Strategy call on real estate leases, Star Wagons carve-out, and deal negotiation

Consent.

Say that again.

Oh no, it's not, JD.

What is not?

I am wrong.

What do you— I, I missed it. What did you say?

12312 Osborn Street. This doesn't make any sense. 12312 Osborn is apartments, multifamily.

The address may be wrong. If you go down a little bit further, there's a lot further down. So they may have just the address wrong, James, if you go on that corner there, the corner of Norris and Osborne. It's the Glen Oaks and Osborne.

JD, let's ask— let's add this to our question list for today. 12312 Osborne appears to be multifamily. Can also ask Richard. No, you're right.

Never mind. 12173, Montague. Maybe it's Osborne Place.

I thought that, but no, that looks like—

uh, no, I think I see a lot. Is it a lot there in Osborne?

No, I don't see it.

Is that what it's called though? Yeah, I see it. I don't think that's it. So look at Osborne Place, and maybe it's not it. I see a bunch of what looks like trailers to me.

Baby, she looks so big in this car seat. Sorry, I'm on a call.

Hi, Laura.

That's not Laura.

Yeah, that was Sam.

Oh, hi, Sam. Hey, James, how are you? We're good.

How are you?

Oh, sorry, I just pressed mute. She said she was good though.

Oh, good, good.

Laura, is the other—

maybe not. James, how big is the lot? Does it say Osborne is only— oh wow, 60,000 feet. Never mind, I don't see it.

Yeah, we'll have to go back to them.

I mean, that's a pretty big— okay, yeah.

Okay, so moving along, Penrose, they've already tendered early term. They're out in November of this year. Um, Ralston is June of next year. Okay, that's going to be a tough one, but it's not like incredibly expensive.

So 1, 3, 3, 4. This is the Star Wagon Lots, right?

That's correct. Also, something I have noticed here is that— can you highlight rows 14 and 15? I don't think they're I think that they're calculating this on just the square footage of the building and not the actual lot around it.

Which, uh, Ralston?

Yeah, both of them.

14,000 feet and 21,000 feet.

Uh, if I go to Ralston, I guess it's possible, but like, oh, you're right, the building is 334 Wall Street, I'm showing coastal ocean is 14,000 feet.

The lot, the land is 0.4 acres. So it's about a little more than 20.

I'm gonna say it's not like a ton of space, but it's not no space.

Yeah, no. So that's— it's, it's bigger. And then the other one, give me a second. The other address is 3278 I'll be right back. This one is 20,000 square foot building. Yeah, just shy. And then the lot is about an acre, so 40,000, 42,000. Um, okay. And Richard Abbott owns this one, and another guy, Lyle Wagner, owns the 3-floor building. The two different ownerships.

Yeah, that's the guy from Star Wagons then owning it. Makes sense.

Okay, is that who it is?

Yeah.

Okay, and then what is the, um, we're paying $41,000 a month for 14 beds. That's fucking way too much. Yeah, the other building is better if you blend them together. I have to see how the property lays out. Are they pretty much like, is it a shared property where they've taken down the walls? Now these sweetheart lease deals they put together right before the transaction closed. Yeah, so it basically operates as one. That's 1334.

13278. Oh, weird.

It's not connected.

No.

Okay. Yeah. So there. Okay. I see how it's set up here. And it's very strange because You've got the building on the corner, then you've got these 3 other, like, blocks. Yeah, and it looks as if Star Wagon occupies the whole yard behind. So I'd be really curious, it, you know, if you've got a building with some yard, it's— and it's being quoted at what, $283,000? Like, that's insane.

But that's just for the building, doesn't include the— like, their lease is for the yard. Like, we've flown drones over this and have seen, I mean, they've just been racked and stacked, nuts to butts, if you will, on all available open space here. Right.

Um, well, the good news is there's only about a year of term left, you guys, on this. I think these would be one where we would market it at market, go to the ownership. We could get someone at market, which I think is probably closer to the $1.50 range. Just so you know, ownership is the, the prior owner of of the Star Wagon.

