Five Point Holdings (FPH) risk factors, FY2024 10-K

Risks Related to Our Business and Industry

1. 01There are significant risks associated with our development and construction projects that may prevent completion on budget and on schedule
2. 02We will have to make significant investments at our properties before we realize significant revenues
3. 03Our existing communities are all located in California, which makes us susceptible to risks in that state
4. 04many other states. Any adverse change in the economic, political, competitive or regulatory climate in California, or the counties and cities where our properties are located, could adversely affect our real estate development activities and have a negative impact on our financial condition and results of operations
5. 05We are highly dependent on homebuilders
6. 06Title to our property may be impaired by title defects
7. 07Inflation may adversely affect us by increasing costs that we may not be able to recover
8. 08Fluctuations in real estate values and changes in our development strategies may require us to write down (or impair) the carrying value of our real estate assets or real estate investments
9. 09Our business could be materially and adversely affected by an epidemic or pandemic, or similar public threat, or fear of such an event, and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it
10. 10Significant competition could have an adverse effect on our business
11. 11Our property taxes could increase due to rate increases or reassessments or the imposition of new taxes or assessments, which may adversely impact our financial condition and results of operations

Risks Related to Laws and Regulations

1. 12Zoning and land use laws and regulations may increase our expenses, limit the number of homes or commercial square footage that can be built or delay completion of our projects and adversely affect our financial condition and results of operations
2. 13We incur significant costs, and may be subject to delays, in obtaining entitlements, permits and approvals before we can begin development or construction of our projects and begin to recover our costs
3. 14Our projects are subject to environmental planning and protection laws and regulations that require us to obtain permits and approvals that may be delayed, withheld or challenged by third parties in legal proceedings
4. 15As an owner and operator of real property, we could incur liability for environmental contamination issues
5. 16Increasing scrutiny and evolving expectations from investors, regulators, and other stakeholders regarding our environmental, social and governance practices and reporting may impose additional costs on us or expose us to new or additional risks
6. 17We may from time to time be subject to litigation, which could have a material adverse effect on our financial condition and results of operations
7. 18We may be subject to increased costs of insurance or limitations on coverage

Risks Related to Our Organization and Structure

1. 19In order to be successful, we must attract, engage, retain and integrate key personnel and have adequate succession plans in place, and failure to do so could have an adverse effect on our business
2. 20As a holding company, we are entirely dependent upon the operations of the operating company and its ability to make distributions to provide cash flow to us or to pay taxes and other expenses
3. 21Lennar is our largest equity owner and will be engaging in transactions with us and may compete with us
4. 22Lennar and GFFP and their respective affiliates control approximately 56% of the voting power of our outstanding common shares and, as a result, are able to exercise significant influence over all matters requiring shareholder approval
5. 23We will be required to pay certain investors for certain expected tax benefits
6. 24investors or their successors equal to 85% of the amount of cash savings, if any, in income tax we realize as a result of the structure of the formation transactions
7. 25In certain circumstances, payments under the tax receivable agreement could exceed the actual tax benefits we realize
8. 26We will not be able to recover payments made under the tax receivable agreement if the related tax benefits are subsequently disallowed
9. 27Certain provisions in the operating company’s limited partnership agreement may delay or prevent acquisitions of us
10. 28Anti-takeover provisions in our operating agreement or provisions of Delaware law could prevent or delay a change in control, even if a change of control would benefit our shareholders

Risks Related to Financing and Indebtedness

1. 29We may need additional capital to execute our development plans, and we may be unable to raise additional capital on favorable terms
2. 30Our substantial indebtedness may have a material adverse effect on our business, our financial condition and results of operations and our ability to secure additional financing in the future
3. 31We may increase leverage in executing our development plan, which could further exacerbate the risks associated with our substantial indebtedness
4. 32We do not expect to be able to generate sufficient cash flow from operations to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful
5. 33Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations

Risks Related to Ownership of Our Class A Common Shares

1. 34An active trading market for our Class A common shares may not be sustained and the price of our Class A common shares may be volatile
2. 35We may issue additional Class A common shares in the future in lieu of incurring indebtedness, which may dilute existing shareholders, or we may issue securities that have rights and privileges that are more favorable than the rights and privileges accorded to holders of our Class A common shares
3. 36Substantial amounts of our Class A common shares could be sold in the near future, which could depress our share price and result in dilution of your shares
4. 37We do not intend to pay distributions on our Class A common shares for the foreseeable future
5. 38Cyber-attacks or acts of cyber-terrorism could disrupt our business operations and information technology systems or result in the loss or exposure of confidential or sensitive employee or company information
6. 39Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price