Hello all, I currently own a business in which I lease a free standing building on .8 acres/2,200 sq building. Also on the property is a billboard owned by one of the major advertising companies. The landlord came to me to see if I wanted to purchase the property because he has some health issues and wants to sell off. Now my question is: When valuing the the Billboard sign, do I go about this the same way I would any commercial real estate? Currently, I have a triple net lease so I am paying the CAM/taxes on the entire property since the billboard is listed as a temporary structure. The billboard company has 6 years left on their lease and as with any major billboard company they have an easy out in the lease(90 days). The current landlord has minimum expenses, and is treating the billboard as traditional commercial real estate evaluation. This significantly increases the asking price because it brings the gross rent to around 145K year(Triple Net). Should I be calculating the estimation a different way?
In my experience billboards are always included in the NOI number which is then divided by the cap rate to give you a rough estimate of value, so to answer you question in short yes it should be included.
At the end of the day, real estate has to be looked at as an investment you're buying today cash flow for tomorrow. As the billboard contributes to these cash flows you must include it.
You would value separately and add together to get total value. More than likely the cap rates would be different so unless the income is such a small percentage of total income it is better to value separately.