Lyle?

Yeah, Lyle is the father. Jason and the Wagoneer Trust, I think, is the landlord.

Um, yeah, it says it's a trust. Lyle and Sharon Wagoneer. And then the other one is owned by Richard Abbott. The, the one that's not— yeah, the one that's further down and bigger. So there's some exposure for these. They're not going to be particularly easy to clear is the short of it. And I would expect that you're going to sit on them for 9 months to a year before you—

okay, so maybe what we do, JD, for this one As we think about, like, this is the decommission— like, for the year that is left, we basically commit to it being the decommission plant.

Where we just strip things for parts?

We get, yeah, period on that. Because I, I've often thought that, like, I agree with what Ryan's saying, this is going to be basically impossible. And yeah, these lease terms are so screwy, um, that unwinding them is going to be challenging.

Ominous.

Yeah.

So I think, like, the plan here would be, like, We have 800 trailers, we need to get rid of 400 of them. Like, pretty much day one, we begin— we commission the decommissioning crew, right? Um, and they just get cracking. And you have Richard and Lewis basically coming up with a strategy for each individual unit of what they're going to salvage or what they're going to do with it. And that team gets put on autopilot and they just have like—

because when does it say it's 30? It's 2027. So we'd probably have 6 or 9 months, let's say 6 to 9 months to just work through, use that as the, the boneyard with the last month being, you know, reserved to clean up the great textures out.

Yeah.

Okay, Yarnell we keep, Cascades we keep. So really what we're— okay, so Ryan, what to read back, you feel decent about being able to get a tenant in at the Norris location because it is below market.

Yeah.

The—

we need to go back to them on these other Well, specifically, we need to go back to them on Osborne to just understand what we're looking at here. Balboa, where did we land on this from an initial strategy read? Like, it's gonna— they're getting— yes, they're getting fucked.

Yeah, fully fucked, man, because, you know, market is— call it for office building out there, you're probably looking at $1.50, you know. And again, I don't know what the configuration is. But yeah, it's— you're paying close to $6. Now, granted, you're getting the benefit of 100,000 square feet of land. So let's try to figure that out. If they were all looped into one.

Katie, what's the current revenue on their— if you approximated how much revenue they're getting from trailers right now, what would it be?

Um, $15 million in 2025. 16, 15, 16.

Current run rate?

Oh, I mean, I— same.

Just as of the data that they sent us where we could see 130 of 800 somewhat out.

Yeah, I mean, I'm— that's trailer utilization of 25%. They were about at 25% trailer utilization, maybe 30. So I would say run rate's about the same.

Okay, so just really quickly on Balboa, if you've got 100,000 square feet, call it 50 cents, that takes out $50,000 a month. Right?

I'm sorry to interrupt you. I'm piecing something together right now though, because JD, if Galpin takes the Ralston rent here is effectively 72 plus—

let's take this call real quick.

Yeah.

92 a month.

Yeah.

$92,000 a month to get all of that.

Yeah.

You know where it is.

So, Ryan, we learned basically last week or the week before last that we are And we never expected to be, but we've always known there was a very short list of people that could really transact with the companies, with Hudson and DOD by Sunset in its current state. It's really people inside of the sector already. It's no one really coming in and doing anything of value here. We, and we never, but even in spite of that, we never really expected to be alone per se in the conversation, but we learned that Galpin is looking to carve out just Starwagons, per what we kind of have heard about what they're trying to do.

Okay.

Doesn't really solve a lot of Hudson's larger problems. It just kind of offloads a brand and offloads, I don't know, 400 or 500 assets, 300 or 400 assets, and leaves them effectively with Coyote by sunset and a bunch of leases and a bunch of other stuff. But what it would give them is probably cash, which is something we are not offering. We are offering zero cash.

Also something they not need, or they don't need.

