Does anyone know of a good source for signage cap rates/transaction comps? Trying to value a property with significant signage NOI attribution and signange comps are rare. Thanks in advance!
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is this the Sunset deal in west hollywood with the H&M billboards by chance?
Negative.
I've done financing for a building in NYCs bowtie district withh significant signage. Every bank/lender looked at the NOI then discounted the signage a certain percentage and kept the cap rate for the rental income. If the property is in a great location then I don't see buyers balking if you use the rental income cap rate to the whole NOI.
Apologies if I'm missing something, but why would you cap the signage separately? You cap NOI, of which signage income/loss is a part of.
Signage isn't as stable as base revenue. Some underwriters discount signage for this reason (either take a discount, or simply utilize a higher cap rate when computing value).
Another example is if you have a mixed use development, say a highrise multifamily rental over retail / restaurant. I compute terminal value by capping the multifamily lower vs. retail (ig. cap multifamily at 4.50% and retail at 5.50%). It may seem silly given that the building will most likely be a single sale, but I see this all the time.
Yeah I understand caping different components of mixed use separately, but it just seems odd to me to cap signage as opposed to simply adding a variable, almost like a vacancy rate, to it. Variable income, such as from vending machines or reserved parking spaces, etc. aren't necessarily stable either, and you don't cap those.
We always bifurcate signage or parking value.
Depending on location, traffic count and leasee we typically cap signage at a 5.5 - 7.5. Have done two recent deals in which institutional buyers have attributed a 5 cap for a downtown location and a 6 cap for a more tertiary market. Both 20 yr leases with relatively strong credit.
Parking is dependent on market but can be as low as a 5.
Note these are bay area comps.
This. We have a mixed use project with significant non-retail/office NOI attribution (i.e., 50% of the NOI is not from a lease structure) through signage and parking. We capped each of those income streams at a different rate, but we sort of just swagged the signage based on a spread to the real estate cap rate. I was just trying to find out if others had found good sources for comping those. Sounds like the answer is not as scientific as I hoped. Thanks guys.
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