Welcome to the Boston Omaha 2020 Annual Meeting of Stockholders. The meeting will now begin.
Thank you. Good morning. A quick note on how things will progress today. Adam and I will proceed with the formal business of the meeting, including the resolutions and voting. Immediately concluding the formal business today, we will give a brief update on recent events and the company in general. With that, good morning. The meeting will come to order. Welcome to the 2020 Annual Meeting of Stockholders of Boston Omaha Corporation, which is being held exclusively through a telephonic format this year. I am Alex Rozek, Co-Chairman of The Board, Co-President, and Co-Chief Executive Officer. The rules of the meeting, which you should have received with the electronic notice of this annual meeting of stockholders, set forth the procedures for today's meeting.
We will conduct our formal stockholders' meeting today and convene an informal stockholder assembly at a later date, which will be relayed to our stockholders of record when we have confirmed further details. Due to the current COVID-19 pandemic and the limited format in which we must conduct this meeting, we ask that stockholders only raise questions that directly relate to the resolutions to be addressed during the meeting. This format should allow us to complete our formal business and address matters of general interest in a more robust and conducive manner at a later time. As this is our first time doing a virtual meeting, we wanted to share some guidance that will help make your experience a good one. For those of you that have attended any webinar, this meeting format is very similar.
The virtual meeting platform that we are using allows you to customize your experience during the meeting. Here are a few tips. You can hide or display any window by using the menu bar located in the bottom middle of your screen. You can move any window within the meeting console to a location that works best for you by clicking on the top gray bar of any window and dragging it to the location of your choice. Most importantly, you can ask questions using the Q&A box by clicking within the Q&A box where it displays "Enter your question." Type a question and then click the submit button. Attendees are not able to see questions posed by other attendees, and we will be answering questions verbally during the Q&A portion of the meeting. We will not be answering questions via the Q&A box.
Now, it is my pleasure to introduce our officers and directors here today. Co-Chief Executive Officer, Co-President, and Co-Chairman Adam Peterson. Chief Financial Officer, Chief Accounting Officer, Treasurer, and Secretary Josh Weisenburger. Brendan Keating, Bradford Briner, Frank Kenan II, Jeffrey Royal, and Vishnu Srinivasan, who together with Adam Peterson and I currently comprise the board of directors. I also wish to introduce Leah Gonzalez from our registered public accounting firm, MaloneBailey LLP, and Neil Aronson, Joe Ramadei, and Zach Fountas of Gennari Aronson LLP, our outside general counsel. Adam will now provide additional details regarding this meeting.
Thanks, Alex. March 31, 2020, was the record date for determining stockholders entitled to vote at this meeting. The proxy materials for this meeting were made available to all stockholders of record on April 14, 2020. Neil Aronson has been appointed to serve as inspector of election for this meeting, and he has confirmed that 18,974,368 shares are Class A common stock, representing 84.5% of our issued Class A common stock, and all 1,055,560 shares of Class B common stock were present at this meeting. As a result, the quorum is present.
The meeting is duly convened. If you wish to speak or raise a question that was not previously submitted through Mediant Communications, the host of the digital shareholder meeting platform, please follow the instructions provided by Mediant and announce your name, confirm your status as a stockholder, and follow the rules for the meeting. Adam, please present the nominations for Directors.
The Board of Directors nominates Bradford B. Brenner, Brendan J. Keating, Frank H. Kenan , Jeffrey C. Royal, and Vishnu Srinivasan for election as Directors. Each will hold office for a term of one year or until their successors have been elected and qualified.
Is there a second?
Second.
Before we open the polls to voting, we will allow one minute for stockholders to make use of the Q&A chat box to comment. We will then read such comments aloud. As indicated previously, only comments directly relevant to the proposal will be acknowledged. If multiple stockholders submit similar comments, we may choose to combine them into one statement. We'll give it a minute here. A little bit longer than we would usually wait. Just make sure if you have a question, you hit that Q&A button on the bottom of your panel. You can submit it, and we can see it.
I don't think there's any questions, Alex.
Okay. All right. If there is no further discussion, we will now proceed to the next item concerning ratifying the selection of MaloneBailey LLP as the company's registered public accounting firm for 2020. Adam, please present the resolution.
I move to adopt the following resolution: Resolve that the appointment of MaloneBailey LLP as Boston Omaha's independent registered public accounting firm for the fiscal year ending December 31, 2020, is hereby ratified by the stockholders of Boston Omaha Corporation.
