Six Peak IC Weekly Meeting

• The meeting focused on project financing conditions, unresolved development issues, operating liquidity, and SixPeak’s future growth.
• Participants emphasized resolving development and financing problems before final approvals so the team can provide informed professional input.
• Reseda’s financing assumptions have deteriorated as tax credit pricing declined, Treasury rates increased, and investors demanded stronger near-term cash flow and at least 1.0 debt coverage.
• Ground leases and changing project characteristics have further narrowed the investor pool.
• The project currently faces an approximately $7 million gap that existing parties cannot fund.
• A potential restructuring would have MRK retain the deal while the Six Peak combination provides construction services and a completion guarantee.
• Extensions are being pursued from the property owner and tax credit authority, while Merchants may still provide a ground-lease term sheet.
• Third Street will remain in place while a two-year DWP license generates $6,000 monthly to offset interest and taxes.
• DWP is evaluating relocation of an obstructing utility pole, with estimated costs ranging from approximately $700,000 to $2 million depending on neighboring-building service requirements.
• The project has approximately $300,000 of equity at risk and was viewed as relatively strong because of its 76 parking spaces and potential access to tax credit equity.
• The team was awaiting MRK’s $2.5 million contribution before repaying John and catching up salaries owed to Chris and Bob.
• Although MRK had not signed the note, participants believed its receipt and use of the funds created a course-of-conduct issue and that the contribution should not be treated as cost-free.
• SixPeak may also redeem approximately $350,000 of operating cash held in Francis.
• Construction has begun, including shoring, and monthly loan payments are scheduled to begin in January.
• Uplifters’ contract was awarded and its term sheet circulated, with a friends-and-family bond raise targeted by year-end.
• SixPeak’s expected economics include a 1% acquisition fee, 6% construction-management fee, leasing commissions, and a 1% exit fee.
• The staffing model could produce approximately $4 million in total income from 60 homes, supported by project management, coordination, accounting, and potential near-term construction assistance from Ivan Krassic.
• Additional financing opportunities were progressing, including an investor-funded gap, a structured package from Genesis Capital, bids expected in early October, and year-end closings targeted after legal work beginning following Labor Day.
• These transactions would add construction and other fee revenue.
• Francis delays may reduce 2026 net income below projections, but the 2027 outlook remained positive, including potential repayment of the debt facility and a return to sustained profitability.
• The business is expected to become cash-flow positive as September billings begin for Francis and HVN.
• Chris proposed offering Kruger the option to convert upcoming bonding cash into additional equity at the existing 18-cent price rather than receiving cash.
• The team also planned to explore greater transparency into HVN’s future deal flow.
• Potential developments included another North Hollywood opportunity-zone project expected to start in January and a $23 million Beverly project that could be shovel-ready in approximately 12 months.
• The team also considered ending the underused New York City office sublease after December, which costs approximately $6,000 per month, while using a Connecticut office and New York locations as needed.

None.

None.