In the over 300 billboard signs I have owned, only two have been lost to development. I achieved this not out of sheer luck, although I have been lucky, but by being proactive about avoiding risks and mitigating the risks I can’t avoid.
In most billboard ground leases, you have to give the property owner a right to terminate in the event of development. Obviously, few people will tie up their land for years when it might sour a huge development offer down the road. As a result, your billboard is at risk of being removed at any time with so many days of advance notice.
When this is the case, there are several things you can do to reduce or eliminate this risk.
FLIP IT IF THE LAND IS HOT
Anyone can see land parcels that have a huge risk of immediate development. If you see a piece of raw land between two office buildings, or a piece of raw land between a Wal-Mart and Home Depot, then you are looking development right in the eye.
Except for cases of environmental pollution or unsuitable terrain, such a relationship makes buildings a billboard a bad idea if you are hoping for longevity. Don’t skip this location, just get a ground lease and permit and immediately sell it to another billboard company. You can use this capital to finance a more permanent location. In just about every case in which I predicted development, it has come to pass. Not that I’m some sort of mind-reader: it just made sense that the land was too hot not to be developed in the near future.
ADD TWO PROVISIONS QUIETLY INTO YOUR GROUND LEASE TERMINATION PROVISION
Be sure that your termination provision requires a building permit requiring removal of the billboard, and that it also includes language restricting any billboard to be built on the property for a period of at least 5 years. This is to ensure that the owner does not use the development “out” to replace you with a higher paying competitor.
BUILD YOUR BILLBOARD IN AREAS THAT CAN’T BE BUILT ON
If you want to sleep soundly at night, deliberately build your billboard within the setback requirements for whatever can be built on the land. For example, if your sign is on multifamily land, and is less than 20 feet inside the property line. Most billboard setbacks are less than the building setbacks. I like to build signs right on the property line using “ full-flag offset” monopole designs that make this possible. I also like to build on the edge of ravines or other obstructions that would also be impossible to build on.
DON’T GIVE UP WHEN YOU GET A TERMINATION LETTER
When you get a termination letter, which I hope you never do, the first step is to cordially request a meeting with the landowner. You still have several attempts to save the sign:
¬ Offer him more money. Sometimes, you can “greenmail” your way out of your problem. If he was getting 20% of the gross, offer to change to a 50/50 split of the net, or some other highly ulcerative option.
¬ Offer him one side of the sign for free for a certain period of time to promote his development.
¬ Ask him to allow your sign to stay until the construction is completed (this can take about a year). Sometimes, while your sign is still there, the development project crashes, and the whole problem goes away (lost financing, lost anchor tenant, etc.)
¬ Offer to sell him the sign for what you have in it to become his own premise sign for the development.
If you follow these steps you will greatly reduce or eliminate your exposure to losing your sign to development. Being proactive can save you a fortune and a lot of mental anguish, which you can put to better use building more signs.
About the Author:
Frank Rolfe started his billboard empire from his coffee table, as a fresh graduate from Stanford University. It began as a resume builder for graduate school applications, and ended with a sale to a public company 14 years later.
Using unique strategies he developed from desperate competition with much larger adversaries, Rolfe eventually owned more billboard units than any private individual in Dallas/Ft. Worth. Along the way, he fine-tuned the techniques to find billboard locations, rent advertising space, and sell signs and leases.
Rolfe is the author of the Billboard Home Study Course and has also put together the only bootcamp for those looking for a crash course on the billboard industry. The Billboard Bootcamp is held twice a year in St. Louis, MO.