Is there a second?
Second.
We will once again allow one minute for stockholders to make use of the Q&A chat box to comment on this proposal under the same rules laid out before. Okay. If there is no further discussion, the meeting will now proceed to the third item on the agenda concerning the vote approving the amendment of the company's second amended and restated certificate of incorporation. Adam, please present the resolution.
I move to adopt the following resolution. Resolve that the stockholders of the company approve the amendment of the company's second amended and restated certificate of incorporation as such amendment is presented on Exhibit A set forth in the company's definitive proxy statement for the 2020 Annual Meeting of Stockholders.
Is there a second?
Second.
We will once again allow one minute for stockholders to make use of the Q&A chat box to comment on this proposal under the same rules laid out before. Okay. All right. If there is no further discussion, the meeting will now proceed to the fourth item on the agenda concerning the advisory non-binding vote approving the compensation of the company's named executive officers. Adam, please present the resolution.
I move to adopt the following resolution. Resolve that the stockholders of the company approve on an advisory basis the compensation of the company's named executive officers as such compensation is described in the compensation tables and narrative discussion regarding such compensation under the caption "Executive Compensation" set forth in the company's definitive proxy statement for the 2020 Annual Meeting of Stockholders.
Is there a second?
Second.
We will once again allow one minute for stockholders to make use of the Q&A chat box to comment on this proposal under the same rules laid out before. Okay. The polls for each matter to be voted on at this meeting are open. We will now proceed to vote. Stockholders who have sent in proxies need not take any further action with respect to the matters to be voted on today. All votes having been collected, the polls are now closed. Adam, please present the inspector's preliminary report.
Alex, the inspector of election has determined that a majority of the shares entitled to vote have voted in favor of each of the four resolutions.
Thank you, Adam. Based upon the preliminary report of the inspector of election, I declare that the election of the named officers, the ratification of MaloneBailey LLP as Boston Omaha's independent registered public accounting firm for the fiscal year ending December 31, 2020, the amendment of the second amended and restated certificate of incorporation, and the compensation of the named set forth in the proxy materials are each approved. There being no further business, I now adjourn the meeting. Is there a motion to adjourn? I so move. Do I hear a second?
Second.
I declare this meeting adjourned. Thank you for your attention. As mentioned, we will not hold our annual stockholder assembly today following this formal meeting, but we hope to convene an informal stockholder assembly at a later date when it becomes advisable to conduct larger in-person gatherings. We will provide stockholders with information about the informal assembly once we have confirmed details.
Now that the formal meeting is adjourned, we'll give an update about the business kind of generally and also the recently announced capital raise. We will not be taking questions with this update, so it will be just a simple business update, Alex and I discussing.
Just one thing, we did receive all those that did submit questions, we received them, and a lot of items in this little update, I think, speak to the majority of those questions submitted. Sorry, Adam, go ahead.
Yeah. Thanks. Yeah, a lot has obviously changed in the last three months in the world. We would like to just address kind of generally what is going on in some of our businesses, but also first address the capital raise we most recently did. We recently issued over three million shares of stock to raise over $50 million of capital. Now, I think it is important to understand the framework in which we think about capital and when it is worth expanding our capital base, when it is worth not, when it is worth even shrinking it. It is more of an overall philosophy on this matter, I think, is an important topic. Really, when we are thinking about raising capital, we have to believe we have an opportunity set to put it to work.
More important than anything else, really, we got to believe that what we obtain, the cash, and what we're able to do with it, meaningfully exceeds the cost of obtaining it, in our opinion. There is no exact way of calculating that, but we can at least give you a framework of how we think about it. First order of business is this capital raise is 100% to be offensive. There is really nothing defensive about it. We have a strong balance sheet, and now it's stronger. We're able to do more than we could do prior. Also, the opportunity set today is a lot different. We started Boston Omaha five years ago, or just over five years ago. Over those five years, the opportunity set is what it is. We can't control the opportunity set, but it does change.
A year ago, we would probably not have done what we did. Today, we would. Opportunity set changes, so does our mathematics of what we can do with capital. Raising capital like this, there's no exact science to get to a cost of it, unlike debt capital. For example, last year, we issued $18 million of debt at Link. That $18 million was sent up to Boston Omaha. Now, the cost of that money to shareholders is very straightforward. We borrowed $18 million. It's going to be fixed for seven years, and it costs 4.25%. We decided to take that capital. We thought it was attractive. It was then sent up to Boston Omaha.
