Six Peak IC Weekly Meeting

• The meeting reviewed deal strategy, capital allocation, legal/document status, portfolio tax risk, guarantees, and acute operational cash and delivery issues across several projects.
• On deal strategy and capital the team re-affirmed the May 5 LITECH position: LITECH deals do not drive near-term revenue outside construction, and the firm should only proceed where guarantees or capital can be structured to be recouped at closing.
• Options discussed were varying mixes of GC work, bonding, guarantees, and capital.
• The Borden award timeline was described as roughly August 1; entering earlier increases leverage.
• The group debated deploying incremental capital now versus recycling proceeds (noting potential proceeds from Grand View asset sales could free a couple million dollars) and emphasized preference to avoid fresh taxable capital and instead recycle proceeds.
• Chris and others emphasized building the GC pipeline toward an $80–100M/year target and monetizing development know-how through paid pre-development or advisory roles.
• Legal and document matters covered DocuSign versus wet-signature logistics for JV and equity amendments, and an LPA amendment required by R4 to reserve for a potential San Francisco transfer tax despite counsel viewing the tax as unlikely.
• The team discussed SF and LA tax developments and potential portfolio impacts.
• Bob reported near-completion of a cost-of-capital draft with limited redlines preserving prior approvals and adding clauses treating deferred compensation as co-invested and granting Chris and Bob rights to co-invest above required amounts with equal distribution treatment.
• Guarantees, trapped cash, and asset-level decisions were reviewed: trapped cash balances were identified (Wilton $6M, Francis $1M, Ramsgate $4M) and noted as invested in credit instruments rather than raw cash.
• Chris reiterated that guarantees and liquidity to back guarantees are higher priority than deploying trapped cash into investments.
• Grandview’s proposal to convert Grandview/Grandview-related assets to affordable/Section 8 was rejected by the partnership; Chris stated he would rather resign as GP than pursue Section 8 leasing.
• An alternative surfaced where Bob could assume debt and buy equity for $1 if an assessor agreed to a $15M valuation, but bank consent for guarantor release is uncertain.
• Potential capital calls and Gramby’s 10% economic exposure were noted as open financial considerations.
• Operational delivery and financing risks were flagged as severe.
• Two key project architects from TAG Architects departed, creating licensing and execution holes across multiple California projects (Melrose, Berryman One, Ramsgate, Francis, Reseda, Third Street).
• Chris reported an acute cash shortfall tied to Francis start delays: the pref equity facility is drawn, payroll for May and June remains unpaid, and the company cannot begin Francis, creating immediate working-capital pressure.
• The group estimated a likely settlement or buyout in the $75K–$100K range to secure the departed architect’s cooperation and protect approvals and lender confidence; graded legal alternatives were discussed.
• Broader financing delays were noted for HVN deals where investor and lender inexperience with construction financing (including Citibank and R4) has contributed to closings slipping and the cash crunch.
• Open issues and constraints remaining after the meeting include uncertain timing for Francis closing and Borden award, limited fresh capital due to tax and leverage constraints, unresolved bank consent and guarantor-release feasibility, decisions about Grandview’s proposed conversion, how much trapped cash can or should back guarantees, and the architect licensing/settlement outcome.

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