All Forum Posts by: Shane H.

Quote from @Shane H.:

Quote from @Paul Klei:

Would you mind elaborating on this? What is the revenue share that you would receive if base rent was breached? How is yours structured? If, for example, your base rent is 20%/$5000, and years later 20% is worth $10,000, do you receive a revenue check for the extra $5000? 

 Correct. Obviously you’re going to read your lease language and ensure it says that. 

 What language is used in your lease? Something like "Lessor is entitled to any revenue above and beyond base rent, totaling and not to exceed 20% of Lessee's gross revenue"? 

Would you mind elaborating on this? What is the revenue share that you would receive if base rent was breached? How is yours structured? If, for example, your base rent is 20%/$5000, and years later 20% is worth $10,000, do you receive a revenue check for the extra $5000? 

Billboard income doesn't always last 50 years. Forces like city ordinances/Caltrans/public opinion/eminent domain by states seem to cut the long years of income stream. When a community wants the big eyes out (think Great Gatsby) they find a way.

@Shane H.then there is Prop L and the City of Pomona lawsuit

@Shane H. most billboard companies do not build the structure, nor maintain it, nor do they finance it. 

$10000 a year rents worth about $70000 loan amount. Commercial loans do not go that low. This is a hard money loan. Rate will be ugly. 

Don't know if they are building a freeway exit 14 x 48 foot big one costs $80000- $140000 or a LED one $150000

Loans don't go 50 years. Commercial loans have to be renewed every 5 or 6 years. It will be amortized over 3 years or due in full something like that monthly $2320 

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. 

No you cannot use income that doesn't exist yet to build the billboard. That's like  construction loan that you want which I know of no lender that does small commercial construction on a billboard.

Hard money at 40% value of the land alone, personal guarantee, you have to qualify the land has no income, probably 12 months term due in full.

What is the raw land worth? 

@Shane H. some of this is market specific and will depend on how sophisticated/aggressive the advertising company is that someone is negotiating with. For example, in my market, two companies own 95% of the billboards along the interstates. Neither of these companies offers nor agrees to revenue share as part of their leases. So regular base rent escalations is the only way to stay on top of the market.

Quote from @Paul Klei:

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)? 

You should absolutely, ALWAYS negotiate rental escalations. The worst case I've seen is a billboard lease signed 25 years ago for just a few hundred dollars annually, with no escalations and no date of termination. Market rate for that billboard now is $5,000/month, and all the current owner gets is a couple hundred bucks and there's nothing he can do about it.

Remove any language that allows them to lower base rent or remove the sign at their own discretion. Always require specific terms of notice and a defined lease length. Require additional compensation if they want to extend. Do not let them extend indefinitley. DO NOT GRANT THEM AN EASEMENT.

Regarding your question, are you referring to appraising the lease independent of the real property that it's attached to? If so, I don't have any experience with that. But I would imagine the more favorable terms for the property owner, the more valuable the lease will be.