Most royalty investors purchase royalties with the intent of holding them to the maturity of the contract, in order to receive the full benefit of the increase of royalty issuer revenues anticipated. However, some royalty owners will be interested in selling their royalties before the royalty payment period ends.

Some income and profit seeking investors will be interested in purchasing royalties from the royalty owners after there has been a history of royalty payments. These investors will be prepared to pay a percentage of the royalties they expect to receive over the remaining course of the royalty payment period.

Our intent in creating the REX-PV.com website calculator service was to assist both buyers and sellers of royalties calculate, understand and negotiate a transfer of royalty ownership.

Either through the royalty exchanges we believe will evolve or currently through direct placement, many owners of royalties will want an ability to sell the royalties they own.

From the perspective of the royalty owner the following questions should be asked and answered:

From the perspective of the new royalty buyer of whatever are the number of remaining years of royalty payments the following questions should be asked and answered?

The REX-Present Value Calculator allows the user to enter and adjust:

The area of greatest negotiation will be that of the level of discount to be applied to the remaining years of projected revenues and therefore royalty payments.

The purchase of a royalty from the owner, who has already received a significant amount of royalty payments, will allow the seller to achieve the desired IRR through the amount paid by the buyer.

The buyer of the royalty, issued by a company having demonstrated its revenue generation and royalty payment history, will justify the amount paid for the royalty, which will be based on the discounted present value as necessary to achieve the minimum required IRR. Of course, the buyer of the royalty will hope the royalty issuer's revenues will reach and exceed the projected levels.

Users of the REX-Present Value Calculator are invited to let me have their comments and questions.

As the amount of the discounted PV will be significant the buyers bid and the seller's offer should indicate the terms of payment. If the terms are 100% cash the buyer's bid will be less. Were the buyer to pay an amount of, at least, the original owner's cost it is possible that some sellers would accept a partial payment in the form of a continuation of the full royalty payments up to an agreed amount. Were this to be the structure of the transaction the buyer would really be paying for royalties from the issuer for fewer than the full period of time left in the royalty payment agreement. The advantage to the buyer would be one of owning a percentage of revenue from an issuer which has performed in accordance with the contract and which has probably been able to increase revenues. This REX-PV calculator reflects an assumption of a 100% cash trade and not one in which there are delayed payments.

Please review both the Samples and the FAQ sections for a better understanding of our service and send me additional questions and comments. We will not publish these questions or comments without your permission to do so.

We are available for consulting.