Finding a lease structure that fits

Flat-rate leases give the lessee the right to use a fixed asset for a specific period of time in exchange for periodic payments of a fixed amount. In the case of a land lease, this can be a fixed payment per year per square metre. Lease rates may vary depending on the condition of the port development site (for example, unpaved versus paved land or land with or without structures). The main advantage of this form of lease is that the lease rent is known to both parties in advance. The flat-rate lease also provides the lessee with the greatest incentive to fully use the available capacity of the terminal.

In a shared revenue lease, the lessor also gives to the lessee the right to use a fixed asset for a fixed period in exchange for a variable amount of money. With a shared revenue lease there is a minimum payment regardless of the level of activity, but no maximum payment. The main characteristics of the shared revenue lease are:

(a) a minimum level of compensation

(b) no established maximum level

(c) maximum compensation depends on the facility’s capacity

(d) minimum compensation may not fully cover the interest and amortisation of the lessor (port authority) for the lease area

A shared revenue lease represents a true partnership between the port authority and the lessees. The shared revenue lease is an approach in which the port authority can maximise revenues, employment levels, and throughput.