Billboard appraisal

[incognito]

Have you asked the CG you are (presumably) working on this assignment with? It was asked once, but what is "the Unit Rule", in appraisal terminology? Attorneys and attorney lingo do not dictate Appraisal methodology and terminology.

http://www.irwaonline.org/eweb/upload/july_web_Billboard.pdf

Great reference! I don't see any mention of "unit Rule"?

 

[Terrel L. Shields]

The Unit Rule applies in any Federal Land Acquisition appraisal.... Read USFLA.
In any taking that involves federal money USFLA is required.

http://www.justice.gov/enrd/land-ack/Uniform-Appraisal-Standards.pdf

The Unit Rule.

The market value concept adopted by the courts to be applied in federal acquisitions generally requires application of the so-called unit rule. This rule has two aspects; one relating to the interests, or estates, into which ownership of real estate may be carved, and the second relating to the various physical components of real estate. The first aspect of the unit rule requires that property be valued as a whole rather than by the sum of the values of the various interests into which it may have been carved, such as lessor and lessee, life tenant and remainderman, and mortgagor and mortgagee, etc. This is an application of the principle that it is the property, not the various interests, that is being acquired.

240

Many cases illustrate the unit rule,241 thus, if there are several interests or estates in the property, the property should be valued as a whole, embracing all of the rights, estates, and interests of all who may claim, and as if in one ownership. The market value of the whole property is later apportioned among those who hold various interests in the property, but this apportionment generally falls outside the scope of the government appraiser’s assignment​

This is the basis of "summation or assemblege" - Example.

The fee simple includes mineral rights, timber rights, billboard (air?) rights and surface rights. If you sell the whole mess say it brings $4000 an acre.

If you hire a mineral appraisers, a timber appraiser, a billboard appraiser and they come up with $1,000 per acre; $600 per acre: and $400 per acre for each and you arrive at $3,000 an acre...sum the bunch up to $5,000 an acre ...then you've violated the unit rule.

 

[cejack]

Billboards - Be Careful

In some jurisdictions, such as Nevada, you will actually have to estimate the lost revenue due the sign company.

http://caselaw.findlaw.com/nv-supreme-court/1474750.html

In most Nevada jurisdictions, new billboards are effectively under moratorium so if you extinguish a billboard, you cannot replace it at a new similarly competitive location. So in effect, the sign company will be permanently losing their revenue stream when you take a billboard property.

Billboard valuation has to be about the most contentious aspect of valuation amongst appraisers I have ever run across. The methods, techniques, and procedures and disagreement even over what type of property a billboard is becomes one of the most contentious debates in the industry.

I have a collection of articles in PDF format I have gathered over time on this issue. When dealing with a billboard in the context of eminent domain, I would strongly recommend hiring somebody that deals with billboards on a full time basis in their practice to handle the billboard component.

There is an outfit in Phoenix, I think, www.signvalue.com that specializes in billboard valuation and billboard data. You may be able to consult with them or hire them as a contractor for any billboard component of what you're dealing with.

Essentially, for the condemning agency in Nevada taking a billboard, you will have to deal not only with the property owner, but the advertising company renting the billboard location from the property owner. Further, the measurement of compensation to the ad company will be the value of the ad revenue that the sign could generate on the site. Get ready for some arguments boys and girls... If there is a moratorium or lock on billboards in your jurisdiction, this opinion may be operative or about to become operative in your state as well.


Charles E. Jack IV, MAI

 

[LostHWY]

This will depend on your state laws and your state should have a Right of Way/Appraisal Manual that specifically addresses how these signs are handled. I would do a search for the manual on your state Department of Transportation website or call an appraiser with your state DOT. In Colorado off-premise advertising signs (Billboards) are considered real property and have a specific set of valuation criteria.

 

[cejack]

I don't really think there is a definitive way these things are handled. Just because some manual by your State DOT says something about billboards does not mean the courts are going to pay any attention to that. At least not based on my experience in the courts on eminent domain cases.

State highways are not the only place you are going to find billboards. There are billboard takings at locations on major local roads in my jurisdiction. County and city public works departments and traffic departments are going to have to wrestle with the issue of "grandfathered" billboard takings. It's not just a highway issue. (Las Vegas has billboards on major streets all throughout town.)

I would suggest a better source for direction on an appraisal framework in the state you are working would be the attorney you are working for in the case. And even they may be wrong or rely on past events or existing statutes rather than what may likely become new case law or statute in your state.

I would suggest in a state or locality that has an effective moratorium on the implementation of any new billboard sign locations, you could reasonably suspect that your State Supreme Court may rule that the extinguishment of a billboard location gives rise to compensatory claims to the advertising / billboard company. (If they haven't done so already...)

I would, at a minimum, make a statement that the appraiser reserves the right to analyze the value of the advertising net income to that particular location in determining just compensation if the court rules that such income is compensable to the advertiser. At least it shows that you were thinking about the issue and conceded that it could be a possible ruling by the trier of fact in the case. If it is not ruled to be compensable in your jurisdiction, no harm and no foul.

 

[berniek]

According to a appraiser friend, the "Effective Gross Income Multiplier Method" (EGIM) is relied upon in the billboard market as a valuation tool. You might want to contact the LAMAR sign company for details for your location.

 

[LostHWY]

"I don't really think there is a definitive way these things are handled. Just because some manual by your State DOT says something about billboards does not mean the courts are going to pay any attention to that. At least not based on my experience in the courts on eminent domain cases."

I was really just offering a suggestion on where they may find some additional guidence. Regardless of the governmental entity they are still subject to the juristictional laws for eminent domain and hopefully thier state manual would honor them.

 

[Mark K]

Almost guaranteed it will end up in court if the acquiring agency does not compensate the owner for the loss of the billboard. Unit rule or no, the owner deserves compensation for the lost income and for the real estate acquired.

I was involved in one R/W case with billboards that took nearly 9 years to resolve. First trial, appeals, went to state Supreme Court, remanded for new trial, etc. First judge said one thing, appeals court said something else, Supreme court said something different, etc. By the time it came back around, the original judge had retired and everything started over.

There are state and federal guidelines for appraisers but the courts will essentially ignore the acquistion guidelines and make their own decisions if they so chose.

Contact the IRWA for a local/regional billboard appraiser.

 

[Restrain]

Seems the question is, what are you appraising? Are you appraising the lease of the billboard site or the value of the billboard itself. If you are appraising the value of the billboard, it would be the capitalized income stream to the billboard owner. If you are valuing the lease interest to the land-owner, it would be the capitalized income stream of the lease. The fact that the billboard itself is currently rented on a MTM basis does not mean that it cannot be rented out to a client for a yearly term. This would be similar to what you would do if the site had a building that had a site rental.

JMO.