Developer Five Point Holdings will acquire Hearthstone in a deal the companies say will create an entity that will “expand access to flexible, off-balance sheet capital for home builders providing land-light strategies.”
“This marks a significant expansion of Five Point’s capabilities, positioning it as a more active manager of capital solutions for the home building sector through investment funds,” the companies said in a release. “The Hearthstone venture will benefit from Five Point’s deep development expertise, valuable long-term relationships with the home building industry, and strong capital base, while leveraging Hearthstone’s respected platform and experienced leadership.”
Five Point will own 75% of the new company, with the remaining 25% retained by Mark Porath, Hearthstone’s founder and CEO.
Hearthstone was founded in 1992 and is focused on managing institutional capital in residential for-sale housing in select target markets across the country. Hearthstone’s business consists of a land banking (or lot option) program that provides capital to public home builders, a joint venture financing program, and advisory services for real estate investors and financial institutions.
With over $2.6 billion in assets under management, the firm has funded more than 173,000 homes and lots, totaling approximately $21 billion in investments across approximately 750 transactions. The acquisition is expected to close by the end of the third quarter.
“Hearthstone has built an impressive track record over more than three decades, consistently delivering value through changing market conditions, and we are very excited to bring this exceptional platform and talented team into Five Point,” said Dan Hedigan, president and CEO of Five Point.
“Hearthstone’s market insight, innovative approach, and operational excellence are a strong complement to our land development platform, and both companies have established trust with their home builder partners. Together, we’re positioned to scale Hearthstone’s land banking business, while further supporting Five Point’s asset-light growth strategy.”
Five Point Holdings designs and develops large mixed-use planned communities in Orange County, Los Angeles County, and San Francisco County that combine residential, commercial, retail, educational, and recreational elements with public amenities, including civic areas for parks and open space.
