Building the Future: Five Point Holdings sets terms for IPO

The real estate business is a challenging one. Now imagine being a startup in that environment, struggling to keep up with the fast changes in customer preference and economic climate that define the industry. Not so with Five Point Holdings (Pending: FPH). Founded in 2009 in the Aliso Viejo region of California, the company has carved its space in the US real estate market with enterprises all over coastal states.

Five Point Holdings was originally known as Newhall Holding Company LLC. It changed its name in May 2016 as it spun off its holding company Lennar. Five Pint Holdings gives diversified real estate-related services, starting from planning to developing mixed-use well-designed community properties. what that means is that Five Pint holdings buys up land, builds houses or communities one them then sells them off. In fact, the company is ranked the largest entitled holding company in the States, having sold land to thousands of builders, house developers and home buyers since its inception.

The Five Point Holdings IPO will help the company raise funds to finish off its three mega projects in the next few months. Five Point Holdings announced on Monday that it’d be selling off 21 million of its common shares in the debut issuance. At $18 to $20 per share, Five Point Holdings should raise about $399 million, bringing its market value to roughly $2.7 billion when fully diluted.

Several companies will act as managers for Five Point Holdings. They include Citigroup, Wells Fargo Securities, JP Morgan, RBC Capital Markets, Evercore ISI, Zelman Partners LLC and JMP Securities. The IPO will price in the week starting from May 8th.

For a company that only had $39 million in sales revenue for the 12 months ending on December 31st, 2016, the overall IPO target still seems ambitious. It seems even more so if you factor in that Five Point Holdings operates in a volatile market. The company could rise or tank within days. But when the firm’s financial status and market share are compared to those of its competitors such as Lafayette LLC and MLane LLC, it seems more reasonable. After all, a company that is ahead of the market must be more valuable.

Five Point Holdings will have an easier time capitalizing on its current projects post-IPO. At present, the firm is handling three large-scale community housing development projects. These projects are the Newhall Project in Las Vegas, the Great Park Neighborhoods that the firm is handling in Irvine, and the Shipyard and Candlestick project that it is collaborating on in San Francisco.

Of the three commitments, the most promising is the Shipyard and Candlestick project. The project involves developing in-demand land between the region’s airport and town. Five Point Holdings is working with Macerich Company on the Shipyard and Candlestick project. Between 2013 (when the project began) and 2015, all homes constructed on the property were sold off. The sales decreased in 2016 however because the economic climate was  unfavorable and because customers started preferring renting to buying.

Five Point Holdings plan to develop more of its sites with the revenue from the IPO.