But if you— we think in between, call it $20 to $30 million that Galpin would throw at them, and then JD The reason I asked that is because it's $90,000, $92,000 a month for the operating leases associated with Star Wagon, previously associated with Starbucks. Galpin has their own big footprint up there in the Valley off the 405. Yeah, but I'm wondering if, I'm wondering if it was an, if it, if it was, if Star Wagon is going to be sold as an asset deal. And from an entity standpoint, they can theoretically step into this entity so that it doesn't necessarily have to be an asset deal. But anyway, like, there's $92,000 of rent a month. So $92,000 against whatever revenue before people and everything else needed to operate. The Star Wagons brand in its current form.

But James, just to back up, you're taking the 92 from Balboa. I thought Star Wagons operating off of Ralston.

So Ralston plus Yarnell is 90, 91.

Yeah, got it. Sorry, go ahead. I was thought we were talking just the map from Balboa kind of got there.

You can't run Star Wagons without Yarnell. I'm, I'm going back to 2020 and before, and I'm just seeing this lot, Yarnell, empty Fill up, empty, fill up. Okay, so Jody, buying 2,000 a month before people, before anything else. What does this tell us about a potential Star Wagons only carve out? There is something here that I'm trying to put my thumb on.

I walked away. I had to grab Sam's keys. What— I missed the through or the thread that connected this.

I think I'm just trying to—

I—

there's something here about from a competitive intelligence standpoint, if we've assumed— if we believe that they are just going for Starwagons and if we know that the trailers are generating $15 million a year, Yep. And even if we assume that, like, sorry, and if we assume that the deal that they would do would probably be for maybe just the brand and the handful of assets, are they really going to let it go? Like, if you're not taking Star Wagon as a thing, I don't know, I'm just trying to figure out where this lease could potentially how they would think about or treat this lease in that proposal.

Almost, I'd imagine they would need that land and the lease just to operate out of, so I doubt they have the capacity to take on all those assets.

Not in Hollywood, but they do have a bunch of land. The dealership group has a bunch of land up off of the 405. Not enough for 400 or 300 assets. But I think it would be—

yeah, I have to imagine their strategy would be to burden Coyote or HPP with these leases and just be like, we'll buy the assets, we're not taking on the liabilities, because they have— they would have the infrastructure to absorb it. So why would they take the lease?

And they would only have a year left on that lease. So, right. But then it's probably not all of the assets then.

All the Starwagons assets that they want. I assume the other ones they would like, like, well, this is just salvage. We're not getting—

this is honestly where it gets a little fucky because they have co-branded Starwagons by Coyote by Sunset.

Right. Because there's other trailers involved in that brand now.

So, okay, we can digest, we can unpack that a little more later. But I think from a competitive intelligence standpoint, because ultimately, JD, if you are correct, then it is less attractive to Hudson, right?

Yeah, it's like they're coming into— they're the first ones in an estate sale and they took all the good stuff. Now that they're just left with everything else that no one wants.

Yeah, they're all right. That's what we've been— that's what I've been struggling with the last couple of weeks since learning it was Galpin. I've been in a bit of a freakout because I'm like, they have unlimited money to throw at this thing, and I think that is potentially attractive to Hudson. But the one thing they said, and they were upfront with us, they were like, you know, there are other conversations going, but they're not as sophisticated or advanced in the conversation as you guys are. And I just thought it was really weird that he would characterize the other group as not as sophisticated as us because look at how sophisticated we are. But like, I just don't know who that is when you describe it that way until I found out it was Galpin. I was like, that makes sense.

Anyway, yeah, I look again, I think you guys are in the weeds on this, but from what I'm hearing, Coyote's got a bigger issue, which is they need to clear all this shit from their books. Selling the one piece of it or leaving the rest. I mean, look, they could asset sale it and hold the leases, but I don't think that's necessarily what they want to do because it gets rid of the upside for them.

They want to solve the problem, the capital T, capital P problem, right? And then they want to preserve some type of future upside thing, which now brings us back to their decision point here. Is less maybe on equity terms or post-transaction membership interest. It's not none, but it is more the believability or the defensibility of the model and the plan that we are effectively co-authoring with them and that they are spending a not inconsequential amount of time on. Yeah, albeit in the last month they have started using more stall techniques to like slow things down, which is why, you know, alarm bells go off. But can you switch to the summary dash real quick?

