Memo From Frank
I just saw another wooden billboard go up near my small town in Missouri. That means that somebody spent around $3,000 to get around $3,000 per year in income. It means that somebody just replicated the income they’d receive on $300,000 at 1% interest in a CD, with an investment of $3,000. It means that somebody is only 9 signs shy of having around $30,000 per year in additional income per year, to give them financial security and freedom. And it might mean that someone has just built the first sign towards their billboard empire, maybe the next billboard billionaire like John Kluge, Arte Moreno and Ted Turner. Why was that person not you? There are hundreds of thousands of towns in the U.S. that can support a billboard program. Have you been looking?
The Wonders Of Route 66: Where Billboards Really Began
I was recently on a road trip through Illinois and Indiana, where a large portion of the original Route 66 still exists. I was driving down the original “mother road” when I came upon this gas station in the middle of nowhere. It’s a fully restored classic gas station from the Route 66 era. But who restored it and why? There was no signage of any type describing its story. It’s not a working gas station, nor is it a museum. Apparently, somebody just wanted to restore an old gas station on Route 66, and did so out of their own pocket. America’s love for Route 66 and billboards is part of our culture. I’ve been to the Route 66 Museum just west of St. Louis, but still find more interesting the random acts of kindness that people of all ages have accomplished to maintain the old road and keep that history alive. No story about America is complete without the inclusion of Route 66 and its remarkable billboards.
My All-Time Best Billboard Deal
Having owned and operated over 300 billboards in my career, I have done a lot of deals. But I would have to say that my best single billboard deal – based on return on investment – was a sign in Lewisville, Texas, and there’s a moral in it for every billboard investor.
The sign belonged to another billboard company. The ground rent on the sign was too high, so the sign owner had stopped paying the landowner years earlier, despite being threatened to be sued for non-payment several times and having the lease cancelled for non-payment. The sign was a 10’6” x 36’ double faced, steel monopole structure, worth around $40,000 to build. The deal was that I could buy the sign for $1, as long as I could get the sign owner released from the potential lawsuits for unpaid rent (which was around $20,000). So to make it happen, I would have to negotiate a settlement for the past due rent, negotiate a new ground lease with an already unhappy property owner, and then complete the purchase. On the surface, it looked impossible.
How I Solved It
Rule number one in doing a turn-around deal is getting everything in writing. So I entered into a written agreement with the sign owner, which also gave me 90 days to close or cancel the deal. Rule number two is to gather the facts. So I called the property owner. To my amazement, he told me that he’d gone bankrupt, and didn’t care about the old rent as he would not get it anyway under his bankruptcy. The property had gone back to the bank. Of course, I would now have to get a release from the bank for the unpaid rent, as that obligation belonged to them now. So I called the bank and they told me that they’d gone bankrupt and any rights to the billboard rent had gone to the FDIC (who takes over all failed banks). So I called the FDIC and they told me that, if I’d start paying a reasonable rent, they’d give me a full release for the old rent, and a new lease going forward. Basically, the last thing they wanted to worry about was some billboard, and just wanted some money every month rather than go to court to fight over it. So the deal was cured and I was ready to close on the sign for $1.
How It Almost Went Bad
When I went to the sign owner to wrap up the transaction, he balked. He told me that it wasn’t fair that I should get the sign for $1 when all I did was make a few phone calls. He told me that he thought I’d have to spend $20,000+ to settle the old rent. So he refused to sign the paperwork. That’s where rule number one came in – he’d already bound himself in writing with the initial contract. So my attorney sent him a threatening letter and -- I’m sure after he asked his attorney who told him he was doomed -- signed the closing documents. The sign was now mine for a total price of $1. And I had made an enemy for life.
My Return on Investment
This sign rented for around $500 per month per side. So it had revenue of about $1,000 per month. The ground rent I negotiated was $250 per month (the guy I bought it from had the rent at $600 per month – no wonder he failed). So the sign netted about $7,200 per year. I had many signs that made much, much more than that in our inventory – including a couple that made ten times that much – but what made this deal spectacular was the fact that I only had $1 in it. So my return on investment was an amazing 7,200% per year.
How You Can Replicate This Deal Today
You should always keep an eye out for abandoned billboards that show signs of neglect, such as rusted skirts and poles, or town ads, or broken panels, or even phone numbers that are faded beyond recognition. These are hot deals potentially, given the right circumstances. Often, the sign owner is only in trouble because of their own mismanagement, and you can rapidly fix the mistake. The prices on these types of deals are always low, and longer diligence periods are common. These represent some of the finest billboard deals in terms of rate of return, just like the one I bought.
There are many ways to approach the billboard industry. But one idea that is always a winner is buying a distressed sign for nearly nothing and fixing the problem. Keep your eyes open, and attack those opportunities. They might just be the best investment you ever made.
My Trip To The Mural Museum In Pontiac, Illinois
Located in Pontiac, Illinois is the Walldog Mural Museum. With wallscapes still a thriving part of the American sign industry, and sign museums few and far between, I thought it would be interesting to tour this landmark on the downtown square. And it definitely was worth the admission price – it’s free! The Walldogs are an eccentric group of sign painters that travel to a town and paint murals on virtually every blank wall in town. They came to Pontiac –at the city’s request –a few years ago and painted around 16 large murals in four days. Cities all over America compete to bring them to their town to paint giant works of art on blank walls. The museum is dedicated to the craft of painting advertising murals, which are a mainstay of brick buildings and barns throughout the Midwest. The museum also holds the Museum of Guilding, which is the process of applying gold leaf to a sign. Much of this craft comes from New England, and is fascinating if you are not familiar with the process of taking gold and pressing it into sheets so thin that it virtually floats in midair. There is even a gallery devoted to a famous Asian mural artist who has been experimenting with painting dresses that glow under ultraviolet light. The staff is friendly, and the price is right, so if you’re in Pontiac, Illinois, you should drop by.
Tip For Landowners When Negotiating a Billboard Lease in Canada
Have you seen this clause below in your billboard lease?
“If [the Billboard Operator] removes the structure(s) for any reason, only the above grade portions of said structure(s) shall be removed”
If so, you will want to remove this clause and replace it with something like
“If [the Billboard Operator] removes the structure(s) for any reason, the entire structure(s), including base and all below grade portions of said structure(s) shall be removed”
When a billboard structure is built, a substantial amount of concrete is used to form the base. In fact, on a standard monopole 10’ x 20’ structure (a very common structure in Canada), the base can go as deep as seventeen feet into the ground. The billboard operator will incur thousands of dollars in expenses if the operator must remove the entire concrete base of the structure.
When the billboard contract is up for renewal, since you are a savvy landowner (well, you must be savvy if you’ve decided to read this), you will ask for an increase in rent (this depends on many factors including the traffic patterns, the municipal by laws, the economy etc). At that point, you will have a negotiating process ahead of you. There is a good chance that other billboard companies will be interested in the opportunity to replace your current operator, and will offer you a slight increase in rent to make the switch. The presence of the “base removal” clause will give your current billboard operator extra incentive to renew your lease at a higher rate!
Have any questions about your billboard lease in Canada, please contact me at [email protected]
Steven Balaban of Mink Capital
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