Startup Verde Outdoor Capital, LLC is seeking to make loans of $1-$50 million to out of home owners and operators.  Billboard Insider talked with Verde Outdoor Capital President Rickard Strom.

On forming Verde Outdoor Capital

I’ve been a commercial lender for 20 years.  I have always liked helping small to medium sized businesses with their financing needs.  I have over 10 years of experience lending to billboard operators while at Metro Phoenix Bank where I helped build the out of home lending platform.  In December of last year, I was approached by Ernie Garcia II, the largest shareholder of Carvana. He had familiarity with the industry and had heard what I was doing at the bank. He liked the idea of creating a privately owned finance company to provide capital solutions to the out of home industry.  He committed his own capital to our new financing program.  We are located in Tempe, Arizona and lend nationwide.

What Verde does

As we are privately owned and capitalized, we don’t have any restraints from liquidity or government regulations.  I provide capital solutions to billboard operators, and I have several ways of how to do that. We primarily do senior debt, but we can also structure deals as equity or as a combination of both.  We are currently a team of three, all with out of home lending experience. Megan Gresko is our Chief Credit Officer and Tashona Joubert is our Loan Coordinator.

Target Loan Size

$1 million to $50 million.  I can look at smaller loans if there are future needs for more financing.  I have found that this industry has had difficult times obtain reasonable financing, especially when you get north of $5 million.  There are the local banks, you might know them for many years, and they will give you a “handshake” loan, but they don’t really understand the out of home industry. So, when you get to a certain size, the financing needed is can’t be provided by that local bank.  That’s what I see as our niche as we can fill the void in providing billboard loans between $1 million – $50 million. I have discovered that there is a huge void in the $10-50 million range.  As of today, we have financed four loans for a total of $54 million. I have seen a lot of activity on the M&A side.

Uses of funds

I will provide financing for any need as long as the borrower is an experienced billboard operator, and my collateral is billboard signs. Needs might include digital billboard conversions, acquisitions, partner buyouts, new builds, refinance etc.  Of the loans we have closed so far, one loan was a refi/equity partner buyout, one was an acquisition of several small out of home companies by an experienced billboard operator getting back in the industry. We recently provided senior debt for a large acquisition.

Loan Terms

We can provide up to 20-year amortization with a 5–7-year balloon. The terms depend on the length of the leases.   Over the last three years most companies I’ve lent to have cash flows that can easily service a 15-year amortization loan but might prefer 20-year amortization to free up additional cash flow.

Guarantees?

Preferable.

Pricing?

Our pricing is on average 7%, depending on the credit of the borrower and performance of the operations.  We typically price at WSJ Prime plus 3% with a floor, adjustable quarterly.

Loan Fees

We typically charge a 2% origination fee and then you may have attorney fees and doc fees.  We don’t typically require an appraisal.  We have enough experience in house to determine value.

Covenants

We understand the industry.  We’re lending at 4-6 times billboard cashflow.  Our covenants are fairly standard including financial covenants such as a minimum debt service coverage ratio and minimum loan to value ratio.  We want to see a couple of years of tax returns, financial statements, inventory list, copy of leases, projections and understand the quality and locations of the signs.

The approval process

I can get a loan approval quickly at Verde as we have a small loan approval committee.  If somebody calls me, I can usually have a term sheet in 24-48 hours.  When I have a complete loan application package, I can have a commitment letter in 1-2 weeks.  My most recent $30 million loan closed within 45 days.  We use fairly standard loan documents called Laserpro.

To learn more contact Rickard Strom, rickard.strom@verdeoutdoorcapital.com.

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