. Five Point's equity and earnings from the Gateway Commercial Venture was approximately 360,000.

With that, I'll turn it over to Jenny, our operator, for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] And we'll go to our first question from Michael Rehaut of JP Morgan.

Elad Hillman -- J.P. Morgan -- Analyst

Hi. Good afternoon. This is Elad Hillman on for Mike. So first, I was wondering if you could provide some more details on the first home sales in Valencia last week and the level of traffic and excitement that you're seeing from consumers in that development.

And then, additionally, I was wondering if there are any production constraints in either materials or labor that the builders are facing to be able to deliver those homes? Thanks.

Emile Haddad -- Chairman and Chief Executive Officer

Well, I think that the -- in light of the conditions we're living in, as it relates to the sales process and the constraints of COVID-19 and the fact that you can't really conduct sales in a normal way or by appointment and streamlining, it's really not easy to look at the process of the sales as the litmus test or the indicator of interest. I think that's why I wanted to highlight the fact that what we're hearing from builders is that they're starting to compile a very, very long list of interest from people. And I just talked to one of the builders about half an hour ago, and they're saying that the challenge they have is the logistics of making sure that, that list goes through as fast as possible and can visit the models and make decisions quickly. So if your question is, is there a high level of interest? The answer is absolutely, for a lot of reasons.

One, LA County is one of the most constrained markets in housing in the whole state, and there hasn't been really anything significant in terms of new products. And this is probably the largest opportunity to buy homes in the country, maybe historically, because, as I said, you're going to have an ability to go and visit 60-plus models, which practically speaking, will take you probably about three days to do. So there's a lot of interest with -- our builders are excited. And the other indication is typically, we do not see the builder start, especially in the beginning of a master plan community, where everybody is looking for momentum.

What we typically have seen is builders try to be more conservative on the pricing of homes and come at a price that might be a little bit lower than their underwriting to just create the momentum. The fact that we have now our first sales that are coming above underwriting speaks volumes, at least to somebody like me who's been in this business for a long time, in terms of the depth of that market.

Elad Hillman -- J.P. Morgan -- Analyst

That's great. And then in terms of the production side, any concern --

Emile Haddad -- Chairman and Chief Executive Officer

Oh, yeah. No. We haven't heard any constraints. Actually, the activity on-site is pretty impressive, if you go see the amount of activity.

What we hear from the builders is I'm sure what you're hearing, which is the pricing of lumber and some of the challenges that are coming from the disruption of the supply chain as a result of the COVID-19. But none of it has impacted the production in the county, who we view as our partner, has been extremely cooperative in terms of the process and everything else because everybody's looking at this as a big answer to the housing crisis that they have in LA.

Elad Hillman -- J.P. Morgan -- Analyst

Great. And then just switching over to Great Park. It sounds like there is even a sequential acceleration in the sales there. I think you'd said last quarter, $247 million, roughly net sales in late December through mid-March.

And then sooner this year, about 300 net sales. So maybe just if you could comment on the sequential strength, if it is sequentially getting better, maybe some of that's related to seasonal trends? And then if you're seeing some of the builders there, looking to meter any of the sales pace or taking large amounts of price increases, or any comments on that would be great.

Emile Haddad -- Chairman and Chief Executive Officer

Great. Sure. So I mean, I do not look at it as a seasonal because we look at season the same season, same periods. And we also try to look at it through the filter of pre-COVID-19 issues as well.

This is not news -- unique to our project because, as you know, the housing market, in general, is one of -- we are seeing some of the strongest housing markets right now, historically, driven by interest rates being where they are on the mortgage side as well as what I always refer to as the cocoon factor, which is the reacquaintance of people with their homes. Those are factors that are driving housing and the fact of the matter is even before COVID, we had a major shortage of housing supply, which got even more aggravated during COVID. So what we're seeing is really very much consistent with what the rest of the markets are seeing in terms of the strength of the housing market. What is probably unique and is worth highlighting is, obviously, everybody is watching any uptick in mortgage rates which has an impact on certain markets or certain buyers in terms of their ability to qualify or not qualify or make the payment or not make the payments.

We are a little bit more insulated than a lot of these markets that might be sensitive to interest rates because today, our buyers are -- 35% of them are cash buyers, and the other 65% are putting on an average 35% down, and the medium price of the great product is about 1.2 million. So that's a buyer profile that is diversified in terms of the product offering and their interest, but they're not as sensitive to movements in interest rates as buyer in the tertiary market would be. So that's one thing that I think is worth highlighting. We highlighted the cancellation rate, because a lot of times, people talk about sales, which obviously is a very important indicator of the strength of the housing market.

