Unlock the Value in Your Broadcast Towers

Many of our broadcaster clients have chosen to monetize their tower assets at impressive prices.  This year alone, I have sold and closed over 200 broadcast towers to tower consolidators.  While radio stations continue to trade at 6.0x to 7.0x cash flow multiples, towers are trading and 10.0x to 12.0x, and well into the “teens” if they include 3^rd-party cellular tenants.


If you would like to confidentially discuss the value and marketability of your broadcast towers, please give me a call.


George
Media Services Group
904.285.3239

Beasley Broadcast Group + Greater Media

Thoughts on the $240 million deal. Read them here. 

NJ Broadcasting, LLC Closes on WWRL-AM In New York City (Press Release)

NJ Broadcasting, LLC, owned by Dr. Nimisha Shukla, closed on the purchase of WWRL-AM, New York City, from Access.1 Communications Corp. Access.1 is headed by Chesley Maddox-Dorsey. The station has been operated by NJ Broadcasting under an LMA since February 1. The purchase price was $7,000,000. 

WWRL-AM, 1600 kHz, programs for the large South Asian Community located throughout the Tri-State Area. Dr. Shukla, a Pediatric Physician, also owns 7 Days Pediatrics, located in Edison, New Jersey.

Tom McKinley and George Reed of Media Services Group represented the seller in this transaction.

Tweet of the Week

Have a great 4th!

George

Guest Blogger Stephan Sloan: Bigger Than Big

$86,422,558,704

That looks like $2.71/MHz/Pop.

I didn't have the optimism to model that there would be reserve price discipline of the middle and smaller TV station owners to support this. The message I see in this information is that the TV broadcasters have participated fully in the FCC's plan and the spectrum is valuable to them. I also see an effect from the consolidation in the Television business as the larger broadcasters had the time and talent to determine optimal yield analysis and bidding strategies. While I remain surprised by the total I believe there is substantial data to support validation from the Forward Auction.

Before recoiling at that clearing cost please consider the quote below from Peter Compton in commenting on the results of the AWS3 Auction back in May of 2015.

"The nationwide average price for the paired blocks was $2.72/MHzPop, about three times higher than investment banking estimates before the auction began."

Stephan Sloan 
Director, Media Service Group
401.454.3130
ss@mediaservicesgroup.com

Guest Blogger Stephan Sloan: The Big Big Number

I tipped my hand with my LinkedIn post on June 1st "The $40 Billion Blink" as to what sort of capital I thought would be required to clear 126 MHz in the Reverse Auction.

George Box famously observed that all models are wrong but some are useful. In this spirit I accept that my models are wrong but none the less support and illustrate reality. Though many of the industry professionals I respect have opined at much lower Reverse Auction clearing costs, I expect $58 Billion or greater. The histogram below presents the data from 99 iterations modeling the Reverse Auction.

What this data means is that I can construct models that indicate a high probability that the clearing cost is more than $58 Billion and costs exceeding $60 Billion are a significant possibility. This represents a range of approximately $1.72 to $1.93 /MHz/Pop. If you accept the idea that the first round of the auction evidenced stations freezing based upon the requirement to meet the maximum possible clearing target, then we were bound from the moment the clearing target was announced, to end up here.

$58 Billion also has an additional significance to those of you following my LinkedIn postings. I’ve enjoyed very much the opportunity to post these thoughts and your responses. For my contacts who would like to take me up on it, I will wager a steak dinner– at the restaurant of your choosing- that the clearing cost will exceed $58 Billion. $57,999,999,999.99 or lower and it’s on me, just memorialize your interest in an email, tweet, LinkedIn Message or other dated communication before the FCC releases the data. I think a good reference should be the Incentive Auction dashboard.

I’ve been focused on this level of clearing cost since 126 MHZ was announced on April 29th. I look forward to discussing how this value is validated in the Forward Auction.

Stephan Sloan
Director, Media Services Group
401.454.3130
ss@mediaservicesgroup.com

Guest Blogger Stephan Sloan: Moving Day

This week's progress in the Reverse Auction includes the rounds in which stations will become frozen in much greater numbers than in the previous weeks' activity. I anticipate that somewhere around 300 television stations will be frozen in the auction in rounds 31 through 45. 

While the last week's rounds illustrated the price decrement in relation to opening bid, this week makes clear the diminished bids in terms of dollars. Round 31's activity is expected to yield an average of $68 million freeze price with a high of $108 million and a low of $16 million (a Class A station). At the week's expected ending round 45, the freeze prices are down to an average of $8 million with a high of $13 million and a low of $5 million. The following chart illustrates the declining freeze prices by stations and round. 

