Related Party Transactions

6 Months Ended

Jun. 30, 2022

RELATED PARTY TRANSACTIONS

Related party assets and liabilities included in the Company’s condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):


	June 30, 2022		December 31, 2021
Related Party Assets:
Contract assets (see Note 3)	$	80,197	$	79,082
Operating lease right-of-use asset (corporate office lease at Five Point Gateway Campus)	17,581		18,715
Other	878		4,021
	$	98,656	$	101,818
Related Party Liabilities:
Reimbursement obligation	$	67,209	$	69,536

Payable to holders of Management Company’s Class B interests	8,365		8,365
Operating lease liability (corporate office lease at Five Point Gateway Campus)	13,252		13,931
Accrued advisory fees	13,426		—
Other	336		4,086
	$	102,588	$	95,918

Development Management Agreement with the Great Park Venture (Incentive Compensation Contract Asset)

In 2010, the Great Park Venture, the Company’s equity method investee, engaged the Management Company under a development management agreement to provide management services to the Great Park Venture. The Initial Term of the development management agreement with the Great Park Venture expired on December 31, 2021 but has been extended by mutual agreement of the parties through December 31, 2022. The compensation structure in place consists of a base fee and incentive compensation. Incentive compensation is characterized as “Legacy Incentive Compensation” and “Non-Legacy Incentive Compensation.” Legacy Incentive Compensation consists of a maximum of $9.0 million of incentive compensation payments attributed to contingent payments made under a cash flow participation agreement to which the Great Park Venture is a party. Holders of the Management Company’s Class B interests are entitled to receive distributions from the Management Company that are attributable to any Legacy Incentive Compensation received by the Management Company. Non-Legacy Incentive Compensation is 9% of distributions available to be made by the Great Park Venture to holders of Percentage Interests of the Great Park Venture during the Initial Term. If, however, the A&R DMA is not extended by mutual agreement of the parties beyond December 31, 2022 (a "Non-Renewal"), any incentive compensation payments received by the Company in calendar 2022 will be retroactively reduced from 9% of distributions to 6.75% of distributions (the “Clawback Amount”), the payment of which will be effected by reducing future incentive compensation payments made to the Company under the A&R DMA. If a Non-Renewal occurs and the Company is no longer providing management services subsequent to December 31, 2022, the Company will continue to be entitled to 6.75% of Distributions paid thereafter, subject to the Clawback Amount holdback described above.

At each of June 30, 2022 and December 31, 2021, included in contract assets in the table above is $74.3 million attributed to Legacy and Non-Legacy Incentive Compensation revenue recognized but not yet due (see Note 3). Management fee revenues under the A&R DMA are included in management services—related party in the accompanying condensed consolidated statements of operations and are included in the Great Park segment. Management fee revenues under the A&R DMA were $2.6 million and $6.0 million for the three and six months ended June 30, 2022, respectively, and $7.5 million and $19.9 million for the three and six months ended June 30, 2021, respectively.

Employment Transition Agreement and Advisory Agreement with Emile Haddad

On August 23, 2021, the Company and the Company’s then Chairman, Chief Executive Officer and President, Emile Haddad, entered into an employment transition agreement pursuant to which, effective as of September 30, 2021, Mr. Haddad stepped down from his roles as Chairman, Chief Executive Officer and President. Mr. Haddad remained a member of the Board of Directors serving as Chairman Emeritus. Concurrently, the Company also entered into an advisory agreement with Mr. Haddad for an initial term of three years, which became effective on October 1, 2021. At June 30, 2022, included in accrued advisory fees in the table above is $10.8 million attributed to Mr. Haddad’s advisory agreement (see Note 2).

Employment Transition Agreement and Advisory Agreement with Lynn Jochim

On February 9, 2022, the Company entered into an employment transition agreement with Lynn Jochim, the Company’s former President and Chief Operating Officer. Pursuant to the agreement, Ms. Jochim agreed to continue in her then current positions, at her then current compensation levels, until February 14, 2022. Concurrently, the Company also entered into an advisory agreement with Ms. Jochim for an initial term of three years, which became effective on February 15, 2022. Pursuant to the advisory agreement, the Company agreed to pay Ms. Jochim an annual retainer of $1.0 million. At June 30, 2022, included in accrued advisory fees in the table above is $2.6 million attributed to Ms. Jochim’s advisory agreement (see Note 2).