And then, Ryan, we'll cut you loose here in a second. Yeah, just really quickly on Balboa, it's, it's not as bad as I thought. So if you look at— I think what happened here is they're shoving a lot of the rent into the, um, into the building, right, versus the land. And if you back out of just a 50, you know, call it $50,000 a month for the land, you're getting at, which is about 50 cents a foot, you're getting at $41,000 a month for the building, which is the 37, which is the 87 minus 50 plus the $4,000 on the land. So that's the other carry. And that shakes out to about $275,000 on the building, which again is is overstated. But I think the loss there wouldn't be as bad. The challenge is you're going to be carrying that whole thing for, again, 9 months to a year. And how much term is left on it?

A lot. 2030.

Yeah.

Yeah. That's, that's the downside with that one. And I'd also really have to look at that Department of Water and Power lease because I just— it's weird that it's a different ownership. It's maybe— it's month to month, it seems like. And so you're trying to get someone to buy into the fact that they can have— they have to pay $6 a foot or $5 a foot for an office building when the land piece of it can go away is like a tough pill to swallow for most companies, right? So it gets me back to the fact that I Valboa, the more I think about it, but Valboa is going to be a challenge to get off the books. But anyways, I'll let you guys kind of do this. So what are we looking at?

This is the projection of both entities combined with the synergies that we've identified, assuming that all of the non- relevant lease leases to the ongoing operations can be fully taken off the books either through subleases or they'd be retained by HPP. So the personnel cost synergies and some of the other fixed cost synergies that we've identified, you're taking a company that did $3 million, $2.8 million of EBITDA in 2025 in our combined group of companies we call PacketCo, QOTY losing $23 million last year. So a net loss combined of $20 million. But after all the synergies, assuming $11 million in 2026, but that's in a merged state. The run rate on 2027, assuming everything is operational, would be $20 million of EBITDA.

How much of that rent factor have you guys taken out? So you guys assuming you guys totally clean up the rent factor?

So we assume that we're getting to $44 or $4.4 million in 2027. Um, they did 11 in 2025, but they've already moved some leases off the books here. So if we look at the rent analysis, we're assuming that we keep Penrose for the remainder of the term, but that's through 2026. Yarnell Cascades, we maintain the New York and Georgia properties, which we haven't touched because we don't know enough about them. Sataquay becomes our main transportation hub in the valley, as well as production supplies, and then Cahuenga becomes the Hollywood location until that lease runs out, and then we transition to a West Hollywood location, which is where we run kind of our hub in Hollywood. Um, so it simplifies the operating footprint of the business into two main hubs, one in Hollywood and then Santa Clarita. Everything else we're assuming is off the books in one way or another.

Right. So, okay. So I think you would just— for that analysis, we'd have to probably just think through if you guys are going to assume some leases, you know, probably for a year we're stuck with the majority of them non-performing, not getting cash in the door. And so I think that probably puts some dampen, but I think by, call it mid-2027, I think we should have found tenants and plug the holes for all of those, meaning we have people butts in seats paying rent. So, you know, if needed to help you guys kind of further flush this out, I could take a look at that and that, like, the rent analysis and give you kind of my synopsis on each one.

What would be a safe number to pencil around right now? So if we think about it being a full 12 months, yeah, um, what would be a safe number? Obviously best case scenario is it's neutralizing the costs entirely.

It's very site dependent. So like Norris, for instance, I think probably does totally get taken out, right? Where you got— where we can find someone in 12 months to take that. I think where it becomes a little more challenging is Balboa, right? It's like, how the fuck do we plug that hole? And I have to like look at the lease and understand the mechanics of it and figure out the sellability of it. Because the sellability of Balboa is not a 15,000-square-foot office building for $6 a foot. It's the fact that you have this DWP lease for 100,000 square feet. The challenge is How do you get someone comfortable with paying that type of rent? And I don't know about the signability of the DWP lease.

