Percentage Leases and the Advantages of Regional Malls

The differences in the ownership structures of downtown retail districts and shopping centers may give rise to varying space allocations and rental contracts found in these markets. This article specifically examines the value-enhancing aspects of percentage leases and explores the mechanisms of tenant mix, risk sharing and rent discrimination through which this value is created. The use of percentage leases may lead to superior returns by allowing a rent structure that approaches perfect price discrimination. Risk sharing through the use of percentage leases may also create value for the property owner and lead to lower rents for tenants.

Ethical issues involving long-term land leases: a soil sciences perspective

As populations grow and arable land becomes increasingly scarce, large-scale long- term land leases are signed at a growing rate. Countries and investors with large amounts of financial resources and a strong agricultural industry seek long-term land leases for agricultural exploitation or investment purposes. Leaders of financially poorer countries often advertise such deals as a fast way to attract foreign capital. Much has been said about the short-term social costs these types of leases involve, however, less has been said about the normative dimension of their long-term environmental impact. We therefore will focus on the likely impact such deals have for soil conservation, by (1) briefly introducing the basics of long-term leasing arrangements by comparing land leases to the renting of buildings, (2) explaining from a soil sciences perspective the difficulties in assessing the current value of an estate and in calculating the damages of soil erosion and degradation, and (3) show how difficult it is to incentivize the conservation of soil quality when one cannot sufficiently and cost-effectively valorize existing environmental capital and eventual future damages. Attempting to oblige tenants through contracts to invest in sustainable stewardship has limited potential when liability payments do not reflect true costs and are hard to enforce

Valuing and Pricing Retail Leases with Renewal and Overage Options

We consider retail leases with landlord overages options, with tenant renewal options, with both and with neither. We illustrate how the ratio of initial expected sales to the sales threshold can be manipulated to equate the value of the landlord overage options to that of the tenant renewal option at the same initial rent. As a result, not only are the values of the dual option overage plus renewal lease and no option leases are equal, but the cumulative distributions of potential IRRs on the two leases are nearly identical, suggesting that these leases are equally attractive to risk-adverse investors and thus that the same risky discount rate can be used in valuing the leases. The analysis is carried out in a risk-neutral framework, and sensitivity of the results to interest rate uncertainty, real sales volatility and growth, and the required risk premium on retail real estate is shown. The appropriate risky discount rate for the overage lease is calculated to be 75 to 160 basis points greater than that for the renewal lease.

The viability of developing Maori leasehold land : the case of Part XXIII hill country leases in the Tairawhiti land district : a thesis presented in partial fulfilment of the requirements for the degree of Master of Agricultural Economics at Massey University

This Thesis is concerned with assessing the extent of underutilization and reversion that has occurred on land leased under the provisions of Part XXIII of the 1953 Maori Affairs Act. It seeks to determine the constraints that exist to the development of Part XXIII leases. Further it attempts to find ways to overcome these constraints, that are compatible with the needs of the Maori people. Chapter One of this thesis discusses the reasons for this study. It outlines the objects of the study and reviews the design of research used to obtain these objects. Chapter Two deals with the selection of a sample of Part XXIII leases to be studied and assesses their relative states of development. Chapter Three describes the Tairawhiti Land District, the farm environment in which the lease sample exists. Chapter Four reviews the evolution of Maori Land Tenure and discusses the institutional and administrative problems that have resulted from changes in it. This chapter identifies 438/53 trusts and incorporations as modes of administration for Maori land that are more compatible, than Part XXIII of the 1953 Act, with the ancient ideals of the Maori people. Chapter Five identifies specific institutional, physical, financial and management factors that can constrain the development of Part XXIII leases. Chapter Six analyses the relationship between specific factors throught to constrain Part XXIII lease farm development and actual states of development on the sample leases. Chapter Seven draws conclusions on the analysis done in Chapter Six and makes recommendations on ways to promote the farm development of land presently leased under the provisions of Part XXIII of the 1953 Maori Affairs Act

An Empirical Test of a Contingent Claims Lease Valuation Model

Despite the importance of leases in the US economy, and the existence of several theoretical lease pricing models, there has been little systematic attempt to estimate these models. This paper proposes a simple no-arbitrage based lease pricing model, and estimates it using a large proprietary data set of leases on several property types. We also define a new measure, the Option-Adjusted Lease Spread, or OALS (analogous to an option’s implied volatility, or a mortgage-backed security’s Option-Adjusted Spread), that allows us to compare leases with different maturities and contract terms on a consistent basis. We find sizeable pricing errors that cannot be explained using interest rates, lease maturity, or information on the options embedded in the contracts. This suggests either that there are significant mispricings in the market for real estate leases, or that lease terms depend heavily on unobservable, property-specific characteristics.

Federal Preemption of Rent Regulation Under FIRREA

After hundreds of savings and loan institutions became insolvent in the 1980s, Congress enacted the Federal Institutions Reform, Recovery, and Enforcement Act, which was designed to provide affordable mortgage financing to low and moderate income individuals, and to dispose of the assets of the failed savings and loan institutions. Among the powers granted by FIRREA to the FDIC was the ability to disaffirm or repudiate leases held by insolvent institutions if those leases are deemed burdensome. In Resolution Trust Corp. v. Diamond, the United States District Court wrongly held that FIRREA cannot be construed to allow Federal preemption of State and local rent regulations, even with respect to tenants other than the low and moderate income individuals that FIRREA was designed to protect. While protections for low and moderate income tenants are appropriate, the language of FIRREA does not preclude Federal preemption of regulations as they are applied to high income tenants. By disallowing preemption with respect to this class of leases, the Diamond decision undermines the goals of FIRREA by preventing the FDIC from maximizing the net present value of the assets of failed financial institutions

The Financial Impact of the Proposed Amendments to IAS 17: Evidence from Belgium and the Netherlands

Prior literature examined the financial impact of capitalizing operating leases by using the constructive lease capitalization method of Imhoff et al. (1991). The empirical evidence of these studies results in the perception that operating leases lead to off-balance financing, improvements of financial ratios and earnings enhancement in the U.K. (e.g. Beattie et al., 1998) and in the U.S.(e.g. Ely, 1995). Therefore, the IASB published in 2010 the exposure draft for the new standard on lease accounting (IAS 17). The most striking change is the elimination of the difference between finance and operating lease. Our study investigates the impact of the proposed adaptation for listed companies in Belgium and the Netherlands for 2008. Our results indicate that debt to equity ratio, return on assets and the current ratio are significantly affected by capitalizing operating leases. Furthermore, the results show that the impact on financial ratios differs among industries.International accounting, lease accounting, lease capitalization, financial ratios, listed firms