Billboard Leases

What Exactly Is a Billboard Ground Lease?

A billboard ground lease is the long‑term agreement between a landowner and an outdoor advertising company that allows the company to build and operate a sign on a specific portion of land, in exchange for rent. In most modern transactions, investors purchase an easement or leasehold interest tied to that income stream while the underlying landowner retains fee ownership of the property. For buyers, this feels similar to acquiring a small NNN lease: the billboard operator is responsible for construction, maintenance, insurance, and operations, while the ground‑lease investor simply collects rent. Because the physical footprint is small but the income is driven by traffic counts and advertiser demand, the value of a billboard ground lease is far more about location and lease terms than the dirt itself.

“Billboard ground leases are essentially tiny net‑lease deals bolted to the best traffic your market has,” notes expert broker Bob Waun. “Once you understand the rent, the term, and the tenant, you can model them just like any other income‑producing real estate.”

How Billboard Ground Leases Are Valued

1. Capitalization of Net Ground Rent

The most common valuation method capitalizes the net annual ground rent using a market‑supported cap rate, similar to other income properties. Industry appraisals and survey data often show billboard ground‑lease cap rates in the 8–10% range, depending on risk factors such as traffic counts, digital vs. static, and strength of the operator. An IRWA case study, for example, illustrated a site with $7,000 in net annual income valued at approximately $77,800 by applying a 9% cap rate 7,000÷0.097,000÷0.09. Another valuation guide notes that many appraisers treat 8–10% caps as normal for stabilized billboard easements, with 7–9% used in stronger locations or with top‑tier credit operators.

In practical terms, a ground lease paying $10,000 per year at an 8.5% cap might support a price around $118,000, while the same lease at a 10% cap would be closer to $100,000. This sensitivity to cap rate is why market evidence—recent sales, operator credit, and local demand—matters so much in valuation.

2. Income Multiple (Cash‑Flow Multiple) Approach

Many billboard specialists also look at income multiples, especially when trading easements in bulk. It’s common to see stabilized billboard ground leases sell for 6–10 times annual ground rent, with:​

• 6x for distressed or short‑term situations,

• 8–10x for typical stabilized deals in good corridors.​

Some aggregators such as Landmark Dividend have reportedly paid 10–14 times cash flow for trophy easements in exceptional locations, reflecting competition for long‑term, predictable income streams. An investor who buys a ground lease with $12,000 of annual rent at 10x revenue, for example, is effectively paying the equivalent of a 10% yield (the reciprocal of the multiple), so the multiple and the cap rate are simply two ways of expressing the same relationship.

3. Discounted Cash Flow and Lease‑Term Analysis

Where lease terms are complex, investors often run a discounted cash‑flow (DCF)model, projecting rent escalations, options, and terminal value over the remaining term and then discounting back to present value. Risk adjustments are applied for:

• Remaining primary term and options

• Termination clauses and zoning risk

• Probability of relocation (right‑of‑way projects, road widenings)

• Regulatory constraints and local sign codes.

DCF analysis is especially useful for portfolios, digital conversions, or easements that may outlive the current structure but support future sign upgrades.

4. Traffic, Visibility, and Market Rent

Behind the income stream, valuation is ultimately anchored to what advertisers are willing to pay for the face, which is driven by traffic counts, demographics, and competition. Prime billboards in places like Times Square can command monthly advertising rates over $1 million, while typical highway faces may rent for $1,000–5,000 per month depending on impressions and market size. As with any real estate, comparable ground‑rent levels in the same corridor are critical; above‑market ground rents may not be sustainable if advertiser demand softens, while below‑market leases may represent upside for a savvy buyer.

As Bob Waun puts it: “The sign itself is just steel and LEDs. The value is in the traffic you own a slice of, and the paper—your lease—that controls it.”

Why Demand for Billboard Ground Leases Is Growing

The macro backdrop for out‑of‑home (OOH) advertising has been strong. U.S. OOH revenue reached approximately $9.1–9.13 billion in 2024, the highest level ever recorded, up about 4.5% year‑over‑year and more than 6% above pre‑pandemic 2019 levels. Digital out‑of‑home (DOOH) accounted for roughly 34% of total OOH revenue and grew around 7.5% in 2024, making it the fastest‑growing segment of the medium. Top national spenders include brands like Apple, McDonald’s, Amazon, Coca‑Cola, Verizon, Disney, Morgan & Morgan, Google, and Samsung, underscoring the credit quality behind many billboard operators’ rent rolls.

For ground‑lease investors, this translates to high‑visibility, inflation‑protected cash flows tied to a sector that continues to grow even as digital advertising fragments online. Many leases include periodic escalations (often 2–3% annually or CPI‑based), providing a modest hedge against inflation and supporting long‑term value growth.

Who Buys Billboard Ground Leases?

There is now a surprisingly diverse buyer pool for billboard ground leases and easements:

Buyer Type	What They Like	Typical Strategy
Billboard aggregators & specialty funds	Scale, operational control, ability to re‑lease faces	Acquire easements and leases in bulk, optimize rents, sometimes convert to digital
Billboard REITs & public companies	Long‑term recurring cash flows, portfolio diversification	Fold ground leases into broader OOH portfolios for stable FFO and dividend support ​
1031 exchange investors	Passive income, real‑property easement status, inflation‑hedged leases	Use perpetual or long‑term easements as replacement property in like‑kind exchanges
High‑net‑worth individuals & family offices	Simple, low‑management net leases	Buy single‑asset or small portfolios at 7–10% yields for income allocation
Local landowners & developers	Control of corridor frontage, future redevelopment options	Acquire or renegotiate billboard leases to enhance site income or future project value

Structuring deals as perpetual or long‑term easements is particularly attractive for 1031 buyers, because the IRS has signaled that properly structured billboard easement sales can qualify as real property for exchange purposes. That combination—real‑estate tax treatment plus essentially bond‑like rent—is why competition for well‑located ground leases has intensified in recent years.

“In a 1031 exchange, a billboard easement with a national operator can function like a bite‑sized net‑lease REIT,” explains Bob Waun. “You get real‑property treatment, predictable income, and zero toilets to fix.”

Making Ground Leases More Marketable

From a brokerage standpoint, the most marketable billboard ground leases share three features: credit, clarity, and term. Investors and appraisers tend to pay stronger multiples when:

• The tenant is a recognized operator with a track record and national or regional footprint.

• The lease file is clean—recorded easement, clear legal description, attornment and estoppel certificates, and documented rent history.

• There is meaningful remaining term (10+ years with options) and reasonable termination protections, minimizing the chance of the income stream disappearing due to non‑renewal or condemnation.

Packaging deals with professional marketing materials—traffic counts, traffic‑camera visuals, advertiser examples, and clear financial modeling—helps position billboard ground leases alongside more familiar net‑lease assets for institutional and private capital alike. As Bob Waun often tells owners, “If you can show the story in three numbers—rent, term, and cap rate—you’ve made it easy for the right buyer to say yes.”