Right.

So there's things we have to kind of think about. Bo is the trickiest one. The Raulston ones, it sounds like you guys have some use for.

You could.

But yeah.

I think one thing, one thing to note though, and we talked about this last week, is that like if you just listed all of these at the same time, you would be competing with yourself, right?

Yes and no. What do you mean? Because you've got multiple offers on— they're so similar.

Ralston and Balboa. While not identical from a purpose standpoint, serve a very similar user?

You're right in a sense, but at the same time, the market's big enough and LA has enough trans, like, different users where you could fit different uses in there. I mean, I'd have to go in and take a look at the properties to assess. The different types of uses and understand kind of what the highest and best use would be, probably is existing, but there are kind of ancillary uses that I think could work. I mean, the challenge, of course, with Ralston now is you've got a year left of term, right? So it's like, I think that one, unfortunately, you probably— it's, it's one like similar to Winona where you go back to the owner and say, hey, let's, let's list this. And if we can get someone sooner, then you take them off the books. It's really their problem at the end of the day. I think the biggest one, just looking at the terms, is Norris, although I feel more confident about that given where the rate is. And then Balboa— big, big challenge at Balboa is we've got what we just discussed, and you've got term through '29. So there's a big risk there that you're unable to clear it and you're stuck with a pretty high rent factor. But going back to your cost analysis or like projections, even if you had to bear the cost of Balboa, that adds what, $1 million of rent almost? $80,000 a month, $90,000 a month, right? So it adds $1 million to your $22 million EBITDA. Like what I mean, backs out of it, right? Or whatever you guys were at, $19 million. So like take off a million of that.

That's the thing is if we can— let's say it's more about like what the, the operating business can do. If there's like pro forma adjustments that we say, and that's the leverage we have against HBP, is hey, you're contributing this dog of a lease here. You can either retain it and get some additional equity in the business, or like, this is why you're only getting X amount of equity in the business in the combination, because you're contributing things that are just not going to be helpful to the bottom line. Um, so it is a bit of negotiating, like, power that we have there, especially if we say like, look, we talked to our guy and he's confident in everything except this Balboa lease. This Balboa lease is the real issue. You retain that, you get X amount of equity in the ongoing business, um, additional, and then we can take care of everything else. Or you want to contribute it, fine, but that's how this affects cash flow and So on and so forth.

The one thing that we played around with but ultimately landed with this footprint was the Satoko reprice next year.

Right. That's another thing that we have to kind of start thinking through. And I think our extra exercise period comes out this year, end of this year.

Yeah, it technically opens 6 months before the thing. But I mean, on the one hand, this gives us a lot of— this gives us not a lot of leverage, but leverage, right? Balboa and Satoko are not identical, but they're similar, right?

No, I hear what you're saying.

Actually, maybe that's part of how we pull comps, is we list the properties and we clear them at ridiculously low prices, and then we go back to Go back to our girl and say, look, okay, it's more just like, I don't know, she would be listing it against us all at the same time, at least some of them, because like, I don't know, there's a lot of— there would be a lot of industrial M2 with close proximity to major highway and a lot of power, there would be a lot coming online at the same time, some of which is in a much better state than her homeless adjacent shelter is, right? Um, but we still have— and like, as you'll see here, we are anticipating to continue on at Sataquay, um, because it is ideal for the combined pro-supply transpo operation, right? Yeah, it gets fed by the golf course Cascades and Yarnell with— because you are offloading Balboa and Ralston. And Penrose and Norris. Um, but it is consolidating everything into this like one space, and I think we even, you know, assumed an increase from 85 to 125.

Okay, yeah, we assumed 125.

125 for, for Saticoy.

It raising right now, we're at 76. I think we jump to 81 or 86, and we're assuming the renewal will come in at $125,000.

If we can get that, I'd be stoked.

In our defense, you said the same thing on getting her to continue at the previous lease's rate.

