All Forum Posts by: Paul Klei

There is also royalty-based financing, for example for oil & gas or music royalties. This may be the closest analogue to what I am seeking. I.e., financing based on future income. 

 Correct. Thanks Shane. I wasn't aware this was such a unique idea. Assets are meant to be leveraged. There are HELOCs, portfolio loans, policy loans/IBLOCs, and passbook loans to access the value in the equity in your home/investment property, stock portfolio, cash value of a life insurance policy, and savings accounts. Businesses have accounts receivable and revenue-based financing available. 

A cell tower lease, a solar farm lease, or a billboard can be significant assets that, in my mind, should be able to be leveraged as well.

 Construction will begin after we sign the lease. The first payment will be made after construction, in advance annually. Once the sign is built, and payments have thus begun, is there a financing option - that is what I am trying to determine. I apologize for the lack of clarity. The land itself is a vacant lot along a freeway in New Boston, TX. I don't live there so I couldn't tell you a lot about the area but it could have future development possibilities. Other than that the billboard income is what I was planning on using as a value-add to obtain financing. And to be clear, the financing is necessarily tied to the underlying land, as opposed to the lease itself, independently of the land? Meaning, can I borrow against the lease income itself?

Land is commercial with no building. 

Company is Lindmark. 

To clarify, the lender does not consider a signed lease agreement in it's valuation until the first payment, even if the agreement sets out a minimum base rent, rather than just revenue share.  Correct?

Vacant land with a sign has little value meaning no value? If a little, how is that value calculated by the lender? That is my main concern - to monetize the lease or lease/land combination. 

 I am presently negotiating a lease to allow a sign to be built on my land. I'd like to monetize the lease. In your experience, how is a lease appraised by lenders? I was originally trying to get the largest gross value possible with base rent, an escalation provision, and a revenue provision on top. Over a 75-year term it would add up to quite a bit. However if valuation is based on a multiple of annual revenue, perhaps I need a different strategy. In any case, what provides value to a lease in the eyes of a lender? And once the lease is signed and the billboard is complete (they'll pay annually in advance), how/where do I seek financing using the billboard income? Thanks

I am presently negotiating a lease to allow a sign to be built on my land. Is there a way to remove or mitigate the sole discretion language that allows them to remove the sign or stop/lower rent payments? They are also offering 20% of revenue, seemingly without a base rent, although I prefer both for the sake of valuation. DOT says traffic will increase soon and I'd like to account for that. I am considering compromising at 10% of revenue for base rent and 10% revenue share. I am receiving mixed advice of the necessity of an escalation clause if I am getting base rent and revenue share. In your experience, are escalation clauses common/reasonable in this situation? Thanks  

I'm presently negotiating a lease to allow a sign to be built on my land. Is there a way to remove or mitigate the sole discretion language that allows them to remove the sign or stop/lower rent? I want to monetize the lease. Are you familiar with how leases are appraised in terms of how they are structured (length, escalation clause, etc)? 

 Also, I'd like to negotiate out the sole discretion language that allows them to remove the sign or lower/stop rent payments. Is there a way to remove or mitigate that language? And, to your knowledge, does that language affect appraisal of the lease? Thanks!

 I am negotiating a lease to allow a sign to be built on my land. They are offering 20% of revenue. I would like a base rent so that there is predictable income to better facilitate lease valuation because I would like to monetize the lease. I am considering asking for 10% of revenue as the minimum, plus 10% variable revenue share. I would like an escalation clause for the base rent but I'm receiving mixed advice about this. I've been told leases are appraised at 8-10x annual revenue, as opposed to gross lease value. Do you have any idea how leases are appraised in relation to how they are structured, escalation clauses, etc.?