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BILLBOARDS & SIGNAGE, P.2

Billboards & Signage, p.2

 

You choose an OAC the same way you choose a managing agent or a capital-improvement contractor. "You've got to interview them, understand the legal parameters and stress that safety issues are paramount," says Schwartz.

Don't forget to address content issues. Andrew B. Freedland, an associate at Cosmark's firm, recalls working on a deal where "there was a solid paragraph of text defining what uses were not appropriate for the sign – what's offensive, what's not offensive." An example of the former? "Strip clubs," Freedland says. "Some buildings might not want liquor ads. And nobody's allowed to do cigarette billboards," he notes, referring to the federal Attorney General Master Tobacco Settlement Agreement of 1999.

You need to be aware of structural and even weather issues. Theresa Racht, a partner at Racht & Taffae, mentions one co-op in northern Manhattan, near the Hudson River that "would do it in a heartbeat, but the wind up there is prohibitive. They also have lightning issues. You may have a building with what seems like a perfect big, exposed space, but there have been some accidents with signs because of wind."

166W72St_Habitat

For aesthetic and/or philosophical reasons, residents in your building may prefer not to have signage. Board president Peyser, who wanted to explore the possibility of leasing billboard space on his building, found himself in the minority of his seven-member board. "There was somewhat of a disdain toward cheapening ourselves by hanging a billboard," he says. "But I think you have to look at where the building is and what the neighborhood is like and what an advertisement could fetch. If you take all those factors into consideration, and if you're in a highly trafficked location anyway, this could be one of the upsides to having traffic outside your door. If you have to smell the fumes and hear the horns blaring, you might as well make some revenue from it."

Photo above: Public service announcement sign at the rental building at 166 W. 72nd Street. Click on image to enlarge.

Discussion never progressed to where the co-op would order zoning research done, but the managing agent did bandy about some figures. "We were hearing, like, $20,000 a month potentially," says Peyser, whose co-op, he notes, is financially healthy without that.

Signs of Revenue

Assuming all these details get ironed out, an OAC generally agrees to pay a flat fee for the right to host and sell advertising on the property; it's generally in the mid-four-figures monthly. "Make it easy on yourself and go with a fixed amount," advises Racht. "If it's a five-year lease, you might try to get increases each year. If you try to tie it to some sort of revenue-sharing … [t]he cost to have an auditor go through records to check on your percentage is not inexpensive. No management company would do it as part of your standard management fee."

Sergio A. Fernández de Córdova, executive vice president of the ad company Fuel Outdoor, also cautions against revenue-sharing, and proposes a novel alternative to flat fee. "If you do revenue-sharing," he notes, "you're a partner in the business and you have to register with the city as an OAC."

It also means that if the outdoor-ad company can't sell an ad to fill the space, you get no revenue – unless, de Córdova suggests, "you do a structured contract that contains a fixed rent and a ‘when sold' [component]," referring to a fee that kicks in only when the ad space is actually sold. "So you may get $1,000 a month," he says, giving an arbitrary figure, "and when the sign space is sold you get another $1,000 a month. So if the space isn't sold, at least you're collecting rent" – presumably more, in total, than you would have had with a straight flat fee.

Condominium buildings take the same steps, up to the technicalities of rights-leasing. "With co-ops," explains Cosmark, "the corporation owns the outside of the building, whereas in a condominium, an outside wall is common element partially owned by every unit-owner. The [condo] board cannot lease a portion of the common elements without getting 100 percent of the owners to agree."

Ultimately, the revenue from signage is only part of what goes into a decision to turn your building into a billboard. "Once you come to the conclusion that marketing or media messages have a power, then you realize some of them are promoting positive ideas and some are not," says Jordan Seiler, founder of the advocacy group Public Ad Campaign. "If it's an issue within your building, then it's an issue outside your building, since you have to look at it every day."

 

Adapted from Habitat January 2010. For the complete article and more, join our Archive >>

Photos by Frank Lovece

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