Actually, with a lot of that capital, we were able to buy, in that case, some public securities that we thought, our own opinion, was that they would return and will return over time a lot more than that 4.25%. That 4.25% interest is also tax deductible. Any dividends or what we receive on the investment side is also taxed. In that, we thought that was intelligent. That same framework, equity capital is perpetual. No doubt about that. There is no exact coupon to it, but there is some range of intrinsic value. I would say, Alex and I, range of intrinsic value where we just raised capital, our opinion is that it is within that range of possible intrinsic value, about which we can't know. We'll know over time whether we're right on that.
It was certainly at the lower end of that range. When we're thinking about the cost of that, we're really comparing it to that capital and then putting it to use in what we're seeing. As we laid out in our use of proceeds, if you read the documents, a lot of that is opportunity we see and may see and believe is probable, even in some cases, in our billboard business as well as in fiber to the home of our newest business. What we'll really know is a couple of years from now, we'll know whether net-net the cost of this capital, which several smart people could figure out their own cost of capital based on their range of intrinsic value, and we do the same thing, versus the return we can obtain on it.
There has got to be a spread there, or it was not net-not-worth it. We believe our judgment is that it made a lot of sense to expand our capital base given what we are seeing. We see more—I would describe it as we see—we not only see more opportunity now potentially than we have seen historically in our five years at this, but we also have scale in a way we never had before in billboards, for example, or even we are going to get there in fiber to the home is our plan. Where incremental investment in, say, the billboard business, an incremental purchase of a competitor or an incremental purchase of an adjacent set of assets, or in fiber to the home, it is more organic-based, those are more valuable to us now than they would have been historically because there are some things that scale within those businesses.
I mean, that's in effect the mathematics we're going through to try to decide if it's worth raising capital and at what price. Alex, I don't know if you have anything that you want to add on that topic.
No, I think that was well said. I would echo all of that. I would say, without question, this is the best opportunity that we've had in Boston Omaha to deploy capital since we've been running Boston Omaha. I think it's important to also consider that there's a sort of themes with which we judge that capital deployment decision, they're consistent. I think there's a consistency throughout everything that we're doing, and that we generally look for the low-cost provider. We look for opportunities where there's advantage from a perspective of inability to add supply materially, or said another way, have various entry opportunity to get good returns on that invested capital and things that we think are very durable long-term. Our businesses really fit that. As we have these now three controlled businesses, they offer us more opportunity than we've ever had.
That, plus the—you have to always sort of be aware of the environment that you're in and the time you're in and the opportunity set that's presenting yourself. It's very different today than it was six months ago. We made the judgment, being large shareholders ourselves, to, as every shareholder, when you raise more equity, you're giving up a little bit of what you own of the company's future cash flows, but you're also believing that in exchange for that, those cash flows will be bigger for what you do own. That's the decision that we came to as shareholders and as managers. We're very excited about it and looking forward to getting to work because there's a lot of work to do. Before diving in, I did want to answer one specific question.
We've gotten it a couple of times, and it was mentioned on—it was submitted earlier about why we show more than $1 billion of turnover in proceeds and purchases of investments. That's required in order to report the purchase and sale of treasuries on a gross basis. The numbers get really high when you're rolling the balances of purchasing treasuries multiple times a year, especially if they're short duration. We have had that question a couple of times. Hope that that answers it.
That is in our—just to clarify too, that is in our cash flow statement where you see some very large numbers of investments and then sale or maturity of investments. Those are all treasuries being rolled. The numbers get to a billion because you are just rolling them and rolling them and rolling them. We say very short duration on that cash because we want to be able to use it to buy assets. We do not like to take a lot of duration customer management. Thank you for that, Alex. Yeah, let us get into an update on what we all own together as of today. We can run you through that fairly quickly. Our biggest business, as you know, is our billboard business.
The Outdoor Billboard business, I'd like to take a step back and talk about some high-level thoughts on it real quick and then get into some specifics on us. If you look at the billboard business since we entered it, which was approximately five years ago, the industry in aggregate of outdoor—this includes everything. We're a roadside billboard company, but this includes airports, everything, the entire sector of outdoor—has grown about 4%. That's the average growth. The most recent two years, it really accelerated. It was 4.5% in 2018, 7% in 2019. This year was setting up to be a good year pre-COVID-19. I think that's important as a backdrop and to understand how we're thinking about it and why we're so bullish on it.
