Balboa Capital pushes "Evergreen" to Brokers
by Christopher Menkin
Equipment leasing brokers have written Leasing News that Balboa Capital, Irvine, California still has the "Evergreen" clause in their lease contract.
When Patrick Bryne bought out his 16 year partner Shawn Griffin in May, 2004, one of the first things he did was bring in a lease broker program. It is no secret in the industry that the two were not getting along. In fact, the company was for sale, and it got to such a point that one had to make arrangements to buy out the other as it was getting quite disruptive to the company, according to many sources, including ex-employees. Griffin and Byrne disagreed on almost everything at this point, one of them being utilizing your own sales force. Prior to this time, all sales were from “inside sales” with sales offices in the United States with a “network” of sales managers.
After taking the reins, Byrne hired a top man with plenty of experience from Colonial Pacific Leasing (CPL), whose company was purchased by GE Commercial. Reportedly CPL had an "Evergreen leasing" program, and was one of the first to pay salesmen and brokers in advance for "purchase options." The key here is the lessee was informed in advance about the $1.00, 10% PUT's, and FMV and the lessee agreed to the “option” and/or informed, normally 90 days before the expiration. It should be noted the actual lease payments reflected the choice of the purchase option. In the three complaints Leasing News received the rates were “capital leasing” rates.
It should be mentioned that Leasing News received several complaints after the portfolio was moved from Oregon back east, both from brokers and also lessees. There was confusion regarding several of the purchase options. To our knowledge, all were resolved, except two that the last we heard were going to court to resolve
(noticeably both were “sub-broker” transactions.)
Note in the Balboa Capital ad which has appeared in several leasing trade publications on the company's new direction, which also were sent out as “press releases,” regarding applications up to $100,000, commercial up to $250,000, “no banks or trades,” “corporation only,” “private party sales” and “We pay commissions up to 20%”
The Balboa Capital complaints received at Leasing News concerned the "advance notice" of the expiration of the term of the lease itself, not the extension clause. There are several leasing companies who have a 12 month or other extensions reportedly to comply with “true lease” requirements. The issue here regards the notice of expiration. It should also be pointed out that in the complaints the contract payment implicit interest rates were those of a typical “capital lease. All three were “discounted” or “sold” and not held by Balboa Capital.
In the first one, it appears a settlement has been reached, as Reche Canyon Mobile Estates received this in writing: "Pursuant to our conversation of today, in exchange for the lease equipment, BALBOA CAPITAL CORPORATION will forgo the remaining renewal period for the above referenced lease agreement. As mentioned in our conversation, you will have your engineer de-install the leased equipment and have your shipping company ship the equipment in address provided to you. I will have Nassau Asset Management contact with the shipping address."
At press time, there was a condition that was not included, according to John Byk, of Reche Canyon Mobile Estates: "and waive any other charges or obligations."
In the second and third complaint, a settlement of a combination of extra rental payments and purchase was paid on the first, and the second not recognized as the notice was not sent by "certified mail," just made verbally, by fax, and e-mail. The first one was settled with the main intent of returning the equipment in the second one, according to Ms. Wang, and not going into an automatic renewal.
It is Leasing News policy to confirm that e-mails sent regarding comments be verified and that the sender give permission to use their name. Normally, we do not “withhold names” without verification or to encourage readers to speak out without retribution, as is this case. None of the senders wanted their names used. In fact, many of them sounded like advertisements as they all wanted to continue to broker leases to Balboa Capital: Yes, all said they would continue to do business with Balboa Capital, liked the rates, the commissions, the service, working with the staff, and the “liberal” credit approvals. In fact, they sound like advertisements, except they were “uncomfortable” regarding the “Evergreen clause:”
"The automatic renewal for 12 months on certain types of leases and other hooks are still in the documents for company complained about in last Wednesday's news.
"See the attached verbiage from their current documents:
“'If you do not give us such written notice or if you do not purchase or deliver the equipment in accordance with the terms and conditions of this Lease, then the Lease shall automatically renew for 12 months term and thereafter renew for successive 3 months terms until you deliver the Equipment to us'”
(name with held)
"Paragraph 16 is the one I am referring to Kit. It is interesting that it is still in the doc's and still says Certified Letter etc etc. I never noticed this until I read it in your story."
(name with held)
"They are the current contracts sent out to a new broker. I assume for their direct mail side they use the same ones. I just signed up with Balboa in ******* and don't want to burn any bridges . . . yet. I got a direct mail piece sent to my corporation for a pre-approved lease account. That first then the announcement of yours about the complaint."
(name with held)
"You are right about it being Balboa. Please do not use my name but I appreciate your keeping everyone in the loop as much as you are able. No forum is perfect or at least it may be until we join it so I will keep reading."
(Name with held)
"Please withhold my name Kit. Don't want to step on any toes. They take deals I can't place elsewhere. But thank you for letting me know about Evergreen clauses."
(name with held)
"Thank you for pointing out the practice, but I like to do business with this company as they put deals together and we both make money.
I will have to keep track of when the leases expire, as I do keep in contact with ‘my' customer. "
(name with held)
Readers on “Evergreen Lease”