Five Point - Q3 2023
October 19, 2023
Transcript
Operator (participant)
Greetings, and welcome to the FivePoint Holdings, LLC Q3 2023 conference call. As a reminder, this call is being recorded. Today's conference may include forward-looking statements regarding FivePoint's business, financial condition, operations, cash flow, strategy, and perspectives. Forward-looking statements represent FivePoint'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 FivePoint'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 FivePoint's SEC filings, including those in the Risk Factors section of FivePoint's most recent annual report on Form 10-K, filed with the SEC.
Please note that FivePoint assumes no obligation to update any forward-looking statements. Now, I'd like to turn the call over to Dan Hedigan, Chief Executive Officer.
Dan Hedigan (President and CEO)
Thank you. Good afternoon, and thank you for joining our call. I have with me today Kim Tobler, our Chief Financial Officer, Mike Alvarado, our Chief Legal Officer, and Leo Kij, our former Interim Chief Financial Officer, who is now our Senior Vice President of Finance and Reporting. Stuart Miller, our Executive Chairman, is joining us remotely. Before we get into the quarterly update, I'd like to mention some positive news on the recent management changes. Since our last call, Kim Tobler was promoted from his position as Vice President of Treasury and Tax to his new role as Chief Financial Officer. Kim brings a great deal of valuable background and experience to this position and is well-suited to help us navigate the current economic environment and execute on our business priorities. Congratulations, Kim.
We are all very appreciative of the great job Leo Kij did as our Interim CFO, and I personally very much appreciated his assistance as we focused our attention on right-sizing our SG&A to position us to achieve our long-term goals. Thank you, Leo. Now let me turn to our Q3 results and update you on the progress of the company through the Q3. I'll also update you on our team's focus during the quarter and the steps we are taking to implement our strategic priorities for the balance of the year. Next, Kim will give an overview of the company's financial performance and condition. We will then open the line for questions to our management team.
To begin with, I'd like to congratulate our team for remaining focused this quarter on both controlling our business and executing on our three main priorities: generating positive cash flow and earnings, establishing appropriate levels of SG&A, and managing and limiting our capital spend, matching those expenditures to near-term revenue events. We ended the quarter with consolidated net income of $14.2 million and added $25.1 million to our cash balance. Our balance sheet at the end of the Q3 reflects $218.3 million of cash on hand, with $0 drawn on our $125 million revolver. We have total liquidity of $343.6 million, and we have no principal debt repayment obligations on our Senior Notes for over two years.
Reflecting our considerable progress in cash and revenue generation, I'm pleased to report on the extension of our revolving credit facility with our bank group, which extends its maturity until April 2026. This allows us to focus our attention on our Senior Notes that are due in November 2025. While our Senior Notes don't mature for another two years, with our growing profitability and cash position, we are focused on repositioning and extending this debt, and we are confident that we'll be able to provide for the long-term capital needs of the company as we manage the upcoming maturity of our notes. Our SG&A and capital spend continue to be in line with our recent trends. Kim will provide additional detail on these numbers during his remarks.
The macroeconomic environment for most of this year has been constructive to homebuilding, but there are challenges that we and our guest builders are facing. While we have entered a phase of more major interest rate adjustments by the Fed, homebuyers are feeling the effects of higher interest rates, and the market appears to expect rates to stay at elevated levels for longer than originally anticipated. notwithstanding these headwinds, we still see demand for new homes up as homebuyers are dealing with the reality of higher interest rates. Homebuilders have also assisted in stabilizing demand by offering mortgage products with reduced interest rates that have allowed new home sales to continue even as the resale market slows. Additionally, as you may recall from my comments last quarter, as a consequence of increased interest rates, resale home inventory remains very low, helping to support the new home market.
Overall affordability continues to be a challenge in California as housing continues to be in short supply. This supply constraint has allowed homebuilders in our communities to continue to sell homes at consistent price levels, albeit at a slightly reduced pace, due to the combination of elevated interest rates and limited builder inventory in our communities. On the commercial land side of our business, we are seeing interest in our unique and limited commercial land offerings. While capital markets have slowed for speculative commercial development in our communities, we're still seeing interest from the user market, as users have limited options if they want to own and control their own facilities on a long-term basis. We expect this user interest will continue to support demand in this preferred asset class, notwithstanding adjustments in the capital markets.