If you look at almost every other traditional medium, newspapers, magazines, radio, broadcast TV, and cable TV over the last five years, that average growth has been negative. Digital, as we all know, has grown wildly. It shows, again, the power of outdoor, its sustainability, and really its ability to work with digital, which is the most growing platform of all. It is interesting to see the growth accelerating in the last two years relative to its, say, 10-year history. A lot of that has to do with the ability to work together, the lack of durable options for advertisers with declining audiences in a whole host of other areas. From a mathematics point of view, the way we think about investing in billboards is really straightforward. It is the day-one yield we obtain when we buy it.
We try to calculate the free cash flow yield that those assets produce and then relative to what we get to pay for it, plus the general growth in the industry, which is what I just kind of talked about. The last factor, which we can try to control and work really hard at, is any ability to scale certain of our costs. Those costs that you can scale are primarily, potentially, our land and our overhead levels. That is why a huge focus of ours is on land. Land is, I think, 21% or so, at least based on the current accounting standards, any kind of cash basis, maybe a little less than that.
In 2019, of our revenue base, if we believe in the growth of the business, which we do, and the day-one yield we obtain, those two things together, we can scale that land cost by converting land leases to easements or negotiating them to lower growth, at least lower growth in our revenue base. You have an additional, however many basis points, could be hundreds of basis points. We'll see over time, a tailwind on top of the other tailwind of general growth, and then on top of our day-one yield. You couple that really with the low capital intensity of the business to obtain that growth and the fixed supply nature of the asset. That can be a really interesting asset, but that is, in a nutshell, how we think about it.
I would say we are probably more bullish than most on just the general growth overall of outdoor over time, even relative to history looking forward. In our billboard business, as you can see by our—we wrote it in the letter—our capital invested relative to our cash flow we produce, we have a lot of work to do. We are not getting a return high enough yet that Alex and I would be happy with. Now, there is a whole host of reasons behind that. It is not a—we do not believe it is an asset problem. It is not like we bought some bad assets. When you piece together that many assets in a short period of time, there is a lot of integration. There are a lot of small things that add up that can be a high cost. With Scott now at the helm, we are getting very organized.
With our density, I've been able to decentralize. We think that's going to make a big difference over time of getting a more correct return that we think is more acceptable. We think it's there because the assets are no different. In fact, based on these general tailwinds in the industry, the assets should be more valuable than they were previously because there's been general growth in the industry that's been at 4.5% and 7%. The supply, at least of outdoor structures in many of the markets we're in, has not really grown anywhere near those rates, at least. A last factor that we really like is that this focus on lower costs, which is that land cost for us in Billboards.
We try to get that as low as we possibly can so we have lower fixed costs than the competition in our markets. We will continue that. Another factor that we are quite excited about is the very low cost per impression of advertising costs in billboards. If you want to advertise in a newspaper or TV or whatever else, it is a lot more expensive per eyeballs reached relative to advertising on billboards. That too could be a pretty good driving factor of aggregate general growth in the industry because you cannot increase supply much other than putting up digital space. Pricing power, as it should occur in time, in our view.
Those are kind of our bullish takes on it and why we're in the business, why we find it attractive, and what we're working on to get us to where we should be on a free cash flow generator basis. The last thing I'd say before getting to specifics of what's going on in 2020 a bit is the capital structure we have. When you look at our cost basis in the billboard business, which we lay out in the annual letter, you should also understand we pulled out $18 million of seven-year fixed-rate debt at 4.25% and sent that to Boston Omaha. You got to consider that too. Link sent some other cash as well to Boston Omaha. We're getting cash out as well.
What we want is Link to find more growth opportunity at a reasonable price, whether that's new acquisitions or more easements to fix that land cost we have. That's kind of an overall high-level view 2020 to date, I think, is maybe what's on a lot of people's minds, what's happening in the billboard business. We haven't disclosed April, May revenues. They'll be in the next queue. We can't talk a lot about that. I can speak generally that both Alex and I have been quite surprised. We would have guessed things were worse. It's been very resilient. For shutting down the economy for that long of a time period, our assets' revenue-generating ability has been very resilient relative to a host of other types of assets that have been decimated in many cases.