Considering the post-auction scarcity of television stations, especially UHF channels, it is hard to imagine many markets where this level of pricing is not a significant discount to what will be available to station owners post auction. 

Since the Round 21-22 delay, the bidding appears to have progressed smoothly. From what we have observed so far I do not anticipate additional delays and am impressed with the FCC staff's ability to conduct, process, report and repeat the bidding rounds. 

Finishing this week on schedule leaves short work for next week to conclude the Reverse Auction. Soon we will find out what will be required to validate this auction in the Forward Auction. 

Stephan Sloan
Director, Media Services Group
401.454.3130
ss@mediaservicesgroup.com

Guest Blogger Stephan Sloan: What was that Noise?

I found this announcement yesterday afternoon: Round 22 was delayed. Interesting. 

The FCC stated:

"We are taking this step because bid processing for round 21 is still underway. We will post the results of round 21 when bid processing is complete." 

The computing tools I have used to simulate the Reverse Auction progress more slowly as it reaches the later rounds. It is oversimplification but the more activity (freezing/repacking) that takes place per round the more time required to process the calculations. More CPUs will not make the calculation go more quickly only faster processors will help and I'm assuming we are all using the fast stuff. 

Maybe Round 21 saw a spike in activity. Perhaps we are finding out that the conduct of the Reverse Auction will take somewhat longer than advertised -- not due to the participation of bidders but what is required to conduct this complex task. 

Stephan Sloan
Director, Media Services Group
401.454.3130
ss@mediaservicesgroup.com

Guest Blogger Stephan Sloan: Out of the Doldrums

I believe the Reverse Auction's relative doldrums of the past week will ease this week. As is the way with doldrums though, it's almost assured that the change will be incremental. Don't expect any thunder claps; I do not believe that's the way of this algorithm with my assumptions. Just as the preceding rounds were characterized by not much going on, the present rounds will have limited stimulus and that will place modest demands on the algorithm to freeze additional stations. The chart below presents potential data for the number of stations frozen in the auction for the rounds to be conducted this week. In this model approximately 80 stations are frozen for a value of slightly over $6 Billion. 

At the close of business on Monday, June 13th, with the completion of the 19th round of the auction, the current bids will have dropped just below 40% of the opening bids. For many network affiliates and stations with strong business plans the ride ends now as they are more valuable to their owners than the auction price. By the end of the week the bid prices will have decremented to approximately 25% of the opening bid. 

These rounds may be where the smart speculators get rewarded. If a speculator or station owner was not fortunate enough to be in the participation constrained first round of freezing activity, the next best prospect for them would be to hold a station keystoned among other stations with significantly higher reserves than their own. In this example the round a station is frozen results not from the reserve price of the station itself but rather the algorithm exhausting other options for repacking given the higher valued neighboring stations dropping out. So I suppose some owners are tuned in -- turned on -- and hoping everybody else will hurry up and drop out. 

Stephan Sloan
Director, Media Services Group
401.454.3130
ss@mediaservicesgroup.com 

Guest Blogger Stephan Sloan: 57 Channels and Nothing On

After the shock and awe that I believe was the initial round of the auction my expectations of the subsequent rounds are very different. 

The algorithmic alchemy resulting from the pressure between solving for the highest clearing target possible given the participation will likely have spent its influence by the end of the first round. The following rounds will decrement steadily seeking a new level of scarcity supported not by participation but rather reserve prices that cause the process to repack those stations with the highest reserves and then seek to order and select among the remaining open bids. 

I believe it unlikely that any additional stations were frozen last week after the initial round. While not completely without event I predict that fewer than 50 stations will be frozen during the rounds accomplished and scheduled for this week. 

My analysis is based upon an assumption that the algorithm will find the little pressure or few reserve prices at very high percentages of the opening bid price. In addition, I believe there is significant population of stations for which the sum of enterprise value and wind-down costs are a very small percentage of opening bid price. Observing a sample of some 1,200+ stations which I model to participate in the Reverse Auction the average reserve price is only about 15% of the opening bid. While an average of this population may be misleading given its variety of participants it does help illustrate a population of reserve prices that significantly skew towards the later rounds of the Reverse Auction. The histogram that follows present distribution of reverse prices from this sample set of stations.

