May 9 Shares of Five Point Holdings, a
real-estate developer backed by No.2 U.S. homebuilder Lennar
Corp, rose as much as 10 percent in their market debut
The offering was priced at $14 per share, much lower than
the proposed range of $18-$20, raising $294 million.
Shares of Five Point, which develops commercial and
residential land sites in coastal California, rose to as much as
$15.40, giving the company a market value of about $3.35
Lennar has also agreed to invest $100 million in the
company. Following the offering, Lennar will have 40.2 percent
stake in Five Point.
The IPO comes amid fears that higher home mortgage rates
will hurt home sales, which are already under pressure from
tight inventories due to shortage of skilled labor and
The company, however, operates in the housing hotbed of
California where, experts say, millennials looking to buy bigger
homes could boost demand.
Also, investments related to the technology sector could
fuel demand for developed commercial space in areas such as Los
Angeles, San Francisco and Orange County.
"We are also reaching point where a lot of millennials are
looking for more space as they get married and start families,"
said CFRA analyst Ken Leon.
Existing single-family home sales in California were up 6.9
percent in March from a year ago, according to a report by the
California Association of Realtors.
At the regional level, the San Francisco Bay Area recorded
annual sales gain of 6.4 percent and the Los Angeles metro area
The company is also seeking approval from governmental
authorities to increase total commercial space at the San
Francisco Shipyard and Candlestick Point, which has been
recently exempted from restrictions on new office development
applicable to all other projects citywide.
The company posted a 10.6 percent rise in net revenue in
2016. However, the net loss widened to $33.2 million in 2016
from $2.7 million in 2015 as selling, general and administrative
expenses surged almost four times.
J.P. Morgan Securities LLC and Citigroup Global Markets Inc
are among the underwriters for the IPO.
(Reporting by Diptendu Lahiri in Bengaluru; Editing by Arun