But for somebody like me, I've always watched cancellation because I view cancellation as a leading indicator of any change in sentiment or a trend, mainly in the area of mortgage qualification. When you have as low as a cancellation rate as we're seeing today, one, it means that people feel good about buying that home. And a lot of it goes back to the second part of your question because builders are pushing prices up and builders don't want to end up missing on that opportunity -- buyers, I mean. But more importantly, that means that builders are qualified -- buyers are qualifying and being able to get mortgage.

And those are two things that are very important for somebody like us who is not building 50 or 100 homes; we have a very long runway, and trends become very important for us. So I don't know if that helps you, but that's how I see where we are at the Great Park.

Elad Hillman -- J.P. Morgan -- Analyst

Great. Thank you. I just wanted to clarify one thing there. I think you mentioned that cash buyers this time was 35%.

I think last time you mentioned they were 22%.

Emile Haddad -- Chairman and Chief Executive Officer

Yes, the last information I got from the builders, which was probably, I'm going to say about four, five weeks ago. We have 35% of the buyers are coming in at cash.

Elad Hillman -- J.P. Morgan -- Analyst

Great. Thank you.

Operator

And we'll move to our next question from Stephen Kim of Evercore ISI.

Stephen Kim -- Evercore ISI -- Analyst

Thanks very much, guys. Appreciate all the info. One of the things that we've been seeing recently, given the incredibly strong housing market is return to different kind of price discovery mechanisms, i.e., I'm talking like auctions; in some cases, moving to like sealed bids. And I know that's probably not what you're seeing at this juncture.

But my question relates to whether you have a policy and/or intend to ever enforce some kind of a policy to restrict price discovering behavior by the builders and what your thoughts are, basically, around that kind of an approach to managing your communities a little bit more finely.

Emile Haddad -- Chairman and Chief Executive Officer

Nice to hear from you, as always. The answer is no to a policy, but we have a long memory. And we have communities where builders want to make sure that they do not disrupt a program that is going to be a long-term program that's meant to be homeownership and not speculators. And as such, I mean, I think that we have a relationship with our builders that doesn't require a policy by us because it's them who are selling their homes that they understand very well that we spent a lot of time, a lot of money and a lot of focus to make sure that our communities are not communities of speculators.

I can share with you that one of the things I do to see whether we are seeing some trends of that or not, is I often enough, will take a drive through the community in the evening and see if the lights are on and there are cars in the driveway, or a good percentage of the homes are dark. That's probably, in my opinion, the best way to see if you have people who are investors or not. But we don't have a policy, Stephen, and neither should we. But we haven't seen it.

We are not seeing any of that. And so far, even when it was happening back in the days, in our mass supply communities, we didn't see it to the same level as stand-alone tracks we're seeing.

Stephen Kim -- Evercore ISI -- Analyst

Yeah. That's helpful. Yeah. And thanks for addressing the investor side of it as well.

One of the things that I've wondered about in this incredibly strong housing environment where builders are seeing an acceleration in the pace that they are able to sell at in addition to price, if what your thoughts are about pacing your way through your long-term community. Is it your view that relative to, let's say, 1.5 years ago, that it will be your desire to maybe move through -- I'm talking specifically, Valencia, by the way, move through the project in a more -- in a shortened time frame, the residential portion; or even a portion of the residential portion accelerate on an accelerated timeline? And if so, how is that actually -- what decisions are you making with respect to infrastructure and the timing of major cash outflows to fund that?

Emile Haddad -- Chairman and Chief Executive Officer

Now, you're asking about the secret sauce of the company. And let me tell you the answer, no kidding aside. We have to look at more than one constraint when we look at this, and more than one opportunity. First of all, in a massive plan community like this, especially in the beginning of it, infrastructure and the speed of providing infrastructure to open up new areas is really critical because you are putting a lot of infrastructure upfront that's going to help open up a lot of phases in the future as you are building a city, and you might not have the luxury to put that infrastructure in at the same speed as you would like to and open up more areas.

But the reality is what we tend to look at is avoiding any cannibalization by the builders. And therefore, we spend a lot of time, as you know, on making sure that we slide in as many products as possible with the segmentation. And when you look at today, 1,268 home sites in the first phase, being segmented into 18 products, you know, that's as far as you probably can go without starting to provide a product that's going to start cannibalizing another product, and therefore, destroying the long-term prospect of value creation out of the land. Our land is irreplaceable.

