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The Value of Hiring Coastline Equity for Billboard Lease Negotiation
Many commercial property owners in Los Angeles have discovered alternative revenue streams through long-term leases with billboard companies like Outfront Media, CBS Media, and Lamar. However, when it comes time to renegotiate these leases, landlords can face a unique set of challenges.
In 2001, the City of Los Angeles established a 25-year moratorium on all new billboard licenses. While existing signs could remain under a 'grandfather' clause, neither property owners nor billboard operators can construct new commercial signs or replace existing ones. This situation creates a high-stakes scenario during lease renegotiation, where if an agreement isn't reached, the property owner may lose their monthly income indefinitely.
How Can Landlords Earn from Billboards?
Just like any other tenant, billboard income is generated from the lease payments made by the billboard operator. These operators, typically large media companies, own numerous billboards and lease them out to advertisers based on monthly contracts. In addition to the base rent, some leases may also include extra income for the landlord, such as Common Area Maintenance (CAM) payments or excess revenue based on traffic counts.
Determining Rent for Billboard Leases in Los Angeles
Rent for billboard leases is typically calculated based on the property's location, traffic counts, and previous ad revenue. Given that billboard leases can last for 20-30 years, it's crucial to negotiate a favorable rental rate when the opportunity arises.
Understanding Billboard Licenses in Los Angeles
The issuing of new billboard advertising licenses in Los Angeles is a rarity, with only a few narrow exceptions. This policy underlines the importance of maintaining existing billboard leases, given the difficulty of replacing them.
Challenges and Tips for Negotiating Billboard Leases and Extensions
Negotiating with billboard operators can be a delicate process. Push too hard, and they might opt to end the lease, resulting in the loss of a reliable income source. It's essential to manage these negotiations carefully, with a clear understanding of realistic pricing, lease terms, and maintaining open communication.
Before entering negotiations, landlords should:
- Thoroughly review the existing lease.
- Determine comparable rents for other billboards in the area.
- Update traffic numbers, as this factor heavily influences the rent.
The Importance of Due Diligence When Buying a Property with Billboard Income
For those considering purchasing a property with a billboard, due diligence is critical. Review the existing lease and all amendments, verify the billboard's existing license with the city, and check if any rent concessions were given to the operator during events like the COVID-19 pandemic. Be sure to understand all terms and conditions, including potential rent increases and responsibility for utilities and sign maintenance.
Potential Fines for Billboard Ordinance Violations in Los Angeles
It's important to know that any unlicensed or non-compliant sign or billboard can be subject to hefty fines from the City of Los Angeles. Ensuring that the sign on your property matches the dimensions provided in the city license is crucial to avoid these fines.
The Value of Hiring Coastline Equity for Billboard Lease Negotiation
Engaging the services of a professional property manager like Coastline Equity can prove invaluable when it comes to billboard lease negotiations. Our team thoroughly reviews existing leases, verifies billboard licenses, provides updated historical traffic counts, and presents rent comparables in your area. This comprehensive approach ensures that you have all the relevant information at your fingertips when making critical decisions.
By hiring Coastline Equity as your property manager, you're not just getting an experienced team to manage your day-to-day operations; you're also gaining a strategic partner committed to protecting your investment and optimizing your income.
For more information on how we can assist with your billboard lease negotiation or any other property management needs, please call (310) 373-0602.
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