The best thing you have going for us is that she seems content on accepting a lower rent as long as it's coming in the door. And she likes you guys, apparently. And that's— I mean, dude, if I were— I mean, we talked about this before. If I were her, I wouldn't have done what she did for you guys. I mean, I love you guys, but that's crazy. She left millions of dollars on the table.

Mm-hmm.

Ryan, money isn't everything to her, I guess.

Yeah.

No, I mean, look, if that's She shouldn't be a landlord if that's the case. Okay, well, look, I think it seems reasonable. Let me know where I can help in terms of giving you guys an opinion on time. But big picture, James, I would assume 12 months of downtime for any of the real estate until we can get butts in seats. Paying rent, like a subtenant or whatever, in, and anything less than a year from when you would take over, so like mid-2027 renewals, are gonna be nearly impossible to get cleared. We're just gonna have to do similar to what you were doing with Winona, is market it and have the tenant go direct. Like, it would basically be a discussion with the ownership to saying, let's get it leased. And we'll help you do that. And, um, that's, that's the end of the story. Yeah. So I think for the time being, um, let me know if you want me to do a side-by-side. Happy to do that.

I don't think it's necessary. Yeah, this has already been the only area we would need I think the only area we really need to maybe— I don't know if flesh out's the right word, but more or less just arrive at a soundbite for what the plan is there is Balboa. Because it's so fucked up and clearly just like the engineering of D'Argenzio on his way out the door.

Yeah.

Sorry, on his way in the door.

I have the lease files for both of them. Let me just take a look if you can. You don't have the leases?

We don't have them. We don't, we don't like, so here's where we're at, I guess, just big picture. We have everything we need now to come to some sense of like a term sheet that, or LOI type device. We gave them a valuation framework last Friday, which is different from a term sheet, basically saying if you use conventional valuation methods, this thing doesn't make any fucking sense and doesn't accomplish the goals. But then we proposed more of a blended framework where we end up with like a 90/10, 90 us, 10 them, or some other like toggles and stuff. But like the Oxure is very much like, let's make sure the model works, let's get confidence in the model. We heard on Friday that from a margin of error, margin of safety standpoint, we are there, having gone from $7 million EBITDA to roughly $18 million. Um, so we're inside their like buffer that they want to see, and now it is really shaping up to be just like a pure commercial terms negotiation over like who gets what and how some of the stuff gets divvied up. And we have proposed as a mechanism this device wherein if they hold the lease back, they get more equity.

Sure. So I think the soundbite then for, um, Balboa is— I think it falls within that framework of saying I personally do not think that you could find a— assuming, and again, you probably have to frame it like this, is assuming that the leases are separate, meaning DWP is under one lease and it's on a month-to-month and D'Argenzio holds the other lease. And it's a fixed term, it's going to be nearly impossible for us to get a new tenant to take and pay $6 a square foot with the assumption that they're also going to get the benefit of the other lease. Because at any time, even though DWP may say otherwise, they could take it away. We saw that with the airport. And the concern, I think, for us is that if we probably for assumption purposes have to assume we do a market deal, which means we get— if we were to sublease them both out. Now, this is where I think the bigger challenge is, is like, I don't even think we could— like, the two options you have with that property is either sublease or assign the lease. You probably would do it as a sublease. And I can get into the reasons why. But if you were to sublease that space, I don't think you could get a tenant to pay that dollar per square foot number. Like, I think there's very little chance they would, because you would also be saying, well, you could also get the land. And we'll transfer that to you. But it's a month to month. So, tenant's going to look at that and go, no. The only thing you could do is saying, have the rent be, be toggled, basically say, so long as this other lease remains in effect, and it wasn't terminated by you, that's the subtenant. In other words, DWT keeps your space intact, then your rent is this. But if DWP takes away that lease, the rent drops. The challenge with that, of course, I think a lot of companies that would bank on that space as being an operational, like, headquarters for them, doesn't work if the DWP lease goes away, right? It's like you've just taken away our yard. So I think you guys, the talking point to them is we have to—

I'm going to share my screen real quick and just show you what I think we're talking about from the drop-off. Not drop-off, but drop— yeah, don't leave, don't leave. Um, we're talking about this. What's the square footage of the LADWP?

