All Forum Posts by: Paul Klei

 Interesting. I had never looked at it that way. Should I approach the lease like a commercial lease?  An escalation provision with an annual set percentage increase, for example. 

 That brings up a concern of mine. There is language in the boilerplate lease that allows them to stop/lower rent payments or remove the billboard if they determine profitability has become diminished. If this cannot be removed entirely, this can perhaps be mitigated with a minimum base ground rent. But there is also a clause that allows the termination of the lease. I am unsure how to mitigate this or if it is even possible to have it removed or altered.  What's your experience with these clauses? 

They want at least a 25-50 year lease. Their boilerplate lease is an initial 15-year term, followed by two 30-year terms, followed by a year-to-year option not to exceed an additional 30 years. 

Negotiating was their idea. The exact numbers have yet to be hammered out but traffic count/views, the company's rate card, and a 15-20% base ground rent gives us a decent annual payment. No, it is not 200k, but when escalation and/or revenue-sharing provisions are included, over the span of a 75-year lease the math adds up to quite a bit. A single percentage point could make the difference between a 4M, 8M, or 15M gross lease. And obviously that is an accumulative number. Hence my desire to structure the lease to be as long/large as possible to then sell/borrow against it, rather than take the annual payments. However, if I was able to borrow against the land itself by claiming the advertising company as a tenant, I would do that instead. You said you have received never received pushback when valuing yours at a reasonable cap rate - what was that cap rate? 

Yes it is. I want to structure the lease very carefully to give myself monetization options. 

Interesting idea. Yes, I do own the land that the billboard will be built on. The land, however, has a rather low appraisal. Unless the billboard will cause the appraisal to grow exponentially, I would not have access to nearly as much capital (i.e., $1800 land appraisal vs $15M+ gross lease). I'm looking for a straight asset collateral lender. Does that exist for this type of asset class? 

I am negotiating a billboard lease. I want to structure the lease to best facilitate a loan against the lease's income. I'm considering a 75-year lease with annual payments, escalators and perhaps revenue-sharing. Does anyone know of a lender/type of lender that will accept billboard income as collateral?