WMG Acquisition Corp. (the “Company”) entered into a lease (the “Lease”) for its new Los Angeles, California headquarters. The Lease between the Company and Sri Ten Santa Fe LLC is for nearly 257,000 square feet of office space located in the Ford Factory Building, 777 S. Santa Fe Avenue in Los Angeles, California. The initial term of the Lease is 12 years and nine months beginning on the later of August 1, 2017 or the date that a temporary certificate of occupancy has been issued for the premises, and the Company may exercise a single option to extend the term of the Lease for 10 years thereafter. Rental payments by the Company under the Lease will total approximately $10.0 million per year, subject to annual fixed increases, excluding rent abatement of 75% for 16 months beginning in month two of the Lease term. In connection with its entry into the Lease, the Company will post a $7.724 million letter of credit with an increase of $7.724 million to be posted on the later of February 15, 2017 and the date that the Company first requests payment of any of the landlord’s (tenant improvement) allowance. The letter of credit reduces over time to zero no later than the first day of the twelfth year of the initial term, subject to certain conditions. The Company currently expects to incur approximately $40 million to $50 million in capital expenditures over the next 18 months, net of the landlord’s allowance, associated with a build-out of the space.