FAIR MARKET VALUE OF THE TELEVISION STATIONS OWNED BY NEW JERSEY PUBLIC BROADCASTING AUTHORITY AS OF DECEMBER 1, 2010 PREPARED FOR

Transcription

1 FAIR MARKET VALUE OF THE TELEVISION STATIONS OWNED BY NEW JERSEY PUBLIC BROADCASTING AUTHORITY AS OF DECEMBER 1, 2010 PREPARED FOR State of New Jersey, Department of the Treasury, Division of Administration Project No

2 15120 Enterprise Court, Suite 100 Chantilly, Virginia Phone: Fax: January 24, 2010 Mr. Michael Jonas, Operations Manager Mr. Rick Williams, Assistant Director, NJN Engineering 50 West State St., 8 th Floor P.O. Box 211 Trenton, NJ Phone: Re: Estimated Fair Market Value of the Television Stations Owned by New Jersey Public Broadcast Authority as of December 1, 2010 Dear Mr. Jonas and Mr. Williams: BIA Advisory Services, LLC (d/b/a ) has prepared this report to arrive at the fair market value of the television stations owned by New Jersey Public Broadcast Authority (NJPBA) as of December 1, Respectfully Submitted, Group Mark R. Fratrik, Ph. D. Vice President

3 TABLE OF CONTENTS STATEMENT OF INTRODUCTION... 5 PURPOSE AND METHODOLOGY... 5 RIGHTS AND LIMITING CONDITIONS... 6 STATEMENT OF APPRAISERS INDEPENDENCE... 6 FAIR MARKET VALUATION OF THE NJPBA TELEVISION STATIONS... 9 QUALIFICATIONS

4 STATEMENT OF INTRODUCTION 4

5 Statement of Introduction STATEMENT OF INTRODUCTION The State of New Jersey, Department of the Treasury, Division of Administration has retained Advisory Services, LLC (d/b/a ) to estimate the fair market value of the television stations and translators owned by New Jersey Public Broadcast Authority (NJPBA) as of December 1, While preparing this report, was not provided with any historical and projected financial statements or any other information about the stations. In the course of the appraisal and analysis, relied on s Media Access Pro for recent station sales information. PURPOSE AND METHODOLOGY This report determines, as of December 1, 2010, the fair market value of the television stations owned by NJPBA. It is being prepared for financial reporting purposes. To determine the fair market values of these television stations, the appraiser has considered three approaches to value. These are the cost approach, the market approach, and the income approach. The cost approach is that approach which measures value by determining the current cost of an asset and deducting depreciation, that is, physical deterioration and functional and economic obsolescence. In its simplest form, it is nothing more than current replacement cost less all depreciation. The market approach is that approach to value in which recent sales and offering prices of comparable properties are analyzed to arrive at an indication of the most probable selling price of the subject property. The income approach is that approach to value in which income generated by the subject property is analyzed and projected over a specified time period and capitalized at an appropriate market rate to arrive at the property s value. 5

6 Statement of Introduction The appraiser has chosen the market approach due to the non-commercial nature of these stations as licensed as a non-commercial television stations. The Business Valuation Committee of the American Society of Appraisers defines fair market value as the price, expressed in terms of cash equivalents, at which property would change hands, between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts. RIGHTS AND LIMITING CONDITIONS It should be noted that this report has been prepared exclusively for the State of New Jersey, Department of the Treasury and is not to be reproduced in whole or in part for any reason without the express written consent of the State of New Jersey, and that of BIA. The appraisers assume no responsibility for matters of a legal nature affecting the property appraised. The appraisers also assumed property free and clear of all liens and other encumbrances. The information provided by the clients was assumed to be accurate and no steps were taken to independently verify the material. This appraisal is valid only for the appraisal date or dates specified herein and only for the appraisal purpose specified herein. The client warrants that any reports, analyses, or other documents prepared for it by the appraisers will be used only in compliance with all applicable laws and regulations. STATEMENT OF APPRAISERS INDEPENDENCE The statements of fact contained in this report are, to the best of the appraisers knowledge, true and correct. The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and is our personal, unbiased professional analyses, opinions and conclusions. 6

7 Statement of Introduction has no present or prospective interest in the property that is the subject of this report, and has no personal interest or bias with respect to the parties involved. s compensation is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. The contents of this report should in no way be construed as a recommendation regarding any investment in, or otherwise contribution of funds to NJPBA or any other entity. No one provided significant professional assistance to the persons signing this report. BIA Advisory Services, LLC () Mark R. Fratrik, Ph. D. Vice President Enterprise Court, Suite 100 Chantilly, VA January 24,

8 FAIR MARKET VALUATION OF THE NJPBA TELEVISION STATIONS 8

9 Fair Market Valuation FAIR MARKET VALUATION OF THE NJPBA TELEVISION STATIONS Overview NJPBA owns four non-commercial full-power television stations and three translators licensed 1 to the following cities, operating on specific channels with specified power (Effective Radiated Power ERP) and antenna height above average terrain (HAAT): Station City of License ERP HAAT WNJB New Brunswick, NJ 17.9 kw WNJN Montclair, NJ 200 kw 764 WNJS Camden, NJ 197 kw 886 WNJT Trenton, NJ 46 kw 873 W36AZ Sussex, NJ 14.6 kw 509 W49BE Hackettstown, NJ 10 kw 518 W43CH Belvidere, NJ 1 kw 814 Valuation Methodology The State of New Jersey has engaged to provide current fair market valuations of these television stations as of December 1, The appraiser has chosen the market approach for calculating the fair market value of the station as a going concern. 1 Note that the three translator stations have construction permits (CPs) for digital operations. At present, there is no Federal Communications Commission mandate to convert translators to digital service. 2 Due to interference issues with WABC(TV) in the New York, NY market and WGAL(TV) in the Lancaster, PA market, WNJB is operating under a Special Temporary Authority (STA), file number BDSTA ADL, with kw of ERP from an antenna HAAT of 715 feet. 9

10 Fair Market Valuation of NJPBA Stations Fair Market Valuation of NJPBA Stations analyzed merger and acquisition transactions of non-commercial televisions stations and translators to arrive at the fair market value of these television stations and translators. was able to find three relevant transactions of non-commercial television stations and seven translators between January 2009 and November This information is shown in Tables 1 and 2. For each of the non-commercial stations that were sold during that time analyzed purchase price versus television households within these stations local television markets. Per the rules covering local non-commercial television stations, all local cable systems and Direct Broadcast Satellite services provide coverage of all local non-commercial television stations to subscribers in those markets. 3 This sales price per local television household can be used to relate the noncommercial station s ability to generate revenues with donor contributions and local business underwriting. The sales price of each of the stations was divided by the number of television households within each of markets served by the television stations sold to calculate price per television household. The average and median prices per television household computed to be $2.30 and $2.33, respectively. Below is a table showing the television households served by the four NJPBA stations and the estimated value of these stations when multiplied by the calculated average price per television household of $2.30. In total the value of these four stations is approximately $47 million. 3 DBS services have to provide all local commercial and non-commercial television stations if they provide any local television stations within a particular market. This portion of the statute is commonly referred to as carry One Carry All. 10

11 Fair Market Valuation of NJPBA Stations Calls City of License Television Households w/n Local Television Market Value of Station WNJB New Brunswick 7,279,000 $16,741,700 WNJN Montclair 7,279,000 $16,741,700 WNJS Camden 2,930,000 $6,739,000 WNJT Trenton 2,930,000 $6,739,000 TOTAL: $46,961,400 For each of the translators that were sold during that time, analyzed purchase price versus population coverage reachable by the translators 60 dbu signal contour. The sales price of each of the stations was divided by the number of pops reachable by a 60 dbu signal to calculate price per pop. The average and median price per pop of a 60 dbu signals computed to be $0.18 and $0.13, respectively. Below is a table showing the 60 dbu signal coverage and the translators population for the three NJPBA translators and the estimated value of these stations when multiplied by $0.15, the average of the 60 dbu calculated median and average prices per pop. In total the value of these three translators is approximately $90 thousand. Calls City of License Population Served under 60 dbu Contour Value of Station W36AZ Sussex, NJ 270,446 $40,567 W49BE Hackettstown, NJ 271,421 $40,713 W43CH Belvidere, NJ 61,439 $9,216 TOTAL: $90,496 11

12 Fair Market Valuation of NJPBA Stations Table 1 Comparable Sales Information of Non-Commercial Full-Power Television Stations CALLS Channel City of License State Market Mkt Rank Market TV Households Sales Price ($)000s Sales Date Price Per TV Household KALO 38 Honolulu HI Honolulu, HI ,000 1,000 06/09 $2.33 WCMZ-TV 28 Flint MI Flint-Saginaw-Bay City, MI ,000 1,000 01/10 $2.27 WQEX 26 Pittsburgh PA Pittsburgh, PA 24 1,145,000 3,000 11/10 $2.62 Average $2.30 Median $

13 Fair Market Valuation of NJPBA Stations Table 2 Comparable Sales Information of Translators CALLS Channel City of License State Market Mkt Rank 60 dbu Coverage Pop Sales Price ($)000s Sales Date Price Per Pop. K32IJ 32 Cortez CO Albuquerque-Santa Fe, NM 46 17, /09 $0.29 WDCI-LP 57 Chicago IL Chicago, IL 3 927, /10 $0.32 WPDN-LP 65 Pittsburgh PA Pittsburgh, PA 24 1,504, /10 $0.13 WDYC-LP 36 Cincinnati OH Cincinnati, OH 33 1,568, /10 $0.10 K25FZ 25 Grand Junction CO Grand Junction-Montrose, CO , /10 $0.07 Tampa-St Petersburg- WGPS-LP 51 Sebring FL Sarasota, FL 14 81, /10 $0.11 KYTL-LP 53 Twin Falls ID Twin Falls, ID , /10 $0.20 Average $0.18 Median $

14 QUALIFICATIONS 14

15 Qualifications QUALIFICATIONS Mark R. Fratrik, Ph. D. Mark R. Fratrik is a Vice President for Financial Network, Inc. (BIA), which offers merchant banking and financial and strategic advisory services for the media, telecommunications, and related industries. For more than 18 years has assisted clients in increasing value by providing a wide range of services related to acquisitions, mergers, divestitures, operations, integration, growth and changes in strategic direction. Prior to joining in January 2001, Mr. Fratrik served NAB for 15 years as Vice President/Economist. While at NAB, Mr. Fratrik conducted primary research about the broadcasting and related industries. He has conducted several research studies including Independent Radio Voices in Radio Markets, Format Availability After Consolidation, Interference from Low Power FM Stations to Existing Stations, and The 1990 Children's Radio Act: Its Impact on the Amount of Educational and Informational Programming. Also, Mr. Fratrik has written/co-authored numerous articles for publication including FM Subcarrier Market Report/Technology Guide, These Taxing Times: A Tax Guide for Broadcasters, and Strategic Planning Handbook for Broadcasters. Before joining NAB in 1985, Mr. Fratrik worked for the Federal Trade Commission in the Bureau of Economics where he spent five years conducting analyses of industry practices to evaluate overall economic impact. Throughout his career, Mr. Fratrik has researched and spoken at numerous conferences on new media technologies including DTV datacasting. Also, Mr. Fratrik has worked closely with broadcasters in determining what opportunities lay in the spectrum as well as exploring regulatory matters concerning the spectrum. Mr. Fratrik received his B.A. in mathematics and economics from State University of New York at Binghamton and his master's and doctoral degrees in economics from Texas A&M in College Station, Texas. 15