Billboard lease proposal...how much for a lease? $1000? $2000?

[Oscar Toledo]

We own some commercial property on a very busy highway. 250,000 cars pass by everyday. We recevied a proposal from a billboard company to build a full sized billboard. the research has been conducted and a written lease has been written and presented to us for 1k/mo, 20 years + 20 yr option, with 10% rate increases every 5 yrs. We are very interested, but what is a fair rate? I think that billboards here run $5000-10000 (maybe more?) a month here because it's so busy, but I'm not really sure.

From what I'm told and from what I've researched, you can expect to recevie about 15% to 20% of the gross monthly revenue that the billboard company gets. I am also going to required annual increases in rent based on the CPI index, among a few other things.

Does anyone have experience with this? I don't want to have any regrets.

Thanks in advance for your responses! 

[Oscar Toledo]

Yes of course. I am traveling right now otherwise I would take a look at my contract. For now I'll try to go off memory.

1. Ensure you specify exactly where they will be allowed to erect the sign. One property owner said he didn't do that, which gave them free reign to move the sign anywhere on the property. He couldn't sell the property because no bank would give a loan on it with that in the contract.

2. You may want to mention that you will not permit any adult content or advertisements for a competitor (we will be operating our business next door). You can also ask for 2 months of free advertising, if you pay for the skins.

3. Ensure they have an insurance policy and put you on it as an additional insured.

4. Most companies want  a twenty year lease. We are going for ten with one option to extend for ten years. Gives us more flexibility.

5. Mention operating hours and specific easements or service procedures so there aren't guys putting up signs during you or you tenant's business hours. 

6. It seems as though the going lease rate is 15%-20% of the monthly revenue that the sign generates. Some property owners were able to add a portion of the sign company's revenue (say, 10%) as a bonus, but sign companies are getting away from that model because there are just too many billboards any too much number crunching. They would rather just give an extra 2% per month.

7. Ask for an artist's rendering of the sign so you can see how it will look on your property and ensure it does not interfere with your signage.

8. Most importantly!!! Have an attorney review you contract and make changes. The contract they sent us was one page long, and our attorney added 3 more pages.

8. I'm sure I forgot a few things,so I'll update when I get home.

Good luck!