Last week out of home leasing and development expert Andy Goodman talked about visibility and rent resets.  Today he talks about these fees, signing bonuses, and rent increases.  Good money is an expert on signed development in California.

Amendment Fees and Signing Bonuses

Five or ten years ago, I would have said we’d never pay signing bonuses. At that early stage, you don’t even know if you’ll be able to build the sign—you don’t have City or State approval, and the permit is still uncertain. But the industry has changed. With so many new billboard companies entering the market nationwide, the landscape is more competitive.

Unfortunately, paying signing bonuses—or committing to a lease early—has become the norm. When an RFP (Request for Proposal) comes out, you sometimes have to offer a bonus just to stand out. Cities and Property owners increasingly want to see that you have “skin in the game.” A signing bonus signals commitment, and it puts pressure on the Company because now you’ve got money on the line. I don’t like the shift, but more and more Cities and property owners are asking for it.

Development Fees and Rent Increases

There are two very different development fee models, depending on the type of property. On city-owned land, fees and percentage rent structures are significantly different compared to private properties—where you’re typically dividing the pie three ways paying both the landowner and the city, and as the Billboard Company still needing to earn a profit.

Percentage rents have grown dramatically. We’re seeing more cities and property owners requesting annual increases—often in the range of 1–3% or even tied to annual CPI—which is a major shift from the traditional model of 10% every five years. When you sit down and do the  math—CapEx, projected revenue, and rising expenses—a lot of deals just don’t pencil out anymore. More and more, billboard companies are walking away, saying the economics simply don’t work.

You can reach Andy at 310-721-8422, andygoodman.age@gmail.com.

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