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 end up 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 third quarter reflects $218.3 million of cash on hand, with a zero dollars 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. 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 will 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 home building, 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, home buyers 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 as home buyers are dealing with the reality of higher interest rates. Home builders 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.

The supply constraint has allowed home builders 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 third quarter, builders in our Great Park community sold 113 homes. Solis park is currently our only actually 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 and traffic in the community, affirming the ongoing appeal of our homes to prospective buyers.

During the quarter, Solis averages sales pace of 0.9 homes per week and four collections sold out. Our next major neighborhood, Luna Park with a debut with 798 homes across 13 collections is projected open in phases from February through December next year.

There remains strong home builder interest in acquiring home sites at great part 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 third quarter 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 have 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 in our market for large parcels of entitled 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, an 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 is opened with two detached calendar 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 third quarter for a total of $60.7 million.

Additionally, we anticipate closing 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 component 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 Candlesticks as it first saves 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 the beginning of the game at some of our communities. But they're not making any more land, and there will never be an abundance of entitled 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 will provide some limited guidance for the fourth quarter and year end..

Valencia, San Francisco, Great Park, and Commercial, I recommend that you review our earnings release or the 10Q 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 to $70 million of net income, and that we expected to end the year with a cash balance of between $250 million to $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 fourth quarter drift into the beginning of the year. With that, I'll turn it over to the operator for questions..

Thank you. Ladies and gentlemen, at this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Arun Seshadri with BNP. Please proceed with your question..

Yes, hi. Thank you, sir. Thank you for taking my questions. And a good job in a difficult environment. I just wanted to 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 and 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..

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 only marketing on a 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 group, another section of land into the market..

Got it, Thank you, Dan. And then, can you also talk a little bit about, I think in your prepared comments, you had 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.

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 where exactly you're seeing the impact of high interest rates?.

Well, first on the year-end guidance, we actually are on track, consistent with that guidance. And so 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.

When a market hour rates are ticking back up again, which will drive towards another new normal, but we believe demand will find its way over these increases. And the thing we're facing in California is just a terrible shortage of housing. And with interest rates, the resale market is very limited.

So affordability will always be an issue, so I don't want to make light of that. But the extent a buyer can afford a new home, there is going to be -- we feel there is going to be demand..

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 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 from me. Thanks..

Yes. So 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. But largely it was rolling forward the existing terms. And really the only thing was they raised the cost. So we're going to have to pay more when we draw on the revolver. But beyond that, it stayed pretty close to what we've done.

We lost what's known as a term out. So we had a term out which allowed us to take whatever balance was due with the maturity and pay out over 12 months equally, that's an unusual provision in a revolver like ours. And so the banks came back and said they didn't see how they could continue that in the current market.

And we understood that and we're willing to give that up. But they gave us a two-year extension, which we were very grateful for and thought we deserved. And very glad that the four banks stayed all together. And we kept the 125 in place. As it relates to the senior notes, as Dan said, we're turning our attention to that.

Don't want anyone to think that we're not thinking about those. We've been regularly meeting with our board and together as management reviewing the different options that we think we may have. That's part of the reason why we've been working so hard to increase our cash balances, so that we have some things to work with.

But we don't have anything really specific that I can talk about right now that we've done. So Arun, it's good to hear you and look forward to talking more in the future..

Thanks very much..

Our next question comes from the line of Alan Ratner with Zelman & Associates. Please proceed with your question..

Hey, guys. Good afternoon. Thanks for all the detail, and congrats on the progress here. First question on the Valencia sale. It looks like the, I guess, the composition of this particular lot sale was quite different than your prior ones, much lower density, much higher price per lot.

I'm just curious, if you can give a little bit more detail in terms of how you're thinking about segmentation of product and lot sales in Valencia in the intermediate term? Is this a concerted effort to kind of mix in more move-up product or lower density product and any kind of guidance you can give on the expected fourth quarter lot sale, if it's going to look similar or different would be helpful..

Thanks, Alan. Valencia actually has a broad level of segmentation. In its entitlement, it actually has zones that are identified for lower density and higher density. And 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.

And we are seeing good demand for that move-up buyer in Valencia. We're talking very traditional homes with driveways and backyards, and we're definitely seeing buyer demand there.

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 kind of preset just on where we're at, but both of those were previously identified and they were just in a lower density area.

As to the fourth quarter land sales, they're actually going to be in different sections of the Velencia project, and so there's going to have a mix of product. There's going to be some that is, you know, our traditional detached condos, and there'll also be a small portion that'll be attached.

But it will be more diverse than what you're seeing that closed this quarter..

Understood, that's helpful color Dan.

Second, I know the timeline is still uncertain with San Francisco and you haven't given a target there, but my question is, when that project does get off the ground, is there any way you can kind of help us think through what the cashflow impact would look like initially? I would imagine you would have to put up some development dollars before the first phase of land would be ready for sale.

So any way to think about what that initial outlay might look like, how long that might be before revenues begin to recognize, just kind of thinking through the forward look there?.

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 developers. So from a standpoint of revenue events on the land side, they will be pretty much tied to completion of a deliverable site.

And as part of the conversations we're having right now with the city and county of San Francisco, is we are looking at that first phase and how you access that first phase. But there's always going to be kind of a variety of options of how we approach that as far as matching, you know, the spend to capital and near-term revenue.

But the revenue really does, it does flow from the horizontal development. We're not really going to need the vertical development. That vertical development, as Kim talked about, is going to be a big part of future capital through CFDs and TIF. But the initial revenue is going to be tied to horizontal land sales..

Just to follow-up on that, Dan, because, yes, I think I understood that.