Finally, I would be remiss if I did not note the emerging geopolitical risks that could impact the economy and our industry, which we will continue to monitor. Let me pivot now and provide you with some updates on our communities, starting first with the Great Park Neighborhoods. During the Q3, builders in our Great Park community sold 113 homes. Solis Park is currently our only actively selling neighborhood and is nearing its maturity with approximately 100 homes remaining to sell. Sales pace during the quarter was impacted by a combination of factors, including limited releases and product offerings, rising home prices, and climbing interest rates. Despite these challenges, we're encouraged by the sustained interest in traffic in the community, affirming the ongoing appeal of our homes to prospective buyers.
During the quarter, Solis averaged a sales pace of 0.9 homes per week, and four collections sold out. Our next major neighborhood, Luna Park, will debut with 798 homes across 13 collections, and is projected to open in phases from February through December next year. There remains strong homebuilder interest in acquiring home sites at Great Park due to the continuing home sales pace. To support underlying land prices, we are carefully monitoring builder inventory by product segment, which allows us to work with our builder partners to identify product offerings that will optimize our land sale revenues. The two land sale contracts we entered into during the Q3 were executed using builder-selected product. On top of the ongoing residential opportunities at Great Park, we continue to market and sell our commercial land.
While there has been a reduction in speculative building in relevant Southern California markets that has slowed the pace of offers and pricing being offered for our land, our location in the heart of Orange County has supported continued interest in our commercial land. We offer one of the few opportunities on our market for large parcels and title land with flexible zoning that allows a multitude of uses. As we mentioned last quarter, we're still on track to close approximately 40 acres of commercial land slated for industrial and distribution uses, either by the end of this year or early next year. In Valencia, new home sales totaled 75 homes for the quarter and overall sales pace of 0.7 homes per week.
As of the end of September, 1,156 homes from our initial offering of 1,268 homes have been sold, with only 112 homes remaining. Our newest neighborhood has opened with two detached condo products and has experienced strong interest, averaging a sales pace of 0.8 homes per week. Each new phase release has seen gradual increases in price, reflecting strong demand for our Valencia community. Looking ahead, we anticipate the remaining five neighborhoods to open throughout the rest of this year and into 2024. These offerings will augment our current lineup and result in increased sales. Builders remain engaged with us in Valencia, and we closed two land sales in the Q3 for a total of $60.7 million.
Additionally, we anticipate closing on a sale of a number of finished home sites by year-end. As we move forward with monetizing our Valencia land holdings, we feel they are ideally positioned for expanding on our strategy of capital management, both by tying our capital expenditures to near-term revenue events and by structuring land sales with our home building partners to shift certain land improvement costs to the builders, which helps reduce our capital spending. We also continue to market a prime 35 acre mixed-use commercial site in the community. We expect to have more to report on that next year.
In San Francisco, we're happy to report that we completed an important step necessary to extend the existing tax increment financing program when the state of California passed legislation that, among other things, allowed for the extension of the timelines to collect tax increment generated by the project and issue bonds secured by this tax increment. This is an important first step in extending the public financing program that remains integral to the development of both Candlestick and the Shipyard. We're also progressing in our efforts to establish Candlestick as a standalone project, separate from, but complementary to, the ultimate development of the Shipyard site, which will be developed once the Navy has completed its remediation activities. Our rebalancing efforts include working with city and county agencies to adjust the current development entitlements between the two areas.
With the state's legislation benefiting the public financing program, we believe that we are building momentum to move forward with the standalone development of Candlestick as the first phase of this larger mixed-use community located on irreplaceable land along the San Francisco Bay. In closing, while there is uncertainty in this market, we have positive momentum and remain optimistic about our future. Land development is a long game, and we are just at the beginning of the game at some of our communities. They're not making any more land, and there will never be an abundance of untitled land in California. Our efforts today are ensuring we are well positioned for that long game, while recognizing the importance of focusing on creating and maintaining shareholder value.
Now, let me turn it over to Kim, who will report on our financial results and provide some limited guidance for the Q4 and year-end.
