With the addition of new data received on billboard purchases during the past few years we have updated our chart of pricing multiples. The new information shows that prices of billboards and billboard companies were higher than previously recorded from 1997 through 2001. The new data comes from transactions that occurred during that time period, but were not available until recently.
Transactions in the database show that buyers paid between five and six times effective gross income for billboards each year from 1997 through 2001. The Effective Gross Income Multiple (EGIM) is the commonly used measure by buyers and sellers in determining market prices.
The average annual multiples from 1997 through 2001 are more than twice as high as the 2.3X average multiple for 1992. That low point in the last 25 years followed the bottom of the economic recession that ended in 1991.
The higher multiples today are the result of two major driving forces: the growing scarcity of billboards, and the level of required returns on investment. The inventory of sign faces throughout the nation is not growing at a significant rate due to widespread restrictions on new permits. Consequently, buyers are willing to pay higher and higher prices to acquire the signs that are remaining. They know that it is becoming more difficult every year to find expansion opportunities. Thus, scarcity is pushing prices upward. The higher multiples also reflect changes in the rates of return on investments, which can be seen in interest rates. An examination of short-term investment yields would not appear to support the higher multiples today. Short-term interest rates on 90-day Treasury Bills are unchanged today from the 3% in 1992. However, investors are more interested in long-term rates than short-term rates. An examination of long-term rates demonstrates why billboard multiples are up over the last decade. The 30-year Treasury Bond was yielding about 8% in 1992, but it is down to 5% at the end of 2001. Lower long-term interest rates correspond with lower discount rates and capitalization rates. It follows that lower cap rates result in higher values. When lower cap rates are combined with increasing scarcity of inventory, the inescapable result is higher prices of assets.
Other Places to go:
Updated Multiples Chart