We did have quite a few, or actually not that many, requests for deferment of April or March's rent. We granted a lot of those because it's smart to be great to your customers, especially when they're having a tough time. We have the ability and the financial position to build that goodwill with them. We have done that. I think that's important. A lot of them have ended up paying their contract anyhow. Our average contract is about a year and a half ballpark. We contractually have lots of revenue. The question is just, do you defer? You're never going to get the revenue. You just defer a portion to do good by your customer. We think that's good business. There has been some of that. There was a period where we did not sign any new contracts.
Everybody was just frozen there for a period. That has changed. We're signing contracts that we have been for three or four weeks now, new contracts. Contracts, the last figures I know for May, new contracts sold are up considerably from new contracts signed in April. Things are moving in the right way. Another statistic you might find interesting is we're mostly in the Midwest. That's our most dense area of billboards. It's very different than the coast. The traffic count in Omaha or Springfield, or you name some other Midwest cities that we're in or near, traffic counts in many spots, not everywhere, but in many spots is actually higher than it was in 2019. Not just higher than April or March, but higher than the year before on a weekly basis. There was a huge dip in March and April, don't get me wrong.
I'm talking in more real time. That's how we sell advertising, eyeballs looking at advertising faces. Anyhow, I just say that that business is very resilient. We're very excited about it and its future. We're glad we have the assets we have, even at the cost basis we have them at. We think it's a very rare asset that has the attributes that outdoor billboards have. Keep in mind too, we have little to no or no really exposure to the transit business, which has really been decimated. Airport contracts, bus shelters, that sort of thing. We stay away from that business. We didn't do it because we knew we could never know that COVID-19 was going to happen. We stay away from it because our biggest cost, the land cost, we can't control very well in those.
You are constantly renegotiating with your city or municipality or whoever has the power. It is an RFP business. We are not really interested in that. That is a quick update on the billboard business. I will leave it to Alex to take it from here on the insurance update.
Yeah. Thanks, Adam. No, I think that is a good update. Also, I think one other important thing to mention about both our billboard business and actually every single one of our operating businesses is that we were all deemed essential by their relevant government authorities during this pandemic. We obviously would never have been able to plan anything like that, but I think it does speak to the nature of the businesses that we are in.
That does not mean that we have not made a great effort to, and all of our managers to make a great effort to be thoughtful, to work from home wherever possible, follow all the appropriate protocols. It means that we could go out and swap vinyl's on billboards. Healthcare has been an important message, obviously, for public consumption. We participate in that as well. Going forward, talking a little bit about General Indemnity Group. We have increased our, of course, every one of our businesses will be affected just like everything else. We have disclosed that about COVID. We have increased our loss reserves and continue to closely monitor the situation. It certainly is fluid. It is uncertain about what losses will develop. We also manage the business in real time.
For example, second situation became, and I guess it was probably like mid-March when the various authorities deemed to stay in place and businesses were closed and courts were closed and construction halted. We did stop writing certain types of business. For example, we did stop writing lease guarantee. Just a quick discussion on lease guarantee and a discussion about the idea of surety in general. A lot of our we write commercial and contract surety, mostly small contract surety. What that means is, as a refresher, is that we stand in the place of a principal, basically ensuring that they're completing the work or completing the work the way it's supposed to be completed, whether that's a service or building something or construction of some nature. The obligee is the one that requires the purchase of that bond.
The principal buys the bond from the surety in order to perform the work for the obligee. In the case where, for example, you might have construction that is halted for some period of time by a government, and that government is the obligee, in most cases, actually, is the obligee for different types of surety projects. The principal is not being allowed to perform by the obligee. That's a really big idea. There's not a claim generally on that work if the obligee for which the bond is supposed to be in place is the one that is preventing the principal from being able to complete the work. We stand in the place of the principal. I think that's a question we've gotten a lot about.
It's certainly something that I think investors would want to make sure they understand and the nature of surety. It's obviously very, very different than business interruption insurance. We don't write that. We're a monoline surety insurance company, obviously, in 50 states and in DC. Going back to our lease guarantee, there's an interesting factor about lease guarantee. It's important for everybody to understand. First of all, we write lease guarantee for overwhelmingly, it's in New York. And in New York, it was designed as a product that really worked for a sliver of the rental market where tenants were of good enough credit quality and earning quality to rent. These are often sort of young professional and high-end rental apartment buildings.
However, they might be missing the very, very high credit quality standards that the landlords typically are able to defend in that market because of the supply and demand and balance of the available rental inventory. They used to be able to take multiple months of rent deposits. Certain laws prohibited that in New York. Lease guarantee was one of many ways that those landlords would then be able to affect the same sort of highest credit quality tenant possible for their units. The interesting thing about that is that if you write a policy on January 1st, every month your exposure declines. When that renter pays their rent on the last day of on December 1st, you have zero exposure. Halfway through the year, you have half exposure.