Kim Tobler (CFO, Treasurer and VP)
Thanks, Dan. A summary of our financial results was included in the earnings release issued earlier today. As Dan mentioned, we reported consolidated net income of $14.2 million for the quarter. We recognized $65.9 million in revenue, which was primarily generated by the sale of 25.8 acres of land, entitled for 146 home sites for cash proceeds of $60.7 million before our traditional profit participation. Two separate home builders purchased those parcels. At the Valencia project, we recognized a 34.2% gross margin on these sales. In addition, we recognized $4.5 million in management services revenue and other revenue of $700,000.
Selling general and administrative expenses were $11.9 million, which is slightly lower than our projected average quarterly range of $12 million-13 million. This reflects our efforts to hold the line on administrative costs. We expect the Q4 SG&A to be within the projected range. The cost of management services was $2.4 million, which includes $600,000 for intangible asset amortization expense at our Great Park segment. We also earned $2.4 million in interest income on our cash and cash equivalents for the quarter. Equity and earnings from our unconsolidated entities for the quarter was a loss of $600,000. This includes small amounts of income or loss from the Great Park Venture, the Gateway Venture, and our Valencia Land Bank Venture.
Although the Great Park Venture didn't have any land sales during the quarter, it did recognize profit participation revenue, which, together with interest income, offset most of its operating expenses. Before I talk about our inventory changes, I'd like to take a moment to review the role of CFDs and TIF play in our business. Since our last call, we've received numerous questions regarding our CFD and TIF reimbursements, so I thought it would be helpful to provide some additional information on these funding sources. In California, Community Facilities Districts, also known as CFDs or Mello-Roos, provide public financing through the sale of bonds for the purpose of financing public improvements and services. These improvements may include streets, water, sewage and drainage, infrastructure, parks, and fire stations, to name a few things, to newly developing areas. We use this financing to construct such improvements within all of our communities.
In addition to CFD financing, in San Francisco, the Candlestick and Shipyard projects also benefit from Tax Increment Financing, also known as TIF. TIF is another mechanism used to fund and finance public facilities and other improvements, often in infill locations, where upfront investments are needed to enable real estate redevelopment. TIF captures the incremental growth in tax revenues, in our case, property taxes, above and beyond what taxing entities currently receive within a designated geographic area. With that background, I'd like to emphasize that the Great Park is a mature community, and there have been multiple bond issuances due to the large number of existing homes in the community. Therefore, when we make expenditures for qualifying improvements, we can receive reimbursements within a reasonably short period of time.
Valencia, on the other hand, is a newer community with not as many residents as of yet, so it could take longer for the CFD to have adequate bond proceeds to be in a position to immediately reimburse qualifying costs. Likewise, the San Francisco projects are in the early stages of the development, where we haven't started receiving CFD reimbursements yet and are in the very early stages of participating in TIF reimbursements. I hope you find this useful in understanding the role of public financing to our business. Now I'd like to talk about our changes in inventory. During the quarter, the Great Park Venture inventory increased by $17 million before a reduction for CFD and other reimbursements received of $17.4 million, resulting in a net decrease in inventory of $400,000.
It is unusual for CFD reimbursements to exceed our capital expenditures, and you shouldn't expect that going forward on a reoccurring quarterly basis. At the Valencia segment, for the quarter, our inventory increased by $26 million before a reduction for cost of sales of $13.9 million, resulting in a net reduction of $13.9 million. Of the increase, $2.5 million was attributable to capitalized interest, and approximately $4 million was attributable to fees, which are paid when homes are built. We had no CFD reimbursements this quarter in Valencia. During the quarter, our San Francisco segment's inventory increased by $11.7 million. The majority of this increase was attributable to capitalized interest of $7.6 million. We also received a TIF reimbursement of $570,000. Now I'd like to emphasize our liquidity.
As Dan mentioned, our total liquidity was $343.3 million at quarter end and was comprised of $218.3 million of cash and cash equivalents and $125 million of available borrowing capacity on a revolving credit facility. No borrowings or letters of credit were outstanding against the revolver as of September 30th. I want to take a moment to thank our banks, the banks in our revolving credit facility, for working with us to extend our facility for two years in these challenging credit markets.
