For those who hadn’t seen the update in May – let me know if you have found fresh news

For the Three and Nine Months Ended March 31, 2026 and 2025 (Unaudited)

The recommended scope of work for the initial phase includes the repair and remediation of a retaining wall. On August 7, 2024, the Development Entity submitted a building permit application to the Los Angeles Department of Building and Safety for the retaining wall repair.
The building permit for the initial repair was issued on October 30, 2025 and the construction contract for the initial repairs was signed. The initial repair phase and the monitoring of the retaining wall and adjoining area began during the quarter ended March 31, 2026. Based on current information, the initial phase is expected to be completed by the end of calendar year 2026; however, timing is uncertain because there have been numerous delays and additional delays may arise. Once the initial retaining wall repair is completed, the retaining wall and site will need to be monitored for a period of time.

In addition, there have been other construction defect claims at this property that have required immediate repair, including pool leaks, water leaks and seepage in the garage and other areas of the home, and multiple glass pane breakages. The Development Entity has completed some repairs in response to these claims, but until the initial repair of the retaining wall and monitoring activities are completed, the Development Entity will be unable to complete all necessary repairs. In addition, the Development Entity is unable to determine whether these damages resulted from the same underlying issues currently being addressed.

The Development Entity’s consultants and engineers continue to evaluate the scope of repairs required to remedy defects. The results of engineering studies, site soil analyses and site monitoring are expected to help define the required additional scope of work. To date, certain repairs have been identified with respect to the pool, pool deck and cracks in the interior ceilings and floors. Additional repairs may be required.

Based on current information available to it, the Development Entity believes that the repairs to address the construction defect claims can be completed by February 15, 2028; however, it may take longer based on the results of the initial phase of repair, subsequent monitoring and the scope of additional repairs that may be required, as well as unforeseen delays in construction.

As of March 31, 2026, there was approximately $8,265,000 accrued for estimated costs related to the construction defect claim asserted against the Development Entity. The estimated costs are the Development Entity’s best estimate at this time and are subject to change as additional information becomes available. As the results of the initial phase of repair and information from the related monitoring become available and the planning for the subsequent phases is finalized, additional costs may need to be accrued. The amount of the Development Entity’s ultimate exposure for the construction defect claim is currently unknown and may be materially different from the amount that has been accrued as of March 31, 2026 in the Company’s consolidated financial statements (see Note 5 for additional information). The Development Entity reviews these estimates on a quarterly basis and accrues updated cost estimates as appropriate.

Construction Defect Insurance

The Company believes that all or a portion of the costs related to the construction defect claim may ultimately be borne by third parties, including the Development Entity’s insurers, as described below.
The Development Entity purchased primary and two excess coverage insurance policies covering certain risks arising out of the Development Entity’s development of the single-family home which is the subject of the construction defect claim. The Development Entity tendered the claim to its primary and excess layer insurers on June 28, 2023. The insurer that issued the primary and first excess layer coverage agreed to defend the Development Entity subject to a reservation of rights. As of March 31, 2026, this insurer has advanced the Development Entity approximately $5,852,000 for the estimated cost of the initial repair phase and some, but not all of the out-of-pocket costs incurred by the Development Entity
which it asserts are covered by the primary and first excess layer policies. The funds advanced by this insurer are included in cash, cash equivalents and short-term investments and have not been netted against accrued development costs in the Company’s consolidated financial statements.
As of March 31, 2026, the Development Entity has exhausted its primary and first excess layer coverage and has tendered its claim to the second excess layer insurer.