It's very different from a lot of our different policies where if you write a $1,000 bond limit policy on January 1st and it's good for a year, you have $1,000 of potential exposure right up to the very end of the expiration of that bond. I think that's important for shareholders to understand that, one, we stopped writing lease guarantee. Two, our exposure declines every month that we go forward. In that sense, I think the other thing I just noticed about our insurance company is that relative to premium surplus levels, generally observable in the market, especially for surety companies, we would be considered overcapitalized. We certainly believe that we are considered overcapitalized for the insurance business based on what we write. From there, we feel good about the insurance business. General Indemnity has made a lot of progress since we started it.
We are certainly excited about the opportunities going forward. Generally, hard markets follow soft markets. We believe very strongly that we have seen a soft market. We would anticipate a hard market with the associated pricing in the future. We obviously have no idea. Just like everyone else, we will continue to be thoughtful about how we manage that business. The business is in great hands with Dave Harmon. Adam, anything else on that? Or would you like to go to Irving?
No. That was great. Thanks, Alex. Yeah. Let's hop to our newest business of all, which is AireBeam, rural fiber-to-the-home and fixed wireless broadband provider. A lot of this recent capital raise we are optimistic will be used in this business. It is very capital-intensive upfront.
From a broader standpoint, what we found attractive about this business, we wrote about this a lot in the annual letter, which I hope you've read. If you've not, I'd read it. It's a good overview of what we're doing today and what we have and why. It was really the stable revenue nature of the business. It's almost utility-like. We describe it as you have a certain number of pipes coming in your house, whether it's water, sewage, electricity, natural gas, and then data that you're going to connect to the rest of the world. That connection, there's no better connection than fiber, at least under present physics and technology. The thing is about laying fiber is you lay it upfront, right? You're trying to estimate the cost of laying this out, this network, how many customers am I going to get?
Ballpark, what are they going to pay per month? What makes sense? What over time will they maybe pay per month to make the math all work? One thing in your advantage is as you lay the fiber, you depreciate it far quicker than its economic life. It is also a tax advantage. You do not have a lot of tax thought going into that calculation of returns. We like that. It is the same in our billboard business. We are not in the business of avoiding taxes, but we are not in the business of paying all we can in taxes on our cash flow either. There is also a very strong forecast of demand, 30% growth last year in data consumption. Also, like billboards, the low maintenance cost to maintain that revenue stream over time once you lay the fiber.
It may seem this, well, man, that sounds so great. Let's just go lay fiber everywhere. Nothing is that easy. In all our work in this business, it became really clear that we got to stay extremely disciplined based on a couple of variables that really decide whether you get enough customers on the network that you build. One, that would be the cost to build. You want to build in spots where you can get in at a cost that's fairly reasonable. Probably more important than all, you want an area where you're going to have a high take rate. To have a high take rate, you're going to have to focus on areas where the competition is weak. There's no doubt that fiber is far better than coaxial cable, but it's close enough.
You're going to win probably in the end if you have the balance sheet to see it through. Your returns on capital are going to take a long time because it's just harder to convince a customer to switch when the difference in product is not enormous. We think maintenance costs and everything else will cause fiber to win that battle anyway, but it might take a long time. Our focus has been on markets that have DSL only or something else that we find far inferior to fiber and where the cost delay is quite reasonable. A huge part of this capital raise really ties back to when we bought AireBeam. We sat with Greg, who built this business over 17 years or so, and still runs it today, just as he did the day before we bought it, or we bought 90%.
He is still a material owner as well. We sat there and budgeted out what we planned to do over the next several years in terms of passing houses with fiber. Greg cannot help but to work incredibly hard every day. Since that budget was set, we have basically almost doubled in 60 days or 70 days, however long we have owned our 90%, the amount of passings we plan to do. Not quite doubled, but close. That is capital-intensive. These are markets that fit what we want to do and also some new development where there is no incumbent. That is a big part of this. Those are kind of the high-level reasons why we like this business long-term. We think it is a great long-term asset where you can collect reasonable returns in rents, if you will, on the network you build.