They have shown their commitment to FivePoint and our ability to deliver housing in California's supply-constrained market. Our debt to total capitalization ratio is stable and slightly down at 24.5%, and our net debt to capitalization ratio, after taking into account our cash balance, was 17.5%. For more information regarding our four reporting segments, Valencia, San Francisco, Great Park, and Commercial, I recommend that you review our earnings release or the 10-Q when it's filed. As Dan mentioned, I will now provide an update on our year-end guidance. On our last call, we stated that we expected the second half of the year to produce an additional $50 million-70 million of net income, and that we expected to end the year with a cash balance of between $250 million-300 million.
We currently have expected sales in our pipeline in both Valencia and in the Great Park that continue to support that expectation. With that said, it is always possible that one or more sales that are expected to close in the Q4 drift into the beginning of the year. With that, I'll turn it over to the operator for questions.
Operator (participant)
Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Arun Seshadri with BNP. Please proceed with your question.
Arun Seshadri (Research Analyst)
Yes. Hi, thank you. Thank you for taking my questions and a good job in a difficult environment. Just wanted to, you know, first talk a little bit about Great Park. I know, I think the last time you talked about interest in both the residential as well as the commercial land marketing. I think you talked about 40 acres as being the expectation. Just wanted to see if there's any update there and, you know, maybe start with that.
Dan Hedigan (President and CEO)
Thank you. The 40 acres is still progressing. We still anticipate it to be closed at the end of this year. It does take some actions by the city, which means it could slip a little bit, but right now we're still on track with that. We still also have another 100 acres of commercial land that we are, you know, only marketing on a, you know, kind of a lot-by-lot basis. It's not all on the market, but we're actually looking at, as we close on this last 40 acres, of moving another section of land into the market.
Arun Seshadri (Research Analyst)
Got it. Thank you, Dan. Can you also talk a little bit about? I think in your prepared comments, you'd mentioned the headwinds created by the interest rate environment. Can you talk a little bit broadly about your expectations in terms of maybe modest slippage in the sort of year-end cash guidance? You know, do you still sort of expect that maybe to be, you know, instead of end of the year, maybe like early next year? Is that sort of the thought process, and are there any additional sort of details you can provide in terms of what, you know, where exactly you're seeing the impact of high interest rates?
Dan Hedigan (President and CEO)
Well, first, on the year-end guidance, we actually are on track, consistent with that guidance. At this point, we're feeling very good about that based on various transactions that are in escrow or very close to being finalized. On the issue of interest rates, that's a very, kind of, very interesting question. You know, home buyers kind of went through a shock of very quickly rising rates and, you know, adjusted to what is the new normal, and they have been buying homes at our communities. Now, in many instances, the home builders are buying down interest rates to support those sales, and we think builders will keep doing that. We're in a market now where rates are ticking back up again, which will drive towards another new normal.
We believe demand will find its way over these increases. You know, the thing we're facing in California is just a terrible shortage of housing, and with interest rates, the resale market is, you know, very limited. Affordability will always be an issue, so I don't want to make light of that, but to the extent a buyer can afford a new home, we feel there is going to be demand.
Arun Seshadri (Research Analyst)
Got it. Thank you. One last question, and then maybe this is for Kim, which, by the way, Kim, congratulations on your elevation. Just wanted to, you know, maybe talk a little bit about the revolver extension. Great job in getting that done. Just a sense of any terms around the revolver extension and sort of any details you could provide around the terms and whether there's any conditionality on the bond maturity? That's all for me. Thanks.
Kim Tobler (CFO, Treasurer and VP)
Yeah. As it relates to the revolver, we'll be publishing an 8-K, and you'll be able to read the documents and see there. Largely, it was rolling forward the existing terms, and really, the only thing was they raised the cost. We're gonna have to pay more when we draw on the revolver, but beyond that, it's stayed pretty close to what we've done. We lost what's known as a term out.
Dan Hedigan (President and CEO)
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Arun Seshadri (Research Analyst)
Thank you very much
Operator (participant)
Our next question comes from the line of Alan Ratner with Zelman & Associates. Please proceed with your question.