So if this week feels a little boring for as extraordinary event as the Reverse Auction is, it' snot you - it's the math. Math is often boring. 

Stephan Sloan 
Director, Media Services Group
401.454.3130
ss@mediaservicesgroup.com

Guest Blogger Stephan Sloan: The $40 Billion Blink

Tuesday quietly marked a most remarkable day in television station trading history. From models developed with my own assumptions, I believe the initial moment of the FCC Reverse Auction saw approximately 115 stations frozen at a valuation in excess of $40 Billion. 

For reference, if one sums all of the television stations sold from 2003 through 2014, inclusive of merger activity, it approximates the value of that one first moment of the auction. I appreciate that this estimate of the first round of the auction exceeds the total value of the Reverse Auction published by many respected entities; however, I have confidence in this estimate as I believe it to be the natural result of the function of the auction algorithm and the legislation causing the entire Reverse and Forward Auction spectacle.

With the requirement of the FCC to attempt the clearance of the maximum bandwidth for which there is participation by broadcasters, we were nearly certain to set the auction algorithm to solve a scenario where there was scarcity of participation among the most valuable stations in the nation. In this initial moment of the auction that scarcity required the freezing of stations at their opening bid with a swath of the northeast consuming $10+ Billion and the mid-Atlantic as well as Southern California taking $8 Billion each.

In terms of the Reverse Auction model, as I see it, we have accomplished the “head” of this freezing activity and will next set about the much more time consuming business of defining the long tail.

Stephan Sloan 
Director, Media Services Group
401.454.3130
ss@mediaservicesgroup.com

Big News in the TV World

FCC sets 126 MHz Spectrum Auction Clearing Target. Signals strong station interest in big auction payday.

Read the story HERE.

George
Media Services Group

Media Services Group Tops the Rankings Again (Press Release)

Media Services Group maintains the top spot in the broadcast brokerage rankings for 2015.*

• #1, Top radio broker
• #1, Top broadcast broker by number of radio stations sold
• #1, Top broadcast broker by number of total deals
• #1 and #6, Top brokered deals (excluding deals exclusively brokered by investment banks)

About Media Services Group: 

Media Services Group was founded in 1990 and has grown into one of the most successful media brokerage firms in the past decade. The firm offers brokerage, asset management, valuation and investment banking services to the broadcast and new media industries from offices throughout the U.S. For more information, please visit www.mediaservicesgroup.com

*Source: SNL Kagan Broadcast Investor: Deals & Finance (Edition: February 29, 2016)

Vertical Bridge Closes on Alpha Media Radio Broadcast Towers (Press Release)

Vertical Bridge, the largest private owner and manager of wireless communication infrastructure in the U.S., today announced that it has completed the acquisition of nearly 200 radio broadcast towers in a two part transaction with Alpha Media. The portfolio of assets acquired includes 64 sites from Alpha Media’s existing portfolio and 49 sites which Alpha Media recently acquired as part of its purchase of radio stations from Digity, LLC. Financial terms of the transaction were not disclosed.

With this acquisition, Vertical Bridge now has a total portfolio of over 42,000 towers, rooftop locations, billboards, utility infrastructure and other site locations that it owns, operates or manages. The company’s geographic presence in key markets across the U.S. has also expanded significantly.

“We are thrilled to partner with Larry Wilson and Alpha Media, which owns and operates an admirable portfolio of assets in prime locations across top markets,” said Alex Gellman, Chief Executive Officer of Vertical Bridge. “It would be challenging to site these towers today, and we feel fortunate to expand our portfolio into these areas and further strengthen Vertical Bridge’s offering to our partners. Since these towers have not yet been marketed to wireless carriers, they offer attractive new collocation opportunities. Our broadcast partners will also benefit from the height of these towers as they will provide good relocation options relative to the 600MHz auction repacking process.”

Alpha Media Chairman, Larry Wilson commented on the announcement, “We could not have done this without the hard work and determination from the great team at Vertical Bridge. We’re proud to call them a partner of the Alpha Media family.”

George Reed of Media Services Group is the broker for Alpha Media.

Alpha Media Closes on 116 Digity Radio Stations (Press Release)

The Alpha Media purchase of Digity’s radio stations has closed.

The $264 million deal results in Alpha owning 251 stations in 53 markets, the fourth largest broadcast company in the country by station count and the third largest by market count.

