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Billboard Valuation & Advisory Services

The Effect of Easements on Sign Multiples

The Effect of Easements on Sign Multiples

The Effect of Easements on Sign Multiples

In a recent Billboard Insider article, a reader posed the following question: “When you are ready to sell your property, is it more advantageous to sell your land along with your structure and include a perpetual easement, or to keep the land and sell it as a whole?”

 

 

Paul Wright, the CEO of SignValue, responded that this decision is far from a one-size-fits-all scenario. Instead, it depends on a complex set of factors. These factors encompass urgency to sell, lease duration, market size, competition, growth potential, prospects of digital conversion, escalation rates, and revenue-sharing agreements embedded in the lease.

 

 

The following calculations offer some revealing insights into the impact of easements on sale prices. For example, a sign that commands a cash flow multiple of 10x might realize a sale price that falls short of the market value of the sign if an easement is included. However, a sign with a cash flow multiple of 12x would incorporate the easement’s value into the sale price.

Q2 Reports From Lamar, Outfront, Clear Channel, JCDecaux

Q2 Reports From Lamar, Outfront, Clear Channel and JCDecaux

Lamar Advertising announced its operating results for the second quarter ended June 30, 2023. The company reported a 4.5% increase in net revenues, from $517.9 million in Q2 2022 to $541.1 million in Q2 2023. Operating income also increased by $10.3 million, from $166.5 million in Q2 2022 to $176.8 million in Q2 2023. The company attributed its strong performance to the recovery of the advertising market and the demand for its digital and transit products.

Outfront Media announced its financial results for the second quarter of 2023. The company reported a 4.1% increase in revenues, from $450.2 million in Q2 2022 to $468.8 million in Q2 2023, driven by higher billboard yields and growth from both its local and national businesses. Transit revenues increased 1%. The company also declared a quarterly dividend of $0.30 per share, payable on September 29, 2023.

Clear Channel Outdoor announced its financial results for the second quarter of 2023 on August 7, 2023. The company reported a slight decrease in overall revenues, from $641.5 million in Q2 2022 to $637.2 million in Q2 2023, mainly due to the impact of foreign exchange rates and the sale of its business in Italy and Spain. The company’s America’s division grew a modest 1%. However, the company also reported a significant reduction in net loss, from $65.8 million in Q2 2022 to $36.6 million in Q2 2023. The company also announced that it is in exclusive discussions to sell its business in France and that it continues to review strategic alternatives for its other European businesses.

JCDecaux announced its operating results for the second quarter ended June 30, 2023. The company reported a 7.5% increase in adjusted revenue, from €1,475.6 million in Q2 2022 to €1,585.0 million in Q2 2023. The company attributed its strong performance to the recovery of the advertising market and the growth of its digital and transit products. JCDecaux announced on May 30, 2023, that it has entered into agreements with Clear Channel Outdoor Holdings, Inc. to acquire its businesses in Italy and Spain.

Unlocking Billboard Value: The Power of Perpetual Easements in Out-of-Home Company Valuations

Unlocking Billboard Value: The Power of Perpetual Easements in Out-of-Home Company Valuations

In a recent article posted from Billboard Insider it discusses the difference between EBIDTA and Billboard Cashflow in the context of valuing out-of-home companies and billboards. Out-of-home companies are typically valued at 8-12 times their Billboard Cashflow.

If you own an easement or the title to the land under a billboard, you have no lease costs for the billboard, which increases its cash flow and, in turn, its value. For example, a static billboard with an easement would be worth 27% more than one without an easement, considering the same 10 times Billboard Cashflow multiple.

Moreover, billboards with easements are likely to command even higher cash flow multiples due to their ability to mitigate business risk. The absence of concerns regarding lease renewals and the stability of lease expenses, thanks to the permanent easement, makes the asset less risky and more appealing to potential buyers.

Paul Wright, ASA, SignValue CEO, emphasizes the superiority of perpetual easements over leases in billboard transactions. Perpetual easements lead to increased cash flow by eliminating lease expenses, making billboards more valuable. Billboard buyers prefer perpetual easements due to lower termination risk and fewer conflicts with landowners, leading to higher prices. Wright states that “These kinds of investments have created a discrete market for billboard easements that is directly related to the annual billboard lease rate. Like other commercial real estate interests, investors can value future billboard lease income based on capitalization rates.” Overall, having a perpetual easement adds value and is considered preferable to having a billboard lease.

The Challenges and Potential of EV Chargers and Cartop Advertising in the OOH Industry

The Challenges and Potential of EV Chargers and Cartop Advertising in the OOH Industry

SignValue recently completed a valuation of EV charger and cartop display advertising assets for a NYC investment firm. While the majority of Out-of-Home revenue is still generated by static and digital billboards, there are countless new companies going into uncharted OOH waters with new display formats.

Neither EV chargers nor cartop advertising are tried and tested business models. A great example of the struggles in these emerging advertising mediums is Volta. Volta is an EV Charger network with digital advertising screens. Volta essentially installed their chargers for free, hoping that the advertising revenue would generate the necessary profits. It didn’t. Volta went from over a $2 billion dollar valuation to being bought out by Shell for $169 million. The valuation was most certainly based on speculation, strategic positioning by an oil company, and the future of EV rather than advertising dollars.


As for cartops, no one is really doing well in this market either. During our market research, we discovered that cartop CPMs go as low as $1 and have dismally low occupancy rates, around 25-40%, with the major players. While there are incredible geo-fencing capabilities with cartops, the demand and capability have yet to gain notable traction.


There are several new place-based digital mediums that need to iterate and evolve to become stable members of the OOH industry. New mediums are refreshing to see, but during a recession, new digital advertising channels may be the first to be cut from a marketing budget.
To learn more about the EV Charger and Cartop advertising markets, BroadSign and OOHToday have excellent articles concerning their risks and pitfalls.


A Guide to EV Place-Based Advertising (Broadsign.com)

Understanding Volta’s $2.2 Billion Valuation and the Complexities of OOH’s Tech Worth (OOH Today)

Global Out of Home Industry Aims to Double Market Share by 2023

Global Out of Home Industry Aims to Double Market Share by 2023, Emphasizes Consolidation and Standardization

The global Out of Home (OOH) industry has successfully recovered from the pandemic, according to Tom Goddard, the President of the World Out of Home Organization (WOO). However, Goddard emphasized the need for the industry to increase its global market share from the current five percent to ten percent by 2030, achieved through incremental one percent annual increases. Key drivers for growth in the OOH sector include reducing the number of sales points and media owners through consolidation, curbing the proliferation of AdTech to simplify processes, establishing common standards and language to highlight the benefits of OOH, and improving audience measurement worldwide. Countries with better audience measurement, preferably entrusted to Joint Industry Committees (JICS), enjoy larger shares of the media market due to trust and transparency.

Goddard announced his intention to step down from his position after another year, in line with WOO’s board rotation policy. The article also mentions that the Congress highlighted various topics such as sustainability, audience measurement, legislation, technology, and diversity and inclusion. A guest appearance by Victor Ivanchenco from Prime in Ukraine, who discussed the impact of the Russian invasion on the OOH industry, received a standing ovation. The article concludes by mentioning WOO’s Sustainability Task Force and its plan to develop a practical toolkit to improve the environmental performance of OOH companies.

The World Out of Home Organization is a global association representing the OOH industry, promoting its interests, and working towards its improvement. The organization’s board members include major international companies and OOH associations from various regions. WOO is open to all companies operating in the OOH sector and reinvests funds in industry issues such as research and organizing an annual international congress.