Billboard Insider talked yesterday with Kalil and Company broker Max Drachman about the out of home transactions market.
Max, what are you seeing in terms of transaction activity as we move into what appears to be another wave of Covid infections around the country?
We have closed five Outdoor deals since April 1st, so we have not had a slowdown in terms of bringing transactions to finality. It does feel like there are more mines in the typical deal minefield right now, but there remains significant demand for Outdoor assets across the country. The current increase in Covid cases seems a lot different than the beginning because there is a lot less uncertainty about the future. I remember sitting in my living room the night they cancelled all travel from Europe and the NBA season within an hour or so and it was uncomfortable because no one really had any experience with a world altering pandemic. Now that we know a lot more about the disease as a society, there is less uncertainty, and buyers and sellers alike are a lot more comfortable transacting now.
Who are you seeing currently as Buyers in the OOH market?
Most of the buyers that are successful in securing acquisitions are looking at Covid as a temporary setback, and not something that will have a long-term impact on the value of Outdoor assets. Furthermore, most of the buyers closing on Outdoor deals today, are the same buyers that are successful in making acquisitions when times are good. Sellers, for the most part, are looking at the virus as temporary as well, and are not looking to take a value discount. If they are only getting offered discounted valuations, they will simply hold for a few more months. That said, there are other sellers who see investment opportunities where they can take slightly less than their perceived value of their Outdoor assets, and secure steep discounts in other spaces they are familiar with (energy, commercial real estate, general stock market, ag, etc.). We have seen some softening on new builds based on the buyer’s uncertainty about rates going forward, but other than that, Outdoor transactions are still trading in the 8x-12x BCF range.
Last year we saw new investors coming into the OOH market. Is that trend continuing?
Absolutely, and probably more so than usual. We still get regular calls from private equity, former owners, broadcast and print companies, all looking to enter the Outdoor space. Some call hoping to hear that Outdoor is all-of-a-sudden trading at a material discount like they have seen in other spaces, and are usually surprised when we tell them that is not the case for Outdoor. This stability in pricing is a testament to the long-term value of Outdoor assets that has been embraced by the marketplace.
If I am considering selling all or some of my OOH assets, what should I know about this market?
It depends on the type of assets and their geography. Buyers are fairly allergic to pricing solely based on upside with no trailing information to back up the extra value right now. However, if you have an asset that has performed year-in and year-out, you can expect comparable pricing to selling this time last year, which was a strong environment. There may be fewer buyers and you may get fewer offers, but at the end of the process pricing will be consistent with where the market has been for years.
You just closed on a transaction between Whistler and Headrick. How does that deal fit into the discussion?
It is a great example of a buyer that is successful when times are good, acquiring good assets when they come available regardless of market conditions. Shawn Whistler has a long term outlook on Outdoor and knows this acquisition will perform for many years to come, and ten years from now it won’t matter what was going on in the world when he closed the deal. We are very close with, and big fans of, Mr. Headrick and his team and have helped them trim very specific parts of their portfolio that do not suit their long-term operating interests. This deal was closely pursued by several other buyers, so getting it done at a retail price point was not anomalous.
Any other general observations?
A couple things come to mind. I see tangible evidence of people evolving to suit the current environment. A small example is that, early on in the pandemic, I was made aware of how many avid toilet paper collectors we have in Arizona, as they came out in full force and our store shelves were empty for months. That has waned, and our supply chain is figuring out how to operate in the Covid world. You can apply that example to almost every industry, ours included. We have some people in our office who have chosen to stay home since late March. There were some speed bumps in the beginning, but we are back to operating as a well oiled machine from top-to-bottom.
The other notable observation is how times like these give people in every industry an opportunity to sharpen their tools. When times are good, average people can do well. When times are challenging, the best in their fields become better because they need to be more precise, thorough, and work harder to get results. The new practices typically linger far longer than any maladies affecting the market, leading to more successful businesspeople upon the inevitable return to normal.
[wpforms id=”9787″]
Paid Advertisement