Wait, it says 100,000.

It's not that. I think it's the lot that they're on. It's where all those vehicles Yes, that's LEDWP.

Yeah, I'm pretty sure.

What is the other Balboa lot square footage?

So you've got 14055 is 25,000 square feet. I believe that's the other side of the building.

Okay, the building is 14,000 square feet.

Yeah, the parking lot to the north of it is the 25,000 square feet, I believe. And then the 100,000 is to the south of it.

I think you'd probably move it, move it up. Yeah. And send it there. Yeah. That gets you to about $25,000. And probably the back area, whatever else. Yeah, that gets you there in the $100,000s below.

Holy shit.

That's why I'm saying like, I, I think the $100,000 is that just that lot below. And so what you're talking about is a $6 per square foot office building.

That's That doesn't make any goddamn sense.

It— again, it was probably the Dergenzio.

Yeah, he probably worked out a deal where he's like, well, this whole lot should be worth this amount of money, but I can't charge you for the LADWP. I can just transfer this contract to you. It's inherently valuable in itself. Pay me the lease.

That's exactly what I think happened. Yeah. The problem is that that other space is month to month. Technically, it could fucking go away tomorrow. And then you're stuck with a $6 office building that doesn't have any fucking parking. Like, I don't even understand how this place is—

We have the studio services sale packet somewhere in our company. I will ask Julie where it is. I got Aaron Skalka on the phone. I'm gonna ask him the same question. Aaron.

Hello.

Yes.

Hi.

Studio Services Building, back on Balboa. Yes. When you were looking at buying that, do you remember the LADWP kind of easement device, how that lot came together?

Give me 30 seconds. I just want to open up. I think I have that right here. Um, there was an easement that ran across their parking lot, um, and they paid something really nominal for it. I, I want to say $10,000 a year. It was something really stupid. Stand by.

So what we're looking at for us, I guess, context is Balboa, the office building, the 14,000 square foot office building is currently being leased to the OD by Sunset at $5.10 a square foot, basically $80,000 a month. Sorry, JD, what is it?

$581.

Yeah. So like $6 a square foot. It's $85,000.

The building is $85,000.

The building is $87,000 for 15,000 square feet. The LADWP is $4,100 for 100,000 square feet.

Yeah. Okay. So it's, it's $85,000 for the building, which was the former studio services spot. And then it's $4,000 a month for LADWP space.

Just, just bear with me while I look through my stuff here and try to find that. I haven't looked at that in a minute. Yeah. Okay, let's see here.

James, I'm going to show you.

Okay. Here's—

when was that, 2014?

Looks like 2017.

Yeah. You know, yeah, because here come those dumb fucking red trucks that he had.

Yeah.

Okay. Let's see if I can see it in their financial statements.

James, it's not as bad as I thought, but you got to take a look at this.

Okay. Hang on, I'm going to take this with me. I got to get in that truck because I don't hear anything. I'm sorry, I don't want to hold them up. Um, do you have the financial statements and all that stuff from that?

I need to go.

I have the packet somewhere.

I was just saying to JD, I— Julie will know where it is.

Um, hang on one second. I'm going to send you this. Because it has to be in their financial statements somewhere.

Yeah, I'm going to track that down. But what you're already confirming for us, though, is that it is— well, it's pretty clear that this was a compensation device in the ZIO transaction because this is just outrageous. How they got away with it, I don't understand.

James, I'm going to show you this. It looks insane.

That would be the only place that I have it. If you can sort of mine it out of that, I just can't look at the moment.

Yeah, yeah, yeah. Send me that and then call me back when you have a minute. We'll catch up.

Yeah, I just texted it to you. Yeah, it was something really stupid, but the problem The problem with it was that it was only like a 10-year thing. Like it was going to be renegotiated in a fairly short period of time, like after that. So it was sort of an unknown.

