We Buy Billboard Land Leases of Any Kind
For many decades, billboard companies have maximized the use of their resources by leasing land rather than purchasing it outright. These businesses enter into land lease agreements with individual property owners, local governments, railroads and other entities.
When a lease agreement is negotiated, the billboard company typically pays the landowner in one of two ways – at either a set rate or as a percentage of revenue. Fixed annual rates are most common, particularly in non-urban areas. Some fixed-rate agreements have escalators that account for inflation. For example, once a year, the rate might be recalculated to account for changes in the consumer price index (CPI). Either way, the value of a location is directly related to the “daily effective circulation” (DEC), which accounts for how much daily traffic there is.
Advantages of Land Lease Buyouts
Sometimes, property owners who receive lease payments face changing circumstances. Some need a cash infusion, while others are motivated to sell their leases for other important reasons, including risk mitigation, changes in personal circumstances or tax benefits.
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Adding to one’s liquid assets may be attractive for many reasons – to grow a business, pay off debt, invest in the market or pay college tuition. Or, perhaps the property owner needs cash to complete another real estate deal. For example, a farmer may have an opportunity to purchase more land.
Changes in Personal Circumstances
Sometimes, it is necessary to sell a billboard lease in order to retire, settle an estate, dissolve a business or conclude a divorce. For instance, when heirs cannot agree on whether to continue a billboard lease, it may be time to sell it for cash.
Potential Tax Benefits
Payments that property owners receive in land lease agreements are typically taxable as ordinary income. If a billboard lease is sold, the taxable income (periodic lease payment) is eliminated.
Although the cash paid in a lease buyout is taxable as a capital gain, it is often possible to avoid capital gains taxes on the proceeds if the money is promptly reinvested in another property. This is known as a 1031 exchange. It may also be possible to enjoy the tax benefits of rolling the proceeds into a 401(k) retirement account. When it comes to the tax implications of billboard leases and lease buyouts, always consult an attorney regarding your situation.
Mitigate Lease Risk
Although billboard leases are typically less risky than regular commercial property/building leases, they still pose certain risks. Lessors may be adversely impacted by consolidation within the billboard industry, storm/weather damage and changes in traffic patterns.
Additionally, when lease payments are tied to billboard advertising revenue, property owners may be hurt by long-term billboard vacancies. Unexpected lease terminations are an ongoing risk for property owners. Sometimes, a company leasing land for a billboard can terminate the agreement with as little as 30 days notice.
However, when the land lease is sold for a lump-sum payment, the purchaser assumes the risk going forward. Furthermore, it is important to understand that when you sell a billboard land lease, you still own the property.
Contact Us Today
Are you a property owner with a billboard land lease? Are you interested in moving from periodic lease payments to a single, one-time lump sum payment? If so, Outdoor Equities can help you – we specialize in billboard land lease buyouts. We would welcome the opportunity to discuss your unique circumstances and to answer your questions. Please contact us today, or fill out our form to get a quote.