4538 Hockaday Drive

Dallas, Texas

75229

Fax: 214/351-3843

 

May 12, 2004

 

Mr. Marc Taubenfeld

McGuire, Craddock & Strother, P.C

3550 Lincoln Plaza

500 N. Akard

Dallas, Texas 75201

Fax: 214/954-6868

 

Re: Further information about the Lorax Property in relationship with the Proposed Settlement Agreement between the Lorax Trustee and J. Baxter Brinkman

 

Dear Mr. Taubenfeld:

 

Yesterday, I visited the building in Athens with Rudy Sauseda and Chance Sauseda in the morning and then with Dick Thorn in the afternoon. During the first visit, I supplied to Neil Nivert a signed release form that was generated by Brinkman’s attorneys. During that first visit I was able to physically examine and walk through the entire building, with the exception of the space currently occupied by Texas Ragtime. It is an undeniable fact that Dallas Manufacturing or other Brinkman organizations are occupying and utilizing virtually all of the building with the exception of Texas Ragtime space.

 

The following analysis of the building space and related rents that are due and unpaid for the use of space in the building are as follows:

 

-Rudy Sauseda Space: 22,000sqf @ contract  - 9/01/02 to 5/01/04           =          $          69,762

-ATCO option space: 44,000sqf @ 2.00 - 9/01/02 to 5/01/04                     =                      154,000

-ATCO vacated space: 66,000sqf @ 2.00 - 1/01/04 to 5/01/04                  =                      55,000

-Diesel building space: 12,000sqf @ 2.00 - 09/01/02 to 05/01/04              =                      42,000

-Dick Thorn’s space: 33,000sqf @ contract - 09/01/02 to 05/01/04             =                      119,901

-DMC on original space: 33,000sqf @ 2.00 from 11/01/01 to 05/01/04       =                      170,500

-DMC for option space: 33,000sqf @ $2.00 from 09/01/02 to 05/01/04       =                      115,500

Subtotal for repaired and fully operational space 243,000sqf                =          $          726,663

 

-Two main rooms not fully repaired consists of 270,000sqf less 35,000sqf,

that has been brought into full service with roof leak, clean up

and re-lighting completed: 235,000 @ 1.00 - 09/01/02 to 05/01/04                        =          $            411,250

Repaired space: 35,000sqf @ 2.00 – 09/01/02 to 05/01/04                       =                      122,500

-Outdoor space which does not have walls but does have concrete pad

and water proof roof, which is being fully used for pallet storage:

10,000sqf @ 1.00 from 09/01/02 to 05/01/04                                            =                        17,500

 

Total amount for all space occupied (523,000sqf) as of 05/01/04                          $        1,277,913

 

The following issues need to be discussed and addressed within the context of any settlement by and between Brinkman and the Lorax Trustee.

 

1.       The ATCO space that the Trustee settled and received money in December of 2003 has been fully occupied by Brinkman and yet there has been no mention of any new lease agreement between Brinkman and the Trustee.

2.       The ATCO option space relates to space it had previously occupied and was fully operational.

3.       Rudy Sauseda’s space was completely being used as storage and staging for loading transport trucks.

4.       Rudy Sauseda’s locks and security devices for his 22,000sqf space have been cutoff and removed and he has no access to his lease area without supervision of Brinkman’s personnel.

5.       Rudy Sauseda’s property, machinery and material that had been securely stored in his lease space and other previously unoccupied portions not under lease are missing.

6.       Dick Thorn’s 33,000sqf are being fully utilized in Brinkman’s operation and his locks and security devices have been cutoff and removed.

7.       Dick Thorn’s locks and security devices that were on the Diesel building where his material and inventory were being stored prior to occupancy have been cutoff and removed. He has no unsupervised access to his property or his previously leased space.

8.       Dick Thorn has leased new space, in Athens for the manufacture of his coffee brewing equipment at $ 2.25 per sqf.

9.       The areas in the building where the roof has not been repaired are being used to store various items such as: bolts of cloth, bar-b-que sets, dog beds, pallets, shipping material and other items. The space used in the not yet repaired areas varies from 10% to 50% occupancy but all of the two main rooms are being utilized by Brinkman to some degree.

10.   Security devices such as infrared curtains have been installed in different portions of the building to secure and monitor the different portions of the building.

11.   An estimated 450 high intensity industrial lamps for use with low or high-pressure sodium type bulbs (with the faint orange colored light) have been relocated with some being stacked upon each other. This is property of Lorax and valued at approximately $ 300 or more per lamp. Over forty of these lamps are used in relighted portions of the ATCO space. The purchase value of these lamps is over $ 135,000 and has not been previously mentioned or added to the value of the assets of Lorax.

 

None of this information has been brought to the attention of the Creditors Committee or examined by the Trustee. The Trustee has at least failed in his fiduciary duty to…

    • provide a credible and complete examination of the building and its contents therein,
    • secure the assets of the estate,
    • maximize the estate’s value due to rental income from Brinkman,
    • not pursued the resolution of the illegal take over of the building, which was done without any title transfer or judicial ruling whatsoever
    • not sought restitution for the lost lease income from Thorn and Sauseda and the re-institution of their leases and stored property
    • not regained physical control of the building and the operation of its spaces for sub-lease.
    • not sought or even mentioned potential additional compensation for the acts perpetrated by Brinkman in the causing of the bankruptcy, see your quote from the most recent motion to the court, page 8 of 12 – paragraph 8, “In fact, non-payment of rent by the subtenants at the Property, particularly DMC, who not only failed to pay rent, but took over other space outside their subleased premises, all of which they failed to pay rent on, by way of which, DMC precluded entry on to the Property by other subtenants who had signed their own subleases with the Debtor, thereby further depriving the Debtor of another stream of income, ultimately causing the bankruptcy filing.

 

The equivalent annual rental income from Brinkman for the space he is occupying is $ 801,000 per year. Using an income basis for determining the building’s value and an interest rate of 10% results in about an $ 8,000,000 value for the building. 

 

With the collection of the outstanding rent income due to the Trustee from Brinkman, Lorax could easily resurrect itself from Chapter 11, pay off the administrative expenses and have cash left over for operating needs. It is that course of action that I am recommending the Creditors Committee communicate to the Court and the Trustee.

 

Sincerely,

 

 

 

 

Keith-Allen: Langenbeck

 

Cc via email to:

Rudy Sauseda (E-mail); Art Leerskov (E-mail); Marc Taubenfled (E-mail); stevegrant@stevegrant.com; megan_cooley@khh.com