1. Billboard Financing May 2015
Dave Westburg
Billboard Loans
5/12/15
Billboard Financing

2. Dave Westburg Background
26 years lending to out-of-home business.
Four funds which have $20 million lent to media companies.
Finance billboards, digital signs, 8 sheets and transit advertising through Billboard Loans
Raise equity and debt for billboard companies.
Provide operating services (sales, accounting and management) to billboard companies via Circle City Outdoor (
5/12/15
Billboard Financing

3. Trends of The Billboard Industry
Industry rebounding from recession
Digital signs creating growth opportunity but have drawbacks.
Some parts of the country overbuilt with rents of 30-50% of normal.
Landmark is aggressively buying billboard land leases.
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Billboard Financing

4. Outdoor Revenues recovering from recession
Year
US Outdoor Revenue (millions)
% Change
US GDP (billions)
2008
$7,300 0%
$14,383
-2%
2009
$5,900
-19%
$14,681 2%
2010
$6,100 3%
$15,238 4%
2011
$6,400 5%
$15,956
2012
$6,700
$16,502
2013
$6,900
$17,044
2014
$7,000 1%
$17,701
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Billboard Financing

5. Digital Sign Pros and Cons
6-8 advertisers versus 1.
Ability to change copy without $400/install.
Cons
100,000 hour life (11 years) versus 40 years for steel monopole.
$350,000 capital costs versus $40,000 for monopole
Higher electricity and insurance.
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Billboard Financing

6. Market impacts of being overbuilt
Normal rent for 14 by 48 billboard or digital billboard: $1,000-1,500/month.
Rent for 14 by 48 billboard or digital billboard in overbuilt market: $ /month.
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Billboard Financing

7. Market impact of Landmark Dividend
LLC focusing on ground lease acquisition.
Buys billboard leases and easements in exchange for a lump sum payment to the land owner, 8-10 times value of annual lease payments.
Negative implications for the billboard industry if they acquire a large portfolio of leases.
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Billboard Financing

8. Industry Valuations 4-6 times gross revenue.
6-10 times cashflow (earnings before interest, depreciation, amortization and addbacks).
Values at high end if:
You own easements under signs.
You have good leases (low cost, long maturity)
You have digital sign conversion potential.
You have 14 by 48 billboards.
You have clean permits.
Values at low end if:
You have bad leases (high costs, short maturity).
You have smaller billboards.
You have permit issues.
Noone pays for potential revenue.
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Billboard Financing

9. What you need to access debt.
Equity.
A transaction.
A loan package.
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Billboard Financing

10. A Lender’s View of Acquisitions
Valuations
4-6 times gross revenue
6-10 times cashflow (ebidta)
Are leases decent?
Lease costs less than 20% of gross revenue.
No guaranteed annual rent increases.
20 year term.
Is market overbuilt?
Digital sign potential
Purchase assets, not stock.
Can depreciate assets but not stock.
You’re stuck with the owner’s liabilities.
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Billboard Financing

11. A guide to addbacks OK Not OK Interest Financing charges.
Fines and penalties.
Leases for space which won’t be used.
That portion of owner’s salary which won’t be replaced.
Not OK
Corporate overhead.
Phone expenses.
Travel.
Unspecified personnel cuts.
Legal fees.
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Billboard Financing

12. Sources of Equity Home equity line of credit. Savings.
Costly to access 401(k) or IRA.
10% early withdrawal penalty.
Taxed as current income.
Friends and family.
Jobs Act (SEC Oct 23, 2013 Proposal on Crowdfunding).
Accredited Investors.
Equity Funds.
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Billboard Financing

13. Examples of Undeclared Liabilities Which You Inherit If You Buy Stock
Unpaid leases.
Unpaid contractor bills.
Environmental liabilities.
Lawsuits.
Tax liabilities.
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Billboard Financing

14. The Loan Package (in order of importance)
Sources and uses of funds.
Historic financials.
Personal financial statement.
Operating spreadsheet of the plant you want to buy (locations, sign type, lease terms, lease expiry, advertiser, ad contract terms).
Management bio.
3 business and professional references.
Projections.
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Billboard Financing

15. What to do when approaching a lender.
Be specific on how much money you want and for what.
Approach the lender when you don’t need the money.
Talk the lender’s metrics
Revenues
Cashflow (EBIDTA)
Dwell on history, not on the future.
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Billboard Financing

16. EBIDTA (what the business can pay the bank)
Earnings before:
interest
Depreciation
Income Taxes
Amortization
Trailing twelve months.
Debt Capacity is a multiple of EBIDTA
Debt Service coverage is (Interest and Principal)/EBIDTA
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Billboard Financing

17. Billboard Loans Debt Terms
Interest rate of Prime plus 6% floating.
Floor on the rate at 12%.
2% loan fee.
2% legal/travel fee.
Personal guarantee.
First security interest in all assets of business.
UCC on inventory, equipment and receivables.
Assignment of material agreements.
Pledge of stock.
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Billboard Financing

18. My Debt Terms Continued
Debt/EBIDTA of 6:1 or less.
Debt Service Coverage (Interest and principal)/EBIDTA in excess of 1.1 times.
Restrictions on dividends, salary, capital expenditures, other debt …
7-20 year amortization.
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Billboard Financing

19. Sources of Debt Billboard Loans Funds Sign Vendors (Yesco, Daktronics)
Banks.
Leasing Companies. Beware prepayment penalties.
Finance companies (usually want to do $10 million or more).
5/12/15
Billboard Financing