I worked an area and sent letters to land owners requesting a lease. An owner is interested and said he wanted to be paid for the 20 or 25 year lease term “up front.” I said I would have to get back with him on it. Annual ground rent would be $4,000, so the request is for $80-$100K paid at the front end of the lease. The highway is a lesser traveled one (15k traffic count) but is by the airport and will grow over time. I don’t really have that kind of capital to put towards a down payment, but I thought I could maybe flip it to another outdoor company after getting the permits, but before a sign went up (which is when I would agree to pay the amount). Question 1: Should I make any kind of adjustment to the cash flows like inflation adjustments for the ground rent amount over time. I’m not sure about discounting the future cash flows to today. Seems I’d have to account for the time values of money. I’m unsure of what the value is - what amount I would pay today up front. Question 2: I’ve seen companies make payments for a permanent easement. Would another company buy a lease like this that ISN’T a permanent easement but is just a prepayment of the rent for the lease term (I’ve never done one of those either)? Thanks.
20y up front is bull. You’re getting played. Offer yearly and if they don’t take it, cut your losses and find a different location.
Hope this helps!