FivePoint Taps Blue Owl for Land Banking Capital

FivePoint Holdings is committing to land banking with its latest partnership.

Irvine-based FivePoint is teaming up with Blue Owl Capital to buy up to $1.7 billion of land in the U.S. housing market, the Orange County Business Journal reported.

In exchange for committing capital to land acquisition efforts, Blue Owl-managed funds will be able to buy Five Point shares at $7 each once it meets contribution thresholds starting at $500 million.

The partnership builds on FivePoint’s acquisition last year of Hearthstone Residential Holdings.

Since acquiring a 75 percent stake in Hearthstone for nearly $59.3 million, FivePoint has been expanding into managing real estate for other homebuilders and institutional partners rather than just developing its own dirt. FivePoint earns management fees while using others’ funds to finance acquisitions.

With the Blue Owl partnership, Hearthstone will use Blue Owl capital to buy land, while FivePoint will handle the approval, entitlement and development process. This setup allows homebuilders to secure future residential lots without using their own money for long-term land investments.

Blue Owl has been dealing with problems in its private credit business. News surfaced earlier this month that investors were looking to get out of some investments before maturity. So many investors have expressed interest in exiting deals that Blue Owl said it is permanently restricting withdrawals.

Hearthstone managed about $2.6 billion when FivePoint acquired it last year. That number has since grown to roughly $3.4 billion, FivePoint CEO Dan Hedigan told the Business Journal. Within five months of the acquisition,

Hearthstone earned $11.8 million in management fees and $3.5 million in net income. FivePoint also expects to secure another $300 million to $500 million in new capital commitments by the end of the first quarter.

FivePoint is known for constructing master-planned communities in Irvine, Valencia and San Francisco.

The partnership with Blue Owl expands FivePoint’s activity into land acquisition and management. In the fourth quarter of last year, FivePoint’s Great Park Ventures, the investment entity behind its Great Park Neighborhoods in Irvine, sold 187 homesites on nearly 20 acres of land for $181.5 million. Builders purchased 920 homesites at Great Park last year, according to FivePoint.

— Chris Malone Méndez