Proposed Limits Irk Billboard Landlords

Staff Reporter

Beauty is in the eye of the property owner.

As L.A. city officials seek to curb the proliferation of billboards and reduce the thousands that already dot the urban landscape, property owners throughout the area stand to lose a steady and sometimes significant source of income from billboard lease payments.

What many homeowners and others consider a visual blight can bring a property owner up to several thousand dollars a month with little or no effort.

"We're talking millions and millions and millions of dollars," said Rick Robinson, L.A. market manager at MacDonald Media LLC, an outdoor advertising firm. "It's going to take money out of the property owners' pockets, hands down."

A moratorium banning the construction of new billboards expires on June 12 but the City Council is expected to consider a permanent ban before then. Certain areas might be exempted from such a ban through the creation of special signage districts.

The Los Angeles City Planning Commission recently rejected a proposal that would permit the removal of hundreds of billboards from city streets, in exchange for the installation of 50 to 70 new ones along designated freeway areas. However, the council, which is believed to be more open to a billboard swap, will have the final word on the reduction program. Plans in the works The swap is only one of several proposals being considered to cut back on the number of signs in L.A., home to an estimated 10,000 legal and illegal billboards, according to Planning Director Con Howe. One ordinance going into effect March 30 will require outdoor advertisers to report all billboards to the city's Department of Building and Safety. The measure, authored by City Councilman Jack Weiss, also calls for the creation of a billboard inspection program that will include placing bar codes on signs to indicate their permit status. A yet-to-be determined billboard registration fee would be implemented to fund the program. The city also is seeking sponsorship for two bills that would change the state's outdoor advertising laws. One would allow the removal of billboards, without payment, after an amortization period. The second bill would permit the city to require the removal of billboards deemed illegal. Talk of taking down billboards worries Arturo Sneider, president of Primestor Properties, a West Hollywood-based shopping center developer. When buying property, billboard income often has been a crucial consideration so much so that the signs can bring in more money than the real estate below them. "It's a very important element. Sometimes, we look at a property that...we have in the past identified that that would be a good billboard location and actually acquired the property for that purpose," he said. "(It is) part of an income stream that you have to count on." Billboard income depends on several factors, such as its size, location and the amount of traffic in the area. Outdoor advertising companies generally seek to keep the lease rate to less than 30 percent of the gross annual revenue generated by a billboard. That means anything from $350 a month for a poster-sized billboard on a street to $25,000 or more for a large "bulletin" along a freeway.

Dan Riley, a local commercial real estate broker, recently helped his family sell a property on the southeast corner of Sawtelle and Santa Monica boulevards that was drawing about 14 percent of its annual income from a large billboard. The family had allowed an outdoor advertising company to install the billboard because it represented a source of additional income.

"If it's in a good location, they'll pay good money," Riley said.

Cities are prohibited from removing billboards without compensating owners, which is why L.A. officials have been considering swapping several street signs for fewer but more lucrative ones along freeways. Terms of such a deal would be decided by the City Council, with the input of the outdoor advertising companies.

No maintenance required

Property owners simply lease the land to the billboard companies, which usually take care of installing and maintaining the signs. Most of the city's billboards are owned by subsidiaries of media giants Viacom Inc. and Clear Channel Communications Inc.

"(Billboard companies) are deciding the landowner's fate without the landowner's input," said Jeff Thomas, author of "Billboards: The Secrets of Free Money For Doing Nothing and the Landowner Revolution."

The reason billboards have become so valuable, according to Thomas, is because they offer advertisers a way to reach their audience with less competition. While the growing number of channels is making television an increasingly fragmented medium, the amount of billboards in a given area is normally limited.

As with other forms of advertising, billboard rates are decided by supply and demand. A reduction in the amount of billboards in L.A. would likely drive up the prices of the remaining signs.

"I frankly believe that at the end of the day, (reducing billboards) is not such a bad thing for the business climate in Los Angeles either because billboards have proliferated," Weiss said. "There's so much clutter out there that they probably mean less to businesses than they used to."

For reprint and licensing requests for this article, CLICK HERE.