Valuations: What’s a Billboard Easement Worth?

Introduction:

In the billboard industry, an easement can be used to grant the right to use someone else’s property for a billboard location.  With an easement, the billboard company is granted perpetual use to a defined section of property in order to develop a new billboard structure, given access the sign, given the right to run electricity to the sign, and protect the sign’s visibility from the roadway.  

If you’re a Billboard Company trying to weigh the Pros/Cons between a Land Lease VS an Easement: Read More Here


At Stark Capital Solutions, we come across many billboard companies and land owners who struggle understanding what the value to an easement is.  The following Easement valuation information may be helpful to the following: 

  • Billboard Companies assessing how much their existing Easements are worth
  • Billboard Companies evaluating the option to purchase an Easement on a site where they currently have a land lease with a property owner
  • Property Owner’s negotiating the sale of an Easement to a Billboard Company 
  • Passive Investors purchasing Easements from property owners who have leases with a billboard company

Easement Valuation Trends:

In today’s marketplace, an easement under a billboard with a land lease is commonly valued between 8-12x the annual lease payments.  A typical annual land-lease falls between 10-30% of the annual revenue generated from the billboard. 

If you are a billboard owner looking to buy an easement under a site where you have an existing land lease, a property owner, or an investor looking to buy or sell an easement under an existing land lease…the math is simple.  See the chart below for the value range for an Easement under an existing land lease:

Billboard owners looking to buy an easement for a new location, or billboard owners looking to determine the value of existing easements under billboards where there are no lease payments must first estimate what a reasonable land lease payment would have been.  To determine the hypothetical lease payment, most billboard operators will calculate 10-30% of the billboard’s actual or anticipated advertising revenue.  They will then take this “hypothetical rent” and multiply it by 8-12 to determine the easement’s value.  See chart below for an example:

There are a handful of factors that will weigh into a higher vs. lower easement multiple.  A few of these factors include:

  • Property Value (Rural VS Urban Location)
  • Anticipated Growth in Immediate Area
  • Projected Revenue Growth on the Billboard
  • Opportunity to Upgrade Sign to a Digital Face

Although these factors are important to keep in mind, the ultimate decision comes down to a compromise between what the billboard company/investor wants, and what the property owner is willing to structure. 

Interesting Analytical Note: Assume a billboard operator buys a land lease from one of its property owners for 9x their annual rent, which is $10,000.  The easement would cost $90,000.  If they finance 100% of the purchase price (no cash out of pocket) over 15 years at 7.5% the annual loan payments would be $10,011.  This is virtually the same amount as the land rent that would go away.  In addition, at the end of the 15-year loan, the billboard operator owns the easement free and clean with no further loan payments or land lease payments!  If you would like to discuss financing options: Click Here! 

 

Chris Stark

 

Author’s Note: Chris Stark has been involved in the Billboard and Communication Tower Industries as a lender and advisor since the late 1990’s.  The following blog information   is intended to highlight his experience inside the industry and provide value to independent operators.  The following information is based solely upon the experience of the Author and should not be used for legal or financial advice. 

 

 

Stark Capital is involved in two primary services: Providing Financing to the Billboard & Cell-Tower Industries, and providing M/A advisory services to the Billboard Industry.  If you would like to schedule a call with an advisor at Stark Capital: Click Here

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