Hello Frank & All,
Whats is the best way to go about selling a ground lease? Do you address this in any or your articles or post? What factors determines what the lease and permits are worth? Is it best to try and sale myself or have a third party do?
Anything you can offer would be helpful
What you do is prepare a sales package with a copy of the lease and permit, the address of the sign location, some photos with red arrows drawn on showing where the sign would go, some reasons why it’s a good location (traffic count, near some landmark, etc.) and priced as “best offer”. Send it to all the billboard companies in that market. See what they offer on it. Try to get two that are interested, and play it off between them trying to get a higher bid (just like eBay). Pick the winning bid (not always the highest, as you still have to get someone to pay you and the bigger company may be a safer bet than the small guy) and try to get it closed and funded.
It’s no different than selling a car, except the price is much more negotiable probably.
Thanks for the info Frank. Is there anyway to determine what the lease & permits are worth, to know if the offers are reasonable?
The formula would be to figure out the prevailing market ad rents, subtract the estimated costs, that would give you the net income, and then value the net income at a cap rate (to make it easy, use 10% so you simply take the net income and multiply x 10). Then subtract the estimated cost to build the sign from that number. Of course, a 10% cap rate is very aggressive. The real number is probably half that amount.
But again, it really only matters what the market will bear, and you only know that by taking offers.
How do you complete the transaction? Meaning what form of payment do billboard companies use and how do you protect yourself to ensure that you get your money. What forms do you need to transfer the permits and ground lease? I see you said its like selling a car, so its just between you and the billboard company? There is no type of closing like there is on a house where you have third parties?