Billboards don't win many beauty contests. Some people see them as the scourge of the landscape. But those who go after the billboard industry do so at their peril. Lady Bird Johnson once led a national campaign against billboards. Final score: outdoor advertising industry one, Lady Bird nothing. Occasionally, a city or town makes a move on its own. One Boston suburb for a time became a commercial-free zone when it brought suit against outdoor advertising and the industry responded by limiting itself to public service posters. Then the case was settled. Some small boards came down, but back came the paid ads. On occasion, the anti-billboard forces think they have a sure winner, as when the building under a billboard is to be torn down. But sometimes billboards have a life beyond the lives of the buildings they sit on. The old Boston Garden is about to be razed. But when it is, the word is that the big sign on its roof will take up residence next door, on the Fleet.

Outdoor advertising is a heavily regulated industry. Generally, local ordinances prohibit the construction of new billboards. Old billboards are grandfathered, and the industry guards carefully against the loss of any of these. The outdoor advertising industry is dominated by a handful of national companies. These maintain confidentiality concerning the monthly advertising rates they charge and the rates they pay to landlords for the locations of the boards. Smith may know what the company has offered him to keep its billboard on his roof, but he has no idea of what they have offered Jones for the use of her roof down the road. Because of the general secrecy about rents (which can be high), billboards are a potentially large source of tax revenue for cities and towns. A well-exposed billboard may earn revenue that can rival that of the building it sits on. In the valuation of billboards, the cost of construction can be deceiving. The cost for a new 14' x 48' sign on a pylon may be $40,000. At the right location, the board may earn that back in just a few months. A billboard has value not so much in terms of what it costs to build it as in terms of rent. What is valuable is the right to maintain a board at a high-traffic location. That right is a right in real estate. And that is where the appraiser comes in.

For the appraiser, the first task in the analysis of a billboard is to sort through the various participants in its ownership and operation and the cash flows to each. A single board might have an advertiser - say, Pepsi - paying Ackerley, the company, for advertising; Ackerley paying rent to Higginbotham, who owns the sign; and Higginbotham paying rent to Mertz, who owns the land. The money flows down in an ever-diminishing stream. Pepsi has no valuable rights in the real estate, but Ackerley and Higginbotham may. Mertz certainly does. The value of the interest of each depends on the cash flow. For the company, a single board represents only a part of a network of boards that allows the company to offer advertisers a "showing" throughout a region. The company may argue that the loss of one board represents damage to the entire network. For courts involved in takings of properties with billboards, the nature of the thing earning the income is an issue: personal property is typically not compensable in eminent domain. Billboards are classified as personal property. Whether removal is a compensable loss is arguable.

Billboards augment the income of many commercial properties. For the valuation expert, a basic familiarity with how they are operated is important. Access to hard-to-get comparable market data is advantageous, as well.

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Eric Reenstierna Associates LLC is a real estate appraisal firm taking on valuation and consultation assignments in Greater Boston, Massachusetts and New England. Eric Reenstierna, MAI, is the office's principal and is a commercial real estate appraiser.


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