On today’s Billboard Insider podcast out of home banker Nick Gonzales talks about the out of home debt markets. Nick’s bank seeks $1-20 million out of home loans.
Podcast: Play in new window | Download (Duration: 18:48 — 25.9MB)
Here are the highlights.
On July 1 Metro Phoenix Bank was acquired by Alerus Financial Corporation. What does the acquisition mean for out of home borrowers?
We’re really well positioned to reach a much larger swath of the out of home industry…It’s going to give us the capital…to reach some of these bigger operators…A little bit about Alerus. They are out of Grand Forks, North Dakota. They’ve been around since 1879. They started as Bank of Grand Forks…We expect our conversion, branding, everything…to be formalized in late September. This acquisition takes Alerus to about $4 billion in total assets.
How does the acquisition change your legal lending limit?
It essentially doubles it overnight. Whereas at Metro Phoenix Bank we were scraping to get to $10 million loan size…it really gives us a lot of independence on how we structure deals.
As a bank lender how do you view the strengths of the out of home advertising industry?
We feel bullish about the industry…the reasons why are…cashflow number one, value creation, market demand, overall profitability…those are the strengths.
What about cyclicality?
We understand that in a recession ad rates can soften, particularly if you don’t have a good sales team. At the end of the day we think that risk is small and mitigated by the fact that if you have an advertiser that’s been in a location for many years they’re not going to give up that prime location for a bad quarter or two…
What sorts of out of home loans are you seeking?
We’re most comfortable with traditional out of home – static, digital billboards…we’ll take a look at any deal which makes sense…We’re going to look at cashflow, collateral value, advance rate, strength of guarantors…We are going to heavily weight our underwriting to focus on the operational experience of…the management team…If we don’t have historic cashflow and it is a true proforma deal but this operator has lead sales for a different operator…we can lean on that strength.
Interest rates
Our pricing is going to be based on the wall street journal prime rate. We’re going to have a spread usually between 1 and 2.5 percent based on risk profile.
Fees
We’re going to have an origination fee. We’re going to have a documentation fee. We’re going to have a collateral inspection fee…Typically we’re going to be around 2%…
Do you require an appraisal?
We do…not for approval…We do that after approval and as a condition of close…We can go up to 65%. Our preference is to be in the 50-55% range…
What borrower information do you want?
First and foremost we want to see what industry experience you have and it doesn’t necessarily have to be operational experience. Maybe you’ve had sales experience. Maybe you were an installer…We’re going to want to see financial statements, tax returns, an inventory package. Sales sheets are always good, they have pictures, they have addresses, they have coordinates…We want to see leases. We want to see permits. A personal financial statement if we have a personal guarantor.
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