Alpha Media Chairman Larry Wilson said, “We are very pleased to get this remarkable transaction done resulting in making Alpha the 4th largest radio company in America. In our fold is now an exceptional stable of diversified stations and markets; bigger markets like West Palm Beach and San Jose, to smaller markets like Mason City, Iowa and Myrtle Beach, South Carolina serving not only their towns but surrounding areas and communities. It has been a tremendous pleasure to work with respected broadcaster, Dean Goodman, and his management team. We look forward to joining forces with the phenomenal people at Digity doing radio the right way.”

Goodman, the CEO of Digity, added, “I have been honored to work with the great broadcasters of Digity. They know their roots are in live and local and their future is dynamic. They will excel as individual and collective entrepreneurs with Alpha. We hand off a thriving company, up this year at top of the industry. I wish Larry, Donna, Bob and team all the best, they have assembled a great platform.”

RBC Capital Markets, LLC acted as sole financial advisor and Cooley LLP as transaction and regulatory counsel to Digity. 

Media Services Group’s George Reed served as broker for Alpha.

NJ Broadcasting, LLC Purchases WWRL-AM (Press Release)

Chesley Maddox-Dorsey, CEO, Access.1 Communications Corp. is pleased to announce the sale of WWRL-AM, New York City, to NJ Broadcasting, LLC for $7,000,000.*  NJ Broadcasting is owned by Dr. Nimisha Shukla and will operate the station under an LMA beginning February 1, 2016.  WWRL-AM, 1600 kHz, will provide programming for the large South Asian Community located throughout the Tri-State Area.   

Dr. Shukla, a Pediatric Physician, who also owns, 7 Days Pediatrics, located in Edison, New Jersey, is now able to fulfill a long term desire to provide a voice to the South Asian Community  through a premium broadcast media platform on a 24 hour,7 day basis.   

George Reed and Tom McKinley, Media Services Group, represented the seller in this transaction.

*Pending FCC Approval    

LR Telecasting Acquires KMYA-DT and KMYA-LP (Press Release)

Veteran Radio and Television broadcaster, William Pollack, of Memphis, TN, is expanding his television holdings, entering the Little Rock market, with his acquisition of KMYA-DT, Camden/Little Rock, and KMYA-LP, Sheridan/Little Rock. The acquiring company, LR Telecasting, is paying $2,750,000* to Seller, I Square Media, LLC.

Pollack also owns KLAX-TV and KWCE-LPTV in Alexandria, LA, and KIEM-TV, in Eureka, CA, as well as a cluster of radio stations in Kennett and Caruthersville, MO.  I Square Media has no other broadcast interests.

Exclusive broker of the transaction was Bill Cate, of Media Services Group. 

For more information: 

Bill Cate

501.727.5100

cate@mediaservicesgroup.com 

*Pending FCC Approval

Nielsen's Radio Market Survey Population, Rankings & Information (Fall 2015)

If you would like a copy of Nielsen's Radio Market Survey Population, Rankings & Information (Fall 2015), click HERE.

George
Media Services Group

Happy Holidays

Wishing you a happy & healthy holiday season! Sending all our best to you and yours.

Sunrise Broadcasting LLC Closes Transaction in Wilmington, NC (Press Release)

The sale of WBNE-FM and W240AS (FM Translator) in Wilmington, NC from Sea-Comm, Inc. to Sunrise Broadcasting, LLC has closed. The purchase price was $1,850,000.

George Reed of the Jacksonville office of Media Services Group served as the exclusive broker representing the Seller in this transaction. 

Thoughts on Station Pricing from Radio Ink’s Forecast 2016

Yesterday’s post dealt with some of the macro issues facing the radio station trading market going into the new year.  Today, I would like to offer some comments regarding station pricing.

The private marketplace today is trading in the 6.0x to 7.0x range, with outliers in the 5’s (primarily small markets) and occasionally approaching 8.0x (usually a strategic deal).  I believe that there is slight upward pressure on the multiples, due primarily to the lack of inventory.  My colleagues took an opposing view, citing the almost certainty of rising interest rates in our future.  They are correct that over the long term, multiples move opposite interest rates (i.e. when rates go up, multiples come down).  But interest rates are at historic lows, and we can absorb modest increases for some time before they exert sufficient pressure on multiples to make a difference.

At the present, there are qualified buyers, and there are lenders ready, willing, and able to finance transactions.  The only thing missing is good station inventory.  That will change (it always does).