But is that kind of like a 12-month horizontal development lead time from shoveling ground to having a parcel ready to sell and begin to recognize revenue on? Is it longer, shorter? What any frame of reference there?.

Well, from the standpoint of getting to the first phase, you know, all things always are driven by having the approvals from the city to move forward. But 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 time frame on it today simply, because there's so many variables that we'd be dealing with. But 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..

Got it. Okay. That's helpful. Thanks a lot, guys. Appreciate it..

[Operator Instructions] Our next question comes from the line of Myron Kaplan, Private Investor. Please, proceed with your question..

Yes, hi. Thanks for taking my questions. First of all, I'd like to commend you for a timely and ship-shaped reporting. Congratulations, Kim, for your elevation..

Thanks, Myron. It's good to hear from you..

Yes.

I wanted to ask, what's the rate of the senior notes that are due in 2025, the coupon?.

7.875%..

And what's the principal amount?.

$625 million..

That's really the elephant in the room, so to speak..

It is the elephant I look at every day when I get in, when I wake up..

Yes. Right off. I just wanted to ask just an informational question.

What -- I didn't understand what's the -- you were talking about a parcel in the Great Park of 40 acres of commercial land?.

Yes, those are actually two pieces, that's a combination of two pieces of property that are actually in escrow today. So those would be closing we anticipate by the end of the year..

I see. So those are basically under contract..

Correct..

Yes, and also just an informational question, or maybe it's a -- at the Great Park, you have builder sales of 113 homes.

So those revenues are substantial, but unconsolidated, yes?.

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 financials..

Oh, I see. So you've previously sold them the land..

Yes. 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..

Right. So then you said you're releasing some more tranches, so that you'll be able to put more revenue. Well, I guess that's pretty much what I -- thank you for taking the questions. And my -- it seems like you're doing pretty well in a very tough environment..

Myron, thank you..

Our next question comes from the line of Ben Fader-Rattner with Space Summit Capital. Please proceed with your question..

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. And I think in the past you talked about an average more in the 200s.

Was this sale above expectations? I wasn't clear from the answer to the previous question or you know if this was more of an expected outlier or there's some other read through on this sale..

No thanks you know it is not an outlier it really is you know the different 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 has about 800 homes. And so 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. So they were zoned to be lower density and it would have been produced. So 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.

And so we've had some traditional SFD lots in the market before, but not a whole lot of them. And in particular, toll had a project up there that's selling right now and selling very well.

And 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. So 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..

Well, can you Give a sense for if you look across the land bank in Valencia, what sales price per home site you would expect or maybe a range? And is this, am I correct in thinking that this is consistent with your expectations? Is this just a higher value entitlement as compared to perhaps some other acreage that you have in the portfolio?.

So I think the best way to answer that, consistent with this density and product type, that is definitely 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.

So most of them are going to be either detached condominiums or attached, and all of those have higher density, and they will definitely have a lower price per unit. And so it really is very product specific, and this product is what's driving those numbers you're looking at..

I see, okay. All right, thank you. Thank you on that. And then just one other question, and I know you haven't given numbers on ‘24, 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 proactively refinance the bonds.

Are you comfortable with the cash balance here or do you think the cash balance is likely to be higher at the point at which you proactively decide to refinance your bond?.

Ben, this is Kim. I would tell you that we're monitoring that regularly. And again, given Dan's leadership, we've been focused on increasing our cash balance strategically, and we're going to keep working on that.

The moment when we're going to deal with the bonds is going to be based on the market, and we're not going to wait for a certain amount of cash. We wanted to have enough as soon as possible so that we had options.

So, again, we're still optimistic about ‘24, and we haven't given any guidance on that, but 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.

But so 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..

Yes, no, that does.

And then just when you say you're optimistic on ‘24, is it, am I correct in assuming that you believe that in ‘24, land sale proceeds will be in excess of G&A costs and interest expense and any other fixed obligations?.

If you were to ask me today, that's what our plan is to do..

Okay, okay. Obviously it's uncertain, but that's very helpful. Thank you..

Yes..

Our next question comes from a line of Kyle Chung, a Private Investor. Please proceed with your question..

Hi, thanks for taking my question, and congrats on a great quarter. I'm actually going to congrats on what you guys have accomplished for the past year or so. So I want to commend you on that first.

My first question is if I did my math right, it looks like your fourth quarter free cash flow guidance is between $32 million and $82 million, which seems like a relatively wide guidance range. And that's $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 fourth quarter is uncertain? Or is it wide because the closing date might slip from fourth quarter into first quarter? And so is it more of a timing issue or is it because the amount and the price of the land for sale, that's uncertain?.

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. And as we've been saying, something may slip from the fourth quarter into the first quarter, because all of the municipal approvals didn't get received in a timely fashion. So we are still expecting those sales.

It's not a question of how much is going to be received..

Right. So just to be 100% clear, if it turns out that your fourth quarter free cash flow ends up being $32 million, what investors should take from that is that $50 million got pushed to first quarter.

Is that right? Is that the right way to think about it?.

Yes. Given that math, yes. And it would add to what we are planning to do in the first quarter..

Right. Okay. So that's really helpful. Thank you. And my second question is, congrats on renewing your revolver.

And I think the 8-K on the credit agreement has been filed yet, but under the new revolver, do you have enough restricted payment capacity to, if you elect to do so, buy back the bonds, buy back the senior notes at a discount?.

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….

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?.

We don't have a restriction that would not allow us to do that..

Okay, great. Great, thank you very much..

There are no further questions in the queue. I’d like to hand the call back to management for closing remarks..

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..

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..