And the thing that I think will hurt us the most is if we focus so much on speed and end up discounting per acre, because that actually has a bigger impact. So you have to always optimize by finding the balance. Having said that, today, we feel very comfortable that between the floor of pricing that exists in Valencia and the ceiling of pricing that we are comfortable with, which typically is we -- hit 40% of median home price as a floor and about 170% as a ceiling, between the floor and seating, we were able to put -- to slide in 18 different product types with five builders and feel very comfortable that, that's going to actually be optimal. Now what will happen, though, is as the market moves and as the community establishes itself, we will start seeing an opportunity to push the ceiling a little bit more and get something more on top, which if you -- and you've been following us for a long time, we've done that with Toll Brothers, even going back to the government days are here, where we now start looking for somebody who's comfortable to go above and start looking at products above.

And we start looking at products on the lower side, that is more higher density, as well as potentially apartments, which is really where our focus right now is at Valencia, is to start looking at bringing apartments to the market and therefore, absorbing some of the land by having an apartment program. So that's really what we try to do. I would say where we are right now in Valencia, now in that we have 21,000 homes ahead of us, the most important thing is lay the foundation properly, and then the market will allow us to do what we need to do. But we're going at an optimal pace.

I wouldn't say at the highest pace or maximum, because the way we look at these things is optimization, not maximization.

Stephen Kim -- Evercore ISI -- Analyst

So -- that's very helpful. Thanks, Emile, for that. So as we look ahead over the next five years, let's say, take that kind of a horizon, in Valencia, would it be your expectation that there might be a point in time where there would need to be a net cash outflow, a meaningful net cash outflow, that would outstrip the pace of cash inflows from residential land sales in an attempt to sort of maintain -- or maintain a higher level of velocity, maybe than you initially envisioned, such that you would need to sort of have a bulge in the infrastructure development and the costs associated with that so that you would be generating a significantly negative cash flow in sometime within the next five years?

Emile Haddad -- Chairman and Chief Executive Officer

So I would say that a lot of the infrastructure that is global in nature, we call it, which is the infrastructure that is meant to open up other areas has been going i since we started development in October of 2018, I think, is when we started -- or '17. And so a lot of it is already in. And that's why we want to have the investors meeting in person so all of you can see with your eyes the amount of development that's been taking place. What we have -- what we expect to see in Valencia is not really anything different than what we have seen at the Great Park because that is the evolution of our master plan communities.

You put a lot of money in the ground, and in the Great Park, we started development in 2013. We put a lot of money in the ground, and then we turned the corner to a positive cash flow. And over the last a few years since, I think, 2017 or '16, we have made distributions of $1 billion. That's after all the money that we invested in the project, and you've seen some of the amenities we built.

So this -- the Great Park today is a big cash flow positive contributor, and a lot of distributions are being made. And as Erik highlighted, we'll be making some major contributions to even retire a $470-some million legacy distribution that we had since 2017. So Valencia is going to follow the same way. For the last two years or three years, we've been spending a lot of money.

We started having sales. We started now generating revenue. And we expect that over the coming couple of years, we will find that balance. And then all of a sudden, you're going to start seeing a major positive cash flow.

That's what we expect to happen, assuming the market stays good, and we don't have a correction in the market. Our expectation is that Valencia will become a very big contributor to positive cash flow for the company. I'm going to say sometime in the 2023, '24 period, we will start turning that corner.

Stephen Kim -- Evercore ISI -- Analyst

That's great. Yeah. I'm really looking forward to seeing some of these projects again. So I'm glad you guys decided to do it in person.

So thanks a lot, guys.

Emile Haddad -- Chairman and Chief Executive Officer

Thank you, Steve.

Operator

And we'll go to our next question from Alan Ratner of Zelman and Associates.

Alan Ratner -- Zelmann & Associates -- Analyst

Hey, guys. Good afternoon, Thanks for taking my question. Emile, first question. Last quarter, you indicated that you were starting to have some conversations with the Board about crafting a strategy for potential build rent product within your communities.

That segment of the market seems to be all the rage these days. And I'm curious if you have any update there, whether it's Valencia, Great Park, any of the projects in terms of where that might go?

Emile Haddad -- Chairman and Chief Executive Officer

Well, we haven't really -- I don't have an update because we haven't had a Board meeting, probably since we talked -- to go into that discussion. However, having said that, we are -- as I said, we are right now in the process of evaluating some parcels at the -- in Valencia to build apartments. And that's our starting point. You understand what happens in Valencia is most of the people who are buyers right now will gravitate to more of the lower density product and I think that it will be a mistake to introduce a for-rent program.

