Clusters Likely To Sell Faster In Station Glut

[Force Commander]

http://www.radioandrecords.com

By Jeffrey Yorke

The radio landscape is littered with hundreds of properties for sale, a virtual heyday for buyers with cash in hand who want to bulk up or fill in their clusters. But it is a “challenging time to be divesting assets,” acknowledges Patrick Communications managing partner Greg Guy, who points out that the cash flow multiples that once priced a large market radio station at up to 19 times cash flow, may now have dropped to 12 times cash flow.

“There has been a squeeze on multiples,” Guys tells R&R. “Major markets and small markets have squeezed the gap.” He adds that medium markets, which used to trade in the low double digits, may be holding their own best and are now being priced in the area of 10 times cash flow while the smallest markets are in the 7-to- 9-times cash flow range. He adds, however, that “many of the smaller broadcasters we are talking to are up this year. Not across the board, necessarily, but we have a number of smaller clients that are doing just fine.”

The inventory of available radio stations was already high before last month when Clear Channel slid another 55 in its Aloha Trust on to the sale page, while CBS added 50 of its properties in a dozen markets. While CBS hasn't officially disclosed which stations are for sale, its five FMs in West Palm Beach and three FMs and an AM in Pittsburgh are likely to be on the radar, along with a trio of FMs and an AM in Riverside, Calif.

Clusters could be hot propositions for buyers, figures veteran broker John Pierce, who operates from Florence, Ky. Pierce expects buyers will be most interested in acquiring clusters -- at least duopolies -- whenever possible. “This is a good time for buying and it could be a good time to sell depending on what you are selling.” He expects bulk-station packages to move the fastest because buyers are attracted to “whole markets with cash flow and Arbitron. And there is more of a chance that the buyer will pay 10 times cash flow for the properties.”

Both brokers say that would-be buyers are stymied right now by tightening credit as banks and traditional broadcast lenders make it tougher to gain funding. But Pierce expects business to pick up “after Labor Day. I expect a stronger market for sales then.” In all, he says, “2009 will not be a record [sales] year but hopefully, it will be stronger than 2008.”


Copyright © 2008 The Nielsen Company. All rights reserved.

[Tom Taggart]

Nothing will move until:

A: Prices come down;
B: Some clusters get broken up.