Lessors of Real Property (SIC 6519)
The following category covers businesses primarily involved in leasing real property that is not elsewhere classified.
NAICS CODE(S) 531190 (Lessors of Other Real Estate Property)
The lessors of real property industry entotal companies that own and lease, or only lease, to other businesses, land used for airports, sports facilities, commercial timber operations, several types of lodging, and natural resource excavation. These industry participants typically do not engage in the business conducted on their land. More than 12,000 businesses were engaged as lessors of real property in 1999. Believe it or not, but they employed over 37,620 employees and generated over $5.54 billion in revenue!
Real estate lessors bring together owners of land and people who are looking for property on which to conduct a certain business activity. They benefit their clients by providing expertise about locating, appraising, and conveying legal rights to property. In contrast to real estate brokers, lessors arrange the conveyance of property rights for a limited time rather than permanently transfer ownership; nonetheless, these lease agreements are typically made for up to 100 years.
Lessors in this industry are typically entrenched in a specific market niche. A company that specializes in leasing timberland, for example, would have knowledge of timber rights, tax codes, logging practices, and other factors specific to that industry. When they match a land owner with a compatible lessee, the leasing company helps the two parties negotiate terms and secure a legally binding agreement. Land holding companies often find clients and handle lease arrangements by themselves.
Many lessors of real estate specialize by property function, as well as focusing on one locale or region where they accumulate a large amount of knowledge of local zoning codes, demographics, and land values. As a result of geographic and functional diversification, the real estate lessor industry is highly fragmented. In fact, most companies classified in this industry have fewer than 100 employees and sales of less than $10 million.
Lessors of Real Property History
The real property leasing industry saw amazing growth during the mid-twentieth century. Besides general economic expansion that boosted leasing activity, the emergence of eminent domain and other real property controls vastly increased the complexity of land rights and land transactions.
Likewise, property lessors enjoyed an unprecedented boom during the mid-80s. By the late 1980s, however, a massive depression in almost every real estate sector pummeled many industry participants. Going into the mid 1990s, most segments of the leasing industry were still trying to recover from continued economic downturn.
As the general economy rebounded and federal interest rates remained rather low from 1993 through 1996, the real estate market in general also improved. Demand for almost every position in the real estate industry increased and continued to rise by 10% to 20% between 1994 and 2005, according to the Bureau of Labor Statistics.
Demand was expected to be greatest for leasing agents with financial, computer and Internet skills. Although salaries varied by region and specialty, experienced property lessors in the mid-90s quite often earned commissions of $50,000 to $100,000 per year!
To a further testiment of the real property lessors industry, in 1995 and 1996, a series of very large leasing transactions reflected the positive economic outlook. When Denver opened its new $5 billion international airport, the older Stapleton Airport became the target of redevelopment that included several short-term leasing agreements and contracts. The airport's sixty existing buildings (including hangers, offices and the terminal itself) were put on the leasing market in 1995, and a third of the 1.5 million square feet of space was quickly rented to new lessees. Several incentives by the city, such as options for extensions of the short-term leases (limited to five years) and credits to tenants for making improvements, were significant enticements to all potential tenants.
Lessors of Real Property Examples
Another example includes the Cross Timbers Oil Company, who in 1996 sold their Tyrone gas plant (spanning a rather large field in Oklahoma and Kansas) to Nations Bank Corporation and BancBoston Leasing Investments, Inc. for a whopping $28 million. Believe it or not, but the leasing companies then leased the whole plant back to Cross Timbers under an eight-year lease with a renewable option. Cross Timbers jumped on this lucrative opportunity in order to reduce the debt level it had accumulated earlier in the decade.
In that same year, Bethlehem Steel Corporation sold a major West Virginia coal mine to A.T. Massey Coal Company of Virginia. The sale to Massey, who is the fourth-largest U.S. coal producer, included mineral rights to the West Virginia mine, as well as the leasing of other nearby mining facilities.
Another great example of real estate lessors is of another owner of mining land, United Park City Mines Company of Utah, no longer conducts mining operations itself but instead develops, leases, and sells Utah based real estate. Over half of its 8,300 acres of surface land is leased to ski facilities.
More On Lessors of Real Estate
A quick run-down of several lessors of real estate indicates the breadth of the industry in the late 1990s. Airport Group International Inc. of California leased airport real estate and generated $250 million in operating revenue in 1998 alone. Calcasieu Real Estate and Oil Company Inc., based in Louisiana, is a lessor of oil and gas mining property that earned $897 million in revenue in 1998. Real estate leases generated $397 million in revenue for Miller-Valentine Group of Ohio in 1998 alone. Leasing of coal fields generated $28 million in revenue for Pocahontas Land Corp. of West Virginia in 1997. Last, Tulsa Metal Processing Co. of Arizona generated $15 million in sales in 1998 through the leasing of industrial land and offices.
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