Letting Sleeping Dogs Lie
—Often Bite When They Wake
The Old OOH Lease Strategy —Letting Sleeping Dogs Lie
As most of us in the billboard business know, leasing the ground space for a billboard can still be very much a wild west show. Strategies are abundant when it comes to negotiating and writing lease agreements. One of the strategies to leasing, more common place than anyone will ever admit, is ‘letting sleeping dogs lie’. Few insiders know it and many who claim to be insiders do not really know or will not be transparent discussing or writing about it. ‘Transparency’ (One of the reasons why you read OOH Today). The strategy is actually, a do nothing strategy.
‘Let Sleeping Dogs Lie’. The proverb restated: avoid interfering in a situation that is currently causing no problems but might do so as a result of such interference.
Enter a recent story by the Johnson City Press.
Lamar Advertising owns a billboard, sized 10′ 7″ x 26′ at a very appealing intersection near downtown Johnson City according to Lamar inventory data. As is most cases, Lamar does not own the land. The land was owned by East Tennessee State University, who, according to the Johnson City Press, has been receiving $50 per YEAR for the last 45 years or so from Lamar for the right to have the structure on the property.
That is $50 per year! But wait, that is not the issue. Nope, that is what some may call a good lease agreement for the lessee, Lamar in this case. The issue is, The City, Johnson City, bought the property from the University in 1978!
So the city of Johnson City, has been the owner of the property where the two sided billboard is located, for about 40 years or so.
Rather than share the uninteresting details about city zoning preventing new agreements, Lamar claims of grandfathered rights and exercising eminent domain, you can read those details in the link below. Let’s get to the interesting part of the lease strategy of sleeping dogs.
If it is to be believed the lease and management team for Lamar were unaware of the land purchase by the City (and that is a tough one to swallow—this is a small town) then why, when Lamar ‘found out’ who the rightful owner was (in 2017 per Sandos) would Lamar go to the city and offer a paltry lease agreement paying $250 per month?
Should they have continued to let the sleeping dog lie and not say anything to the city about the property and lease?
Lamar went to the City about entering into a contract, according to Johnson City Press, and that is supposedly when the city officials realized the billboard was on city property and asked that it be removed by September 1.
City officials stated the city’s zoning ordinance, which doesn’t allow billboards, prevent it from entering into an agreement with the company.
City leaders; most of them are pretty smart people. According to City attorney Sandos, at $3,000 a year, the Lamar agreement offer would be significantly less than comparable billboard lease agreements, particularly for that location. Double oops!
Examining the Lamar listed rates for the 2 sided location, our calculations for a lease could translate to a figure between $9,240 and $27,300 per year. Big range we know, but Lamar knows what they are getting for the space and who can trust an advertiser (Pal’s Sudden Service in this case) not to give the number up? FYI, I used a 30% lease payout. Oh and at 13 periods.(that damn transparency thing keeps rearing its ugly head doesn’t it?) Yes, its high but better than losing the structure and maybe rebuilding some credibility with the city from their first offer.
In March, the city asked Lamar to remove the billboard by June 1, which they extended to July 15 after the company requested more time.
We love the intestinal fortitude (translation– balls) Lamar has on them with this deal. It keeps getting better. Allegedly, Lamar attorneys told the city, the billboard should be grandfathered in and that Johnson City would be exercising eminent domain if it removed the structure, which the Lamar attorney claimed would cost the city $281,000. And the spheres get bigger! Does Lamar really wants to enter into a lease? But if you don’t ask, you will never get.
Hummm. Seems to me, table stakes have been now established, if I were the city, setting the buy in is now at $281,000. And then negotiate a lease agreement. Forget the fact the City arguably has never had a contract with the company for the billboard.
This is boiling down to a wait for the deadline of September 1 to see how Lamar Advertising responds.
According to Sandos, “We remain very hopeful that the billboard will be properly removed.” Do you think they mean removing the concrete foundation making it a clean site removal?
Remember, cities are getting smarter about OOH.
What is your take Mr or Ms OOH Owner? Let the sleeping dog lie? How would you have handled this? Based on the one sided story provided by the city via the local paper, could anything have been done to salvage this location thereby retaining the billboard?
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Read the story from Johnson City Press here ⇒Johnson City wants billboard removed by Sept. 1; owner claims that’s eminent domain