Once it's built, it is very hard to compete with. It makes very little sense to lay fiber twice if somebody else is already there. If we're there, they got to compete with somebody. If we already lay our fiber, somebody comes in and wants to try to do it again. One, they're going to do it in tomorrow's dollars, where we did it in yesterday's dollars. I don't know about you, but count us under the view that there's going to be more money in the system over time, not less, as just recently witnessed in the last few months. Inflation is not working in their favor when your primary cost is labor. Not only will they probably have a higher cost than us, they have to compete with us and steal customers we already have, which we work really hard to keep happy.
Those are two very expensive, that's a very expensive endeavor to do both those. The only way to do it really would be to offer a really low price. If you have a higher cost basis than us and you have a lower price than us, you're not making anything. Lastly, we don't use a lot of debt at Boston Omaha. We will use it in the fiber business to some degree, but I feel like we'll always have a fairly low interest expense line item. Many other players don't. That's also a cost advantage in effect for protection. It might lower the returns on equity, but we always look at these things on a return on asset basis anyway, not on leveraged equity. Anyhow, that's kind of a high-level view of the business and where we're at.
Alex, go ahead and add what you want. Alex is our resident physics expert on fiber alongside Greg. There are a lot of funny and good things to say here.
It is fascinating to me because I have learned so much from Greg in just the short amount of time that I have had the privilege of working with him. Again, Greg Friedman founded and has built AireBeam from scratch over 17 years to over 7,000 customers and quite an interesting geography between Phoenix and Tucson. When Adam and I had spent a long time, we were generally interested in the fiber-to-the-home business because of economics we had seen in high-speed data businesses across the country. For some time, we have been looking at a number of different businesses across the country.
I've even gone so far as to volunteer at a town where I am right now in Vermont that is a community-owned fiber cooperative through a number of member towns. They've done an amazing job building an all-fiber network up here. Again, it's public. It's owned by the towns. It's a very different business model. Just seeing that business, how it started, its costs, costs in neighboring areas. We've looked at costs in the Midwest, costs out West and the Southeast, all over, really different businesses where some were just building greenfield, some were old ILECs with telephone companies that were replacing the copper on their poles with fiber over time, varying levels of debt. There were attributes that we started to identify that we liked that might have been present, one or two attributes in one business.
Maybe this one had a good geography, but it was competing against cable. Maybe this one was not competing against cable, but it was in a really bad geography in terms of high cost for home paths. When we were introduced to Greg at AireBeam, we raced out to Phoenix. We looked through the company and really got a hands-on perspective on it, in which the maze that AireBeam, to us, had so many of the attributes that we had been looking for in the business. The low cost, really durable, the competitive profile was good. I mean, to give you an idea of the competitive profile, we talk about all the time that many customers in market, their current option is 5 meg speeds for $39. That is a DSL product, or they can get 39 Megs for $39. That is an AireBeam product.
Also, remember, most of AireBeam, traditionally, as Greg had built it, was a WISP, a wireless internet service provider, meaning he had over 130 towers throughout his geography that were broadcasting an internet signal from a radio to a receiver on a customer's house. Obviously, a very different model than fiber-to-the-home, but also an interesting model if you're doing rural high-speed data. It was fascinating because what Greg came to on his own years ago was in denser areas, this is the physics, and this is where Adam makes fun of me because I love getting into this. I won't get into it too much. The physics of actually having so many radios around, you can usually only put about maybe 400 or so customers on a radio.
If you have a 10,000 potential customer market and maybe say five sq mi or something like that, you would end up needing about 25 radios. Those radios in too much close proximity to each other interfere with the signal. It was an engineering solution for Greg to then pass fiber throughout a market and then realize the incremental cost benefits that he gets from that. What are the cost benefits? In real terms, radio equipment is powered, just like coaxial equipment is powered, copper equipment is powered. You're running an RF signal down a piece of metal, and you have to power that in order to make it happen. Powered equipment sits out in the elements. Radios, for example, the radio equipment typically needs to be replaced every five to seven years. Fiber is glass. It's shielded by in a cable.
It's either trenched in the ground or it's hung on a pole. That glass could last up to 30 years. It's not powered. It's passive. You're shooting light down the glass. We put this in our annual letter, but probably the best analogy, again, for those who maybe haven't read it, was when you, for instance, compared to copper, which is with whom we compete in our market, if the amount of data you could put down a copper line was the equivalent to maybe a 2-inch wide pipe, one strand of fiber would be 15 mi wide. It just has this incredible advantage of ability to continue to deliver incrementally high amounts of what the consumer wants. A high-speed data consumer is consuming over 30% more data per year. They will pay more for that too. That's observable in the pricing trends of this product.