Alan Ratner (Managing Director)
Hey, guys. Good afternoon. Thanks for all the detail. Congrats on the progress here. First question on the Valencia sale. You know, it looks like, I guess, the composition of this particular lot sale was quite different than your prior ones. You know, much lower density, much higher price per lot. You know, I'm just curious if you can give a little bit more, you know, detail in terms of how you're thinking about segmentation of product and lot sales in Valencia, you know, in the intermediate term. Is this a concerted effort to kind of mix in, you know, more move-up product or, you know, lower density product?
Any kind of guidance you can give on the expected Q4 lot sale, if it's gonna look similar or different, would be helpful.
Dan Hedigan (President and CEO)
Thanks, Alan. Valencia actually has a broad level of segmentation, and in its entitlement, it actually has zones that are identified for lower density and higher density. What you're seeing in the two sales that closed this quarter, they're in the area that was by design set up for lower density. We are seeing good demand for that move-up buyer in Valencia. You know, we're talking very traditional homes with, you know, driveways and backyards, and we're definitely seeing buyer demand there. You know, as I think I've commented in the past, I'm really trying to work with the builders to be sure our product is really responding to the market, but some of our product is, you know, kind of preset just on where we're at.
Both of those were previously identified, and they were just in a lower density area. As to the Q4 land sales, they're actually going to be in different sections of the Valencia project, and so there's gonna have a mix of product. There's gonna be some that is, you know, our traditional detached condos, and there'll also be a small portion that will be attached, but it'll be more diverse than what you're seeing that closed this quarter.
Alan Ratner (Managing Director)
Understood. That's helpful color, Dan. Second, I know, you know, the timeline is still uncertain with San Francisco, and you haven't given a target there, but my question is, you know, when that project does get off the ground, is there any way you can kind of help us think through what the cash flow impact would look like initially? I would imagine, you know, you would have to put up some development dollars before the first phase of land would be ready for sale. You know, any way to think about what that initial outlay might look like, how long that might be before revenues begin to recognize the...? You know, just kind of thinking through the forward look there.
Dan Hedigan (President and CEO)
Well, when we think about San Francisco, we really do think of ourselves as the horizontal developer. You know, there will always be the need for vertical development in that site, but we are the horizontal developer. From a standpoint of revenue events on the land side, they will be pretty much tied to completion of a deliverable site. As part of the conversations we're having right now with the City and County of San Francisco, you know, we are looking at that first phase and how do you access that first phase.
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Alan Ratner (Managing Director)
Just to follow up on that, Dan, because yeah, I think I understood that. Like, is that kind of like a 12-month, you know, horizontal development lead time from shoveling ground to having a, you know, parcel ready to sell and begin to recognize revenue on? Is it longer, shorter? What, any frame of reference there?
Dan Hedigan (President and CEO)
Well, from the standpoint of getting to the first phase, you know. All things always are, you know, driven by having the approvals from the city to move forward. What I think I would say on that, I mean, to get to the first phase is not going to be extraordinarily long. I don't want to try to put a timeframe on it today, simply because there's so many variables that we'd be dealing with. The initial phase, once we are positioned and, you know, kind of have the rebalancing done, is actually not that hard to get to, especially in Candlestick.
Alan Ratner (Managing Director)
Got it. Okay. That's helpful. Thanks a lot, guys. Appreciate it.
Operator (participant)
As a reminder, it is star one to ask your question. Our next question comes from the line of Myron Kaplan, a private investor. Please proceed with your question.
Myron Kaplan (Shareholder)
Yeah, hi. Thanks for taking my questions. First of all, I'd like to commend you for timely and shipshape reporting. Congratulations, Kim, for your elevation.
Dan Hedigan (President and CEO)
Thanks, Myron. It's good to hear from you.
Myron Kaplan (Shareholder)
Yeah. I wanted to ask, what's the rate of the Senior Notes that are due in 2025, the coupon?
Dan Hedigan (President and CEO)
7078.
Myron Kaplan (Shareholder)
What's the principal amount?
Dan Hedigan (President and CEO)
$625 million.
Myron Kaplan (Shareholder)
Uh-huh. That's really the elephant in the room, so to speak.