Well, it's on month to month right now. Yeah.

So maybe they never— they never did a thing. I don't remember.

They never did an extension on it.

Yeah, but what I can't figure out is that you drive by there now, they've put up these big sort of like Quonset hut sort of deal.

Yeah, yeah, yeah.

You're not supposed to be able to put any structure under those.

But actually that explains the why they put those types of structures up there. Is it prior to that it was just like shipping containers and shit. But those things are— I won't say portable, but they are easily constructed and deconstructed. We looked at them for Peoria. Yeah. And they're also not expensive. They're like $15 grand.

Yeah, there was a whole thing about that, and I, I, I'd have to like dig a little bit into what what that was, but it was problematic in that you needed more under-roof space, but you couldn't really put anything there other than parking vehicles that were like immediately movable. The way that the—

it was like, it was very similar to our Burbank lease. Yeah, is what it sounds like. Okay, so what we're learning here is that we obviously know that they are getting fucked on the office, that the LADWP space is on a month-to-month and it has problematic terms associated with it in terms of what you can and cannot do on the land. Um, and that might be enough for now for where we're at.

Okay. Um, yeah, I'll call you this afternoon.

Okay, sounds good. Talk to you then, brother.

Bye.

Ryan, I just sent you the property, uh, from title, the lot line. If you take a look at how it's laid out, it like cuts diagonally through the property.

Oh, whoa.

Um, and so DeGenzio owns the building and then the lot that's diagonal, and then yeah, it's this month-to-month piece So typically in these situations, you will have like, it sometimes will set up for an initial term that then rolls month to month. And I think maybe the risk then for it to go away, it's not as bad as I thought. The risk for it to go away, I think would have— it's like, it's rare. So maybe there is a chance where it isn't as bad. But I think as it sits right now, you could try to use it to your advantage to basically say, look, this embedded risk in this. It's not a, it's not a fixed term, and it could go away. But it's a very, very kind of weird layout.

Okay.

All right. This has been very helpful, Ryan. Thank you.

Yeah, well, you guys, we will be in touch. And then I guess the— do you need me to do anything to begin with or you guys are going to just deal with—

No, I would say like we're going to— we got to— we're trying to just cattle prod the negotiations along as quickly as possible so that it's hanging out there for as little time. But they're going to move at their own pace, honestly, even though they've committed to having the earnings drag solved by the end of the year. I would say that no action required on this right now until we, you know, God willing, get some types of terms locked. And then at that point, we would move into formal, like, diligence, but also execution. Like, part of my plan here to just get them further on the hook is in our LOI. Scope diligence so that— like, they're going to have to do a bunch of diligence on us and/or we'll structure enough risk away through preferred losses or whatever. But there's not going to be no diligence here, I guess is my point. But at a certain point, in the diligence phase, we will— we've pushed the kind of start date out to January 2027, but if we get it done in the back half of this year, like, we will want to hit the ground as close to walking, if not running, as possible. So all that is to say, like, in the diligence phase, we will want to move towards an execution kind of posture very quickly, up to and including getting the ship listed, that we're going to— that clock can start whether or not the deal's done.

Makes sense. All right, well, look, I'll stand by. And let me know. Uh, you know, best of luck, I guess, with trying to put it together. Talk, man.

Long time coming, right? Like, how long have I been—

I've been looking at these guys' stock and reading up on the reports. I mean, they're down 3 years.

We've been talking about this 4 years.

I know. I mean, I've never seen their stock— this is atrocious.

Is it under $6 again? Yeah.

I mean, they've lost 97% of value.

Almost under $6 after a 7-to-1 reverse.

No, I'm looking at the 90— yeah, I mean, when— yeah, I've looked at the top price they ticked after the 7-to-1 was $2.63 a share. They've lost 97% of their value. And Victor's— Victor's a— he's an egotistical dude, man. He doesn't want— he want— doesn't want a big L like this.

Yeah.

So, all right, um, I appreciate you guys with the updates.