Billboards have life spans that can range from months to centuries. As a billboard owner it’s essential to get as many years on the clock as you can, as once you’re paid off the debt every year thereafter is straight profit. There are some choices you can make that will ensure a billboard to last a long time versus a short lifespan. In this Billboard Mastery podcast we’re going to discuss this issue and give some practical tips to make a billboard last longer.
Episode 37: Tips On Longevity Transcript
I've owned billboards that have been up a half a century. And I've owned billboards that only survived a matter of a few months. This is Frank Rolfe, the Billboard Mastery Podcast, talking all about longevity of the sign. How long will that sign stand? How long will that sign be able to make you money? And the way I look at it, there's basically six different components in making that estimate.
Question one, what are you making the sign out of? Now, there are many different ways to build a sign: wooden telephone poles, I beams, steel monopole, wall mount, roof mount. So how are you building the thing? If you're building the thing at a telephone poles, you need to know right off the bat, that is not a permanent fixture. Telephone poles, as great as they may be, over the years tend to rot. Over the years, they tend to have the combination of rotting and wind load that can lead to catastrophic failure. No one who builds a wooden sign ever anticipates that it will last for hundreds of years. However, we build them anyway because they're cheap. So that's your trade off. When you're buying that wooden telephone pole sign and building that wooden telephone pole sign, you're doing so the full expectation that you're exchanging massive longevity, for low initial price. And who knows? There are wooden signs out there which have lasted 50 and even maybe 100 years out there. But you know that wood is not as long as steel. So on the very front end, when you build the sign or buy the sign, it's absolutely safe to bet that a steel sign will last longer than any other type. And that doesn't matter whether it's I beam or monopole. I've owned both, and basically metal is metal. As long as it was built according to original plans, it should last seemingly till the end of time.
Number two is the position of the sign. Where do you have the sign positioned on the property? The key here is I don't want to have the sign where it gets in the way of what goes on on the property on a day to day basis. Because if I do that, over the years, there'll be endless irritation, and then ultimately, that will lead to the signs removal. So if I've got a property, and it's got some kind of business on it, where there's a lots of traffic going in and out, I don't want to be anywhere near the things that will get me in trouble. I want to be over in the corner of the property, I want to be right up against the wall of the building, I just want to be in an area that's completely out of the way. The more out of the way you are, obviously the longer the sign will exist.
Then comes the issue of is the property developed or undeveloped. Clearly a developed property gives you greater chance of longevity than undeveloped, because on undeveloped, we don't really know what the use will be so it's hard to stay out of the way. And on undeveloped, we know that the future buyer who wants to build the item on the property may well elect that your sign has to go. And it's not always because of development itself, just because the building has to go there. It could also be that having your sign on the property limits how many signs they can have for the business that they build there. So if you want to be a permanent sign, you want to be on a developed property as opposed to a raw piece of land.
And then you have the question of future development potential. There are some raw land pieces out there that will never ever be developed. I once built a billboard on a piece of land, on a part of a farm that was heavily in the floodplain. There's no way you could ever build a building on it. That sign still stands today, it will still be there probably 100 years from now because there's no other way the farmer can get any money from that piece of the farm, because he can't even raise crops on it, because it floods out periodically. Now, there are many different attributes of a property that make it unlikely to be developed. Floodplain is definitely one, and then just how you orient to the general city at large. Are you on a frontage road or are you cut off with no access? You can kind of look at most land from an aerial and decide what the future potential for development is. And if you say to yourself, well, there's not much then there probably, there probably isn't.
Next comes your lease. How long is your lease? Now, I have always thought that the length of your lease is one of the most important parts of any lease. So I've always tried to go with a 15 year lease with a 15 year option, where the option is fully in my court. That equates to a 30 year lease. If I do a 30 year lease, I have a very good chance of that lasting far, far longer because 30 years later, everyone has forgotten about the sign and my lease will just roll over and over and over again until the end of time. If however you do a railroad lease, which is only a 24 hour lease, then it's very possible that it won't last that long. I always had terrible luck with my railroad leases. Because even though the railroad told me Oh, don't worry, we'd never terminate you, they always did. You only made it through a few years before they would terminate it. So having a nice, lengthy ground lease is another great way to ensure that your sign will be up for a really, really long period of time.
Also, what happens at the end of the lease is equally important. You want to have your lease, if no one says, "Wait, I don't want to renew, " that it automatically renews for a similar term. You don't want to have it where the lease ends, and then you have to renegotiate the new lease. The key reason for that, of course, is if I have to go and renegotiate a new lease, I have to remind the person that they do have the option at that moment to cancel. I don't want them to remember that. I want to get calls from people who say, "Hey, I think I missed a deadline to renegotiate the ground lease by six months." And you say, "Oh, yeah, well, that's okay. Just let me know again in 30 years." They'll never remember that. No one can buy a Day Timer that goes 30 years out. So go for as long lease as you humanly can. And on top of that, go for a lease that does not require you to do anything to have it automatically renew.
Finally, one of the most important parts of how long your sign will last is simply how much money are you paying the ground lessor. Typically, on a good highway sign, it's a significant sum. It could be $5,000 a year, it could be $10,000 a year. When someone's getting that kind of money, they got skin in the game, they don't really want to lose the sign either. So when there are big dollar signs, typically, both the billboard company and the ground owner are agreement on one thing, and that is that sign is never coming down. But in other cases, I've seen signs, I've bought signs, I have not built signs, but I've owned signs that had ground leases that were as little as $100 a year. I remember about some old wooden signs from Stuckey's, and one of them was like $100 a year, can you imagine that? About $8.50 a month, that was the ground lease. Well, at $100 a year, you know, there's no way that property owner is going to want to renew that thing. And at the very first mention that it's going to hold up anything they want to do at all, they're going to get that sign removed. So another way to spot how long your sign will last possibly is how much you're paying the ground rent. That's why if you're buying a sign with very, very low ground rent with a lease is coming up soon, it's a pretty good bet it isn't going to make it. I would go back to the property owner, try renegotiate a new lease, even if I had to start paying them more. It's typically not a great idea to try and be ripping off your landowner by paying them a sub market rent, thinking you're getting ahead by pocketing the balance. It's a very short term thought, because that's a lease that will not survive.
The bottom line to it all is every billboard can be evaluated if you simply look at the type of structure you're building, your position on the property, whether the property is developed or undeveloped, what the future development potential is of the property, the length of your lease and how much money you're currently paying the property owner. Remember that all of your profitability on a sign typically comes after you pay off the debt. So every day, every month, every year that it doesn't stand that's really eating into your profits. This is Frank Rolfe, the Billboard Mastery Podcast. Hope you enjoyed this. Talk to you again soon.