Yes, that is not your typical apartment. So the answer to your question is, yes, we shared with our board, and we have the full intention to start testing the apartment market up there. I don't think that there's anything new if you're thinking about the single-family detached for rent. And I'm going to find it difficult for us to really find that away because our homes are not -- our homes are expensive.

And when you start talking about, the Great Park, for instance, with a median home price of 1.2 million, it's typically not a home that somebody who wants to rent is looking at. And even in Valencia, when you're looking at something that's going to start pushing $700,000 per home, it might not be. But look, you know it's well enough to know that we explore everything. We look at everything.

But I can tell you that I've gotten excited about a for-rent program except for apartments.

Alan Ratner -- Zelmann & Associates -- Analyst

Got it. I appreciate your thoughts on that. Second question. I think you did this maybe in a small scale on your Valencia lot sales, but when you look at what the homebuilders are doing on lot acquisition, clearly, there's a lot of interest in keeping as much off-balance sheet as long as possible.

And I know you're delivering effectively finished lots to builders, so it's not like they're necessarily sitting on the balance sheet for a while. But I think you did auction some lots to builders in the last round. I'm curious, as you embark on the next round in the Great Park, whether there's any conversations about doing that in a greater scale there, and if kind of land banking in general could potentially be a growth opportunity for the company?

Emile Haddad -- Chairman and Chief Executive Officer

Yes. As we -- I think we shared last call that we have already put in place a land bank, and we have builders who have taken advantage of our land bank at Valencia. So we have a land bank in Valencia that's dedicated to land bank. We're a 10% participant in it.

90% of that is coming from a capital provider. And it's a program that was put together not because necessarily of the return on the 10% investment we have, but it's another way to accommodate our builders as we start looking for where the pressure points are. And as you said, we delivered finished homesites. We pretty much give the product.

We put all the amenities ahead of time. And because of my previous life experience, we always anticipate that there's going to be a point in the cycle when builders start feeling pressure on the balance sheet, especially with expensive land like our land. So we put together the land bank, and it's up and running, and builders have taken advantage of it. And we are going to have a same exact program at the Great Park, and we already know of builders who are taking advantage of the land bank to put the land bank.

And it's your typical land bank, the builders -- the land bank buys the land from us as a land company. The land bank holds the land and have a contract with the builder, where the builder puts up a certain amount of deposit and has a commitment to take down a certain number of home sites periodically. And the land bank charges somewhere between typically 9%, 9.5% interest on that. And that's a program that's worked very well for us in Valencia, and it will be exactly the same one here as a Great Park.

Alan Ratner -- Zelmann & Associates -- Analyst

Great. Thank you for that detail. And final question, I apologize if I missed this, but I believe you had estimated the distribution from Great Park that you anticipated this year to be roughly $100 million. I just want to make sure that, that's still the current estimate.

Emile Haddad -- Chairman and Chief Executive Officer

Yes. And if you recall, I said that, and then I said -- Erik, is giving me the evil eye, just not because of anything, it's just because -- I said that because all kind of -- I mean, it will be what will be valuable to a certain extent, nothing major, will be how much do we participate in a fee build, like we have done with the new home company, where we decided to do a fee build. And as I said, it's going really good. And we are looking right now as a repeat of that in the next takedown or next sales at the Great Park.

So if we decide to set aside some of the distribution or some of the capital within the venture to -- because that's the deal that was done within the venture, to go ahead and take advantage of the fee build opportunity or the land bank. Those are two things that might keep the cash within the venture to reinvest it, and that's why Erik was looking at me that way. But the fact that is, I think that the $100 million is still a good number, and I think you should look at it as a good number.

Alan Ratner -- Zelmann & Associates -- Analyst

Perfect. Thanks a lot. Good luck, guys.

Emile Haddad -- Chairman and Chief Executive Officer

Thank you.

Operator

And we'll go to our next question from Ken Hansen of Stifel.

Ken Hansen -- Stifel Financial Corp. -- Analyst

Good afternoon, gentlemen. Once again, for full disclosure, I'm a CFA, but I'm representing myself as a shareholder, not the Stifel research department. I think it's a great idea to have that September 15th meeting in-person because I'm not sure that you get credit from the investment community -- investor community for what you've built out there. I know homeowners are giving you credit because they're early buying the product that's there.