Dan Hedigan (President and CEO)
It is the elephant I look at every day when I get in, when I wake up.
Myron Kaplan (Shareholder)
Yeah. Right on. I just wanted to ask just a informational question. I didn't understand. You were talking about a parcel in the Great Park of 40 acres of commercial land?
Dan Hedigan (President and CEO)
Yes. Those are actually two pieces. That's a combination of two pieces of property that are actually in escrow today. Those would be closing, we anticipate by the end of the year.
Myron Kaplan (Shareholder)
I see. Those are basically under contract?
Dan Hedigan (President and CEO)
Correct.
Myron Kaplan (Shareholder)
Yeah, also just an informational question. At the Great Park, you have builder sales of 113 homes, so those revenues are substantial but unconsolidated, yes?
Dan Hedigan (President and CEO)
That's correct. Those are the sales that the builders themselves are reporting. They bought the land, and they're reporting those sales on their-
Myron Kaplan (Shareholder)
Oh, I see.
Dan Hedigan (President and CEO)
-financials.
Myron Kaplan (Shareholder)
I see. So you previously sold them the land?
Dan Hedigan (President and CEO)
Yeah, we give that guidance, Myron, so that people can understand the pace of sales of homes, because that indicates when they'll need more land in the future.
Myron Kaplan (Shareholder)
Right. You said you're releasing some more tranches so that you'll be able to book more revenue. Well, I guess that's pretty much what I. Thank you for taking the questions. It seems like you're doing pretty well in a very tough environment.
Dan Hedigan (President and CEO)
Myron, thank you.
Operator (participant)
Our next question comes from the line of Ben Fader-Rattner with Space Summit Capital. Please proceed with your question.
Ben Fader-Rattner (Managing Member)
Hi. Just going back to the Valencia sale, unless I'm doing the math wrong, it looks like it was over $400,000 per home site. I think in the past, you've talked about an average more in the $200s. Was this sale above expectations? I wasn't clear from the answer to the previous questioner, you know, if this was more of an expected outlier or there's some other read-through on this sale.
Dan Hedigan (President and CEO)
Yeah. Well, thanks. You know, it is not an outlier. It really is, you know, most of the homes in our initial phase. We have two phases we talk about. The kind of initial first phase is about 1,200 homes, and then we have another phase which it has about 800 homes.
Ben Fader-Rattner (Managing Member)
Mm-hmm.
Dan Hedigan (President and CEO)
So, you know, as part of that overall land plan that was put in place, there are always larger lots in a certain area that actually, by zoning, are supposed to be lower density. They were zoned to be lower density than the way they've been produced. You know, all we're really seeing is that we're actually finally getting to them. You know, the infrastructure's kind of caught up to them. It's kind of followed to them. So we've had some traditional SFD lots in the market before, but not a whole lot of them. In particular, Toll had a project up there that's selling right now and selling very well.
They basically saw an opportunity to kind of continue that program through lots that were coming available in the due course, based on our development course, that is a larger traditional SFD. It's kind of all due course. It's just how the land, and when we get to the land, how it's been flowing.
Ben Fader-Rattner (Managing Member)
value entitlement as compared to perhaps some other acreage that you have in the portfolio?" Is "it's just a higher value entitlement" a separate sentence? "Because, am I correct in thinking that this is consistent with your expectations? It's just a higher value entitlement as compared to perhaps some other acreage that you have in the portfolio." If I make it a separate sentence, the second part is a statement, but the original transcript has a question mark at the end. If I keep it as one sentence, the question mark at the end applies to the whole thing. "A
Dan Hedigan (President and CEO)
Well, I, you know, so I think the best way to answer that, consistent with this density and product type, that is definitely, you know, kind of in the ballpark of what we'd expect. On the other hand, as we look at what's coming up in the market, I don't think I have anything else that's additional SFDs, and part of it's just where we're at, kind of in the land plan that's out there. Most of them are gonna be either detached condominiums or attached, and all of those have higher density, and they will definitely have a lower price per unit. So it really is very product specific, and this product is what's driving those numbers you're looking at.
