If 2020 has shown operators anything, it is that circumstances can change quickly from beyond their control. 

While the pandemic period has been characterised by economic uncertainty, there were parts of business ownership, such as lease agreements, which already carried an inherent amount of risk.

The minimisation of unknowns in the rental market forms the basis of LDC Infrastructure, a lease acquisitions company that provides property owners with easy access to capital. 

For a cash lump sum, a lease is purchased from a property owner, allowing them to re-invest money into diversifying their real estate portfolio, paying off debt, or growing their business.

This transaction does not affect the asset and LDC Infrastructure receives the future rent payments from the tenant for a defined period of time.

LDC Head of Operations (Australia), Harley Mckenzie, said when the company entered into an agreement to purchase a ground lease, it took on all the associated risks.

"We have a large, diversified portfolio of infrastructure leases which allows us to accept and even expect that a percentage of the leases we purchase will be cancelled, a luxury most lease owners can’t afford," he said.

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LDC has purchased hundreds of telecommunications leases across Australia with many situated on the rooftops of buildings located in built-up areas. Source: LDC Infrastructure 

"All of our clients are different, but they have one thing in common – they have a better use for the lump sum than the potentially unsecure rent."

LDC agreements are based on its own valuations of sites, for which its analysts will research the other sites in the area, market rent for the area and the risks associated with the particular site.

The company also consider specifics such as the fixed annual increases, creditworthiness of the tenant, and annual rent.

After the value of a lease is determined, a Letter of Offer is prepared for review. 

If accepted by the property owner, a draft legal agreement is prepared by LDC’s solicitors Corrs Chambers Westgarth for negotiation. 

Should there be a mortgage associated with the property, then consent is sought from the lender at this point.

The settlement is then completed within the space of a week.

Mr Mckenzie said it was important to note the transaction did not impact an owner's capacity to sell or redevelop their property.

"When the property is sold, it is simply sold without the income associated with the lease," he said.

"We also have significant evidence to demonstrate that selling the property and the lease separately means more money goes to the owner overall.

"In terms of redeveloping, we are happy to include a redevelopment clause in our legal contract, including a payout schedule if the lease needs to be removed from the site in its entirety." 

Click here for more information about LDC Infrastructure.

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