The regulatory question came up, specifically whether or not a loosening of the ownership rules would help.  The short answer is “yes.”  Certainly an elimination of the subcaps would be a positive.  But the regulators seem to always lag marketplace realities.  We’ve been talking about the elimination of the antiquated cross-ownership rules for decades, yet they are still in effect.  Ironically, with the demise of the newspaper business and changes in the TV world, cross-ownership is no longer a big issue.  If the rules went away tomorrow, little would change.

One subject which didn’t come up, but probably should have, is broadcast towers.  There is a built-in pricing arbitrage which broadcasters should consider.

Thanks to Deborah, Eric, Drew, Peter, and the others who provided me the opportunity to participate in Forecast 2016.  It was great.

George
Media Services Group 

Crystal Ball Gazing at Radio Ink’s Forecast 2016

I enjoyed participating in this week’s Radio Ink Forecast 2016 in New York.  The event was well attended, and the panels informative and engaging.

My panel was entitled Prospects for Radio as an Investment in 2016: Wall Street or Main Street?  Moderated by Drew Marcus of Sugarloaf Rock Capital, the speakers included Brian McNeill, Founder and Managing General Partner of Alta Communications and Jerry Sargent, Middle Market Banking Head at Citizens Bank. Drew provided the Wall Street perspective, I talked deal making/station trading and values, Jerry talked about debt/banks, and Brian brought a private equity point of view.

Not surprisingly, there was a lot of talk about Cumulus and iHeart, specifically their balance sheet problems. My takeaway was that there was still time for Cumulus to resolve their operational issues, and work their way out of trouble.  Not so much for iHeart.

iHeart has a looming series of important bond payment due dates.  So far, they have masterfully been able to kick the can and refinance debt, albeit at much higher interest rates (with the result of a steadily increasing cost-of-capital).  But their bonds are now trading at a deep discount; that does not demonstrate much confidence on the part of the bond holders.

We talked about the impact on the industry if Cumulus and/or iHeart went through restructuring.  I believe that we would suffer through a (hopefully short) period of nuclear winter; station prices would suffer, and the lenders would likely pull back from the business.  But the thaw could get interesting.  If, for example, they decided to become a more CBS-esque type of company, focusing on the top 25 or even top 50 markets, the spinoffs into the hands of entrepreneurs more comfortable (and perhaps more skilled) in operating in small and mid-sized markets could result in a tremendous resurgence for the industry.  I contend that good operators, with healthy balance sheets, would line up to acquire the markets being spun off.

Brian indicated that there is not much love coming from the private equity world, but that family offices, with their more “patient money” approach, are an option.  On the other hand, Jerry is open for business on the debt side. Capital structures of at least 40% equity and 60% debt seemed to be a 

safe target.

Tomorrow, I will post some thoughts on station pricing which I shared with the group.

George
Media Services Group

Join us at Radio Ink's Forecast 2016

I will be on a panel called, "Do Investors Still Believe in Radio?"  Please join us in New York on November 17.  Click for details HERE.

George
Media Services Group

Financing the Future of Radio: Pillsbury at the Radio Show

Hope to see you in Atlanta!

http://www.commlawcenter.com/2015/09/financing-the-future-of-radio-pillsbury-at-the-radio-show.html

George

Alpha Media closes purchase of Morris Communications Radio stations (Press Release)

Alpha Media of Portland, Oregon announced today they have closed the purchase of radio stations from Morris Communications. The Morris purchase includes thirty-six radio stations located within the following markets; Topeka, KS; Salina, KS; Amarillo, TX; Palm Springs, CA; Anchorage, AK; Wasilla, AK; Grays Harbor-Hoquiam, WA and Wenatchee-Columbia River, WA.

When all pending deals are completed, it will bring the total number of stations owned by Alpha Media to two hundred, fifty-two. Chairman of Alpha Media, Larry Wilson commented on the acquisition, “I have enjoyed getting to know Mr. Morris and am thrilled to be adding stations that have been in the hands of such a successful and influential team. We look forward to expanding our Alpha family.”

George Reed of Media Services Group is the broker for Alpha Media.

Upon the successful completion of all pending transactions, Alpha Media, headquartered in Portland, Oregon will own 252 radio stations within 54 markets across the United States covering all formats including Top 40, Adult Contemporary, Spanish, Urban, News Talk, Sports, Rock, Country and more. In addition to the radio stations, Alpha Media owns the intimate performance venues, Skype Live Studio in Portland, Oregon and Alamo Lounge in San Antonio, Texas.