Ben Fader-Rattner (Managing Member)
I see. Okay. All right. Thank you. Thank you on that. Just one other question, and I know you haven't given numbers on 2024, and I'm not asking for them, but I guess, if you could, as you think about now versus the point at which you'd, you know, proactively refinance the bonds, are you comfortable with the cash balance here, or do you think the cash balance, you know, is likely to be higher at the point at which you'd proactively decide to refinance your bonds?
Kim Tobler (CFO, Treasurer and VP)
Ben, this is Kim. I would tell you that we're monitoring that regularly. Again, given Dan's leadership, we've been focused on increasing our cash balance strategically, and we're gonna keep working on that. The moment when we're gonna deal with the bonds is gonna be based on the market, and we're not gonna wait for a certain amount of cash. We wanted to have enough as soon as possible so that we had options. You know, again, we're still optimistic about 2024, and we haven't given any guidance on that. You know, the challenge we've been given and that we've been trying to address is more regular positive cash and earnings each quarter, which is, you know, something we're trying to maintain, but can't promise every quarter.
What I would say is, we're focused on increasing our cash, and then we'll be watching and working with the market to figure out when we can go into it and deal with our Senior Notes, if that makes sense.
Ben Fader-Rattner (Managing Member)
I see. Yeah. No, that does. Just when you say you're optimistic on 2024, am I correct in assuming that you believe that in 2024, land sale proceeds will be in excess of G&A costs and interest expense and any other fixed obligations?
Kim Tobler (CFO, Treasurer and VP)
If you were to ask me today, that's what our plan is to do.
Ben Fader-Rattner (Managing Member)
Okay. Okay. Obviously, it's uncertain, but that's very helpful. Thank you.
Kim Tobler (CFO, Treasurer and VP)
Yeah.
Operator (participant)
Our next question comes from the line of Kyle Chung, a private investor. Please proceed with your question.
Kyle Chung (Company Representative)
Hi, thanks for taking my question and congrats on a great quarter. Actually, congrats on what you guys have accomplished for the past year or so. I want to commend you on that first. My first question is if I did my math right, it looks like your Q4 free cash flow guidance is between $32 million and $82 million, which seems like a relatively wide guidance range, and that $50 million range, I'd like to understand why it's so wide. I mean, is it wide because the acreage and the price that you expect to close for Q4 is uncertain? Is it wide because the closing date might slip from Q4 into Q1?
Is it more of a timing issue, or is it because the amount and the price of the land for sale that's uncertain?
Kim Tobler (CFO, Treasurer and VP)
Thanks, Kyle. This is Kim. Yes, it is a timing issue. We don't control everything as it relates to when we can get something closed. As we've been saying, something may slip from the Q4 into the Q1 because all of the municipal approvals didn't get received in a timely fashion. We are still expecting those sales. It's not a question of how much is gonna be received.
Kyle Chung (Company Representative)
Right. So just to be, you know, 100% clear, if it turns out that your Q4 free cash flow ends up being $32, what investors should take from that is that $50 got pushed to Q1. Is that right? Is that the right way to think about it?
Kim Tobler (CFO, Treasurer and VP)
Yeah. Given that math, yes. It would add to what we are planning to do in the Q1.
Kyle Chung (Company Representative)
Right. Okay. That's really helpful. Thank you. My second question is congrats on renewing your revolver. I think the 8-K on the credit agreement hasn't been filed yet, but under the new revolver, do you have enough restricted payments capacity to, if you elect to do so, buy back the bonds, buy back, you know, the Senior Notes at a discount?
Kim Tobler (CFO, Treasurer and VP)
Well, I mean, there isn't enough capacity to buy back the Senior Notes at a discount. Again, the entire revolver is only $125 million. So.
Kyle Chung (Company Representative)
Right. What I mean is, for you to like, you know, do a partial tender or just buy back, you know, bonds at a discounted open market. Do you have restricted payment capacity under the revolver for that or no?
Kim Tobler (CFO, Treasurer and VP)
We don't have a restriction that would not allow us to do that.
Kyle Chung (Company Representative)
Okay. Great. Great, thank you very much.
Operator (participant)
There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.
Dan Hedigan (President and CEO)
Thank you. On behalf of our management team, we thank you for joining us on today's call. We look forward to speaking with you next quarter.
Operator (participant)
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.