But I don't think, unless you're on-site and walk the trails and interact with the ball fields and the hockey rink, and those sorts of things that you really can appreciate how high-quality of a product you develop and design. Add that experience on-site with the -- a little bit of help with the net asset value calculation for the rest of that product plus the rest of your development, I think you'll be at a turning point for investors' realization that this is a fantastic opportunity. One thing I'll mention, because it is about the details and the product, and I'm on your Great Park site at least once a week, and I visited there last week to play beach volleyball. So one comment.

If you go there, and Emile, you were saying you drive around occasionally, you might drive around and see that the beach volleyball courts, you have tables nicely positioned and then chairs. You'll notice that all the chairs are on the ground. And the reason is, it's not because the wind moves them over because they're substantial chairs, or that some juveniles knock them over; it's because in the design of that product of those volleyball courts, three sides in the volleyball court has land that descends from the surface of the court. So people are chasing balls all over the place.

And so what they do is they put these -- they take the chairs you have made available nicely, and they use them as a barricade, so they don't have to go a quarter mile to get the balls out of the parking lots. So just a small thing, and I know you're about small things. And when people come to take the tour, I don't want them to think that there's something going on that's not going on. So a simple -- some solution that your people can come up with that keeps the volleyball somewhat contained would prevent us from having to chase those around and go into traffic and such.

So that's my only request. Outside of that, the amenities are spectacular. Irvine is. And I don't know that people know this about Irvine, but it is consistently, annually, one of the safest cities of its size in the United States.

The schools are world-class. You definitely have a diamond there that you're polishing, and I hope that the rest of the investment community can see that when they show up on September 15.

Emile Haddad -- Chairman and Chief Executive Officer

First of all, Ken, it's nice to hear from you again, and I truly appreciate your comments. I hope that after September, as many people as they go, they will all have the same excitement that you have about what we build over there and what we do. And yes, you are 100% right. I am about the small details, because at the end of the day, I'm a big believer that if you pay attention to the details, people will know how much heart you have in whatever product you build.

And just to tell you, that I don't only drive around, but I walk around. Probably about two years ago, I was walking around with a suit and a tie on a warm day, and I think I might have been walking somebody to probably show them what we're working on. And I had to chase one of these balls off the sand volleyball and I went down running after it, which I realized I am too old to try to sprint. But kidding aside, I mean, I was talking to some of the players over there.

And one of the issues that they raised was one, the descending slope and the balls running and they're chasing the ball. And two, the fact that they thought that there could be a need for more sand volleyball courts. As such, and as you know, we have built the facility, but we have dedicated and given it to the city, so we don't have the operational right to do anything over there. But I can tell you that we are working with the city now on plans to add, I think, about three additional sand courts and deal with the issue you just highlighted in a way that doesn't take chairs and block the balls.

So COVID has delayed some of the thinking, but I can assure you that even as small as the detail you just highlighted, it has my personal attention.

Ken Hansen -- Stifel Financial Corp. -- Analyst

Fantastic. And I think the rest of the project shows that. So -- and I think even looking at the major trees that you saved and salvaged from the old base and replanted, is just a reflection of that attention to detail. So I look forward to that September.

Emile Haddad -- Chairman and Chief Executive Officer

We look forward to meeting you in person as well.

Ken Hansen -- Stifel Financial Corp. -- Analyst

Pleasure.

Emile Haddad -- Chairman and Chief Executive Officer

Thank you very much.

Operator

And with no other questions in the queue at this time, I would now like to turn the call back to Mr. Emile Haddad for any additional or closing remarks.

Emile Haddad -- Chairman and Chief Executive Officer

Well, again, thank you, all, for sharing your time with us today. I am glad that we are starting to look at the light at the end of the COVID tunnel, and hope that next time we talk, the situation would be much more stabilized. We really look forward to seeing you all in September. And as Ken said, I think that it will be worth your while to come and see these things in-person and be able to get to know this company a little bit more than just financial reporting.

And lastly, as I look at the screen and see the amount of associates who have taken the time to dial in and listen to us tell the world about their effort, I want to thank you all for everything you do every day and for being on the call today. Thank you very much. Until next time.

Operator

[Operator signoff]

Duration: 55 minutes

Call participants:

Emile Haddad -- Chairman and Chief Executive Officer

Erik Higgins -- Five Point Holdings LLC -- Analyst

Elad Hillman -- J.P. Morgan -- Analyst

Stephen Kim -- Evercore ISI -- Analyst

Alan Ratner -- Zelmann & Associates -- Analyst

Ken Hansen -- Stifel Financial Corp. -- Analyst

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