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Old 10-20-2011, 04:54 PM
Claudia Wincelowicz Claudia Wincelowicz is offline
 
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Default Cap rates applicable for valuation of billboards?

I am appraising the leased fee on a billboard that is somewhat atypical in that it is not subject to a ground lease or any expenses that could be considered in a typical billboard revenue. Market participants have told me that 3 to 5 times GRM is the predominant way to value a billboard. I have found that comparables are hard to come by. I was just curious to find out if anybody would consider using a cap rate to value a billboard and what an appropiate range be? Thank you!
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Old 10-20-2011, 06:53 PM
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Joyce Potts Joyce Potts is online now
 
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Call Ron Nation at JVI in Lake Mary, Florida. He's the billboard czar and will put you on the right path.
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Old 10-20-2011, 07:09 PM
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PropertyEconomics PropertyEconomics is offline
 
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Claudia .. I would not ignore what the market participants have told you, ie .. if they value the billboard at a multiplier Im not sure I would attempt to use an overall rate against the income. Calls to several billboard companies and following Joyce's advice should get you on the right track.
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Old 10-21-2011, 08:17 AM
Claudia Wincelowicz Claudia Wincelowicz is offline
 
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Thank you to both for the reply! I will contact Ron to ask for his opinion.
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Old 10-21-2011, 12:48 PM
Ken B Ken B is offline
 
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Ron never did return my call...maybe I didn't have the proper password...
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Old 10-26-2011, 09:30 PM
kristin0731 kristin0731 is offline
 
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Claudi...I have done several ODA appraisal for condemnation. When appraising ODA signs for this purpose we have to go through all three approaches based on the Heathrow Decision. In my opinion GRMS are pretty unreliable due to the lack of recent sales. Also, most sales involve bulk purchases. There are few billboard appraisers in the State of Florida and they all tend to use the same sales that are from the 90's. That being said, the data I have on file shows gross annual billing multipliers between 4 and 7.

The income approach based on advertising revenue is your best bet.
The cap rates generally range between 8% and 10% depending on the quality of construction and the risk associated with termination of the lease. Obviously, if your sign is on fee owned land with no easement, there is little to no risk associated with its removal. One thing to also consider is that most cities and counties have placed a moratorium on billboards. As such, they may not be able to be put back in the event of a natural disaster...

The income approach is almost always higher than the sales comparison and is generally given most weight in the valuation. When doing the income approach with an ODA on a ground lease you would deduct this expense when calculating the value. Since you won't be doing this, your NOI will be higher so that will also give value to the sign being on fee land rather than being subject to a ground lease.

Good luck...feel free to e-mail me directly if you need additional assistance or examples.

I feel your pain!
Getting billboard data is equivalent to pulling teeth!
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