You can have your lower incremental cost, you're not having to constantly go and swap out the software, the hardware, adding more bonded pairs in the case of coax. That's expensive to provide them that. We love businesses where there might be a high capital consumption business day one, but have very generous cash flow because the revenues can rise faster over time than the incremental spend of your CapEx. That's what we love. Greg is just a phenomenal operator. I think that we hope that kind of explains. I mean, one other note that I would just have, again, this is just general information. You can generally see these things in different businesses. When you talk about low cost too, the geographies matter. It's not just most importantly, it's about the competition. It's also about how much it costs you to build and permit.
Those can be very, very different too. For example, where I am up in New England, pole attachment, which is usually supposed to be cheaper than digging in the ground, the pole attachment networks can cost somewhere like $5,000 per mi in just permitting costs. Whereas in some of our markets in Arizona, Greg has been able to get that cost of 12 cents per ft, which is $633 per mi. These things add up. They are all components of what makes for a low-cost business. You can tell by the price that we paid and the number of subscribers, we think we acquired high-speed data subscribers at a good cost, under $2,000 per subscriber. If we can keep our per-passing costs low, we would think they should be able to be kept under $1,000 per subscriber.
We think, again, if you just look in the market generally at what subscribers are valued at in a number of deals that are done today, they can be anywhere from $5,000-$7,000 per subscriber. Either building or buying subscribers for less than half of that is a tremendous opportunity and one that, again, really encouraged Adam and I to have the cash capital on hand to go out and do this most recent raise to pursue that. We've gotten some questions from people that just generally want to know what were our priorities for the capital allocation. I think we are, you can put us down as fiber-to-the-home and the acceleration in that opportunity that we see to build is probably our top priority. We think that's likely going to be mostly organic. We are also looking at acquisitions all the time.
Where you should be surprised to find us going are in areas where there's heavy, heavy incumbent cable operators. That's a real heavy fight door-to-door to get people to switch off their video triple play and switch to a data-only product. Where you will likely find us operating more are going to be areas where the competition is more copper, meaning DSL, or less cable for that matter. One last thing I just want, it has come up quite a bit. People naturally, given the marketing of 5G, they say, "Well, what about 5G? Isn't everybody about to have high-speed data over the phones?" 5G is another form of, if you will, wireless internet, obviously. It's powered by the same thing. It's the towers, it's the radios. It uses a very high-frequency radio, very high radio frequency, mm waves.
The higher the frequency, the more data it can carry. It's still far less than, obviously, the amount of data you can carry with light over glass. Most importantly, fiber, in our opinion, is extremely bullish. Excuse me. 5G is very bullish for fiber. The reason why is that that data has to be carried by something. That's called backhaul. If you're going to push huge amounts of data over the airwaves through 5G networks, it needs to be carried somewhere. It needs to be carried from radio to radio. Actually, the number of those radios is going to go up a lot from the 4G LTE, without a question. You look at every company out there that's doing it.
The signal, a high—Adam will get me again for the physics of this—but a high mm wave radios require a lot of power, and they do not go very far. Maybe 400 yards or something like that. They need to have receivers again. They can get blocked by quite a bit of easily. In Boston, they were trying it a little while ago. I think it was Verizon or one of the operators. They realized in the spring, the signals were degrading quite a lot. They realized it was the leaves came in on the trees. You have to put a ton of radios out there, and you have to have backhaul for them. They do not just magically connect to the internet. They have to connect somehow. Verizon's spending a ton of money putting fiber into their towers.
In short, we think 5G, one, is not likely based on the physics of the way the signals work to be coming to rural areas anytime soon. Were it to make its way to rural areas, it will absolutely need a fiber backhaul to be able to support the amount of data that it's putting over the air. Again, owning fiber and spending the money putting it in the ground to have another user on it, we believe is a good position to be in. That's all I've got to say on the fiber right now. I'll let you.
Obviously, or on their third cup of coffee after the physics lesson. Minority. It's weird not having any feedback, isn't it? You can't—
Yeah. Everybody's farther there.
Anyway, a little minority holdings real quick, and then we're done. We'll wrap up here. On our minority investments, which is that second bucket, we have the first bucket of controlled businesses where we control the capital coming in and out as well as the capital structure, AireBeam, Link, and General Indemnity. We then have the second bