Closing Gavel - and FM CP Prices - Come Down in Auction 94

It’s a buyer’s market when it comes to FM construction permits.

[WARNING! While Auction 94 has closed, strict federal anti-collusion rules remain in effect for several more weeks. Parties who were involved in any way in the auction – including folks who filed applications but then elected not to participate in the auction – should refrain from discussing any aspect of the auction with anyone who was similarly involved in the auction.]

Another auction of FM construction permits has come to an end (although the FCC has not yet posted the final results – we’ll update this post when that happens). Plenty of happy bidders are now presumably basking in the warm auction afterglow – because successful bidders in Auction 94 were, in many instances, able to snatch up permits for bargain-basement prices. It’s a buyer’s market out there.

Of course, as usually happens, a handful of markets saw exuberant bidding, with final price tags hitting six digits and beyond. At a cool $2.015 million, Lake Park, Florida (a community adjacent to Palm Beach) topped the bidding leader board. The Southeast also produced two $400,000+ markets – Silver Springs Shores, Florida (near Ocala) and St. Simon’s Island, Georgia. But Big Ticket permits were few and far between: of more than 110 permits on the block, only 11 fetched more than $100,000. 

On the other end of the scale, nearly three dozen permits sold at or very near the minimum prices that had been set for them. Looking for a swell Class C-0 opportunity in Grand Portage, Minnesota? It could have been yours for $750 – and even less if you could claim bidding credits. (True fact – once bidding credits are factored in, the Grand Portage C-0 will end up having cost less than $500.)

Unfortunately for the Commission, the bow-wow-woof-woof factor continues to be a problem, as 19 of the available permits – nearly 17% – turned out to be such total dogs that they attracted no bids at all. We will likely see these permits in future auctions, although it’s not clear how, if at all, the FCC could apply lipstick to make any of these look more attractive.

The good news for prospective bidders: two-thirds of all bidders walked away with at least one permit. By contrast, half of the bidders in last year’s Auction 93 went home empty-handed.

And the sort-of good news for the Commission: revenues from FM auctions remained steady, averaging about $48,000 per, approximately the same as in Auction 93. But don’t look too closely at that statistic. While the total of all successful bids in Auction 94 exceeded last year’s total by $1,000,000 or so, the details suggest a continuing slump in prices. In particular, the Lake Park, Florida permit – at more than $2,000,000 – dramatically skews this year’s totals, particularly since last year the highest bid amount for a single permit was a comparatively paltry $309,000 (who can forget Tishomingo, Oklahoma?). If you remove those two high-end items from each of the calculations, the per-permit average in 2012 drops to about $45K, while this year it was nearly ten grand below that, at about $36K. (By contrast, in 2004, successful bids averaged more than $500K per permit.)

And let’s not forget that the successful bids don’t reflect the effect of bidding credits, which will significantly reduce the amount of cash the FCC actually pockets at the end of the day.

But the feel-good story of this auction has got to be that of Mr. Robert E. Lee of Reno, Nevada. Mr. Lee is the proud winner of a construction permit for (we’re not making this up) Robert Lee, Texas, named after the other Robert E. Lee (i.e., the Confederate general, not the late FCC commissioner).  Gen. Lee reportedly may have set up camp nearby while serving in the U.S. Army (1856-1861) several years before the Late Unpleasantness. The town of Robert Lee, located 70 miles from Abilene, has a population of 1,000 people and will soon have a Class A on 105.7 MHz purchased with a bid of $910. Fortunately for Mr. Lee (the bidder), he’ll be on the hook for only about $600, thanks to bidding credits. Unfortunately for him, both the call signs KLEE and KREL have already been assigned to other stations – but NOT to any FM stations, so it’s at least possible that he could arrange for KLEE-FM or KREL-FM. We’re keeping our fingers crossed.

During the next few weeks the FCC will release a public notice formally announcing the winning bids and procedures that winning bidders must follow. That notice will trigger payment and paperwork deadlines, and will establish the date at which the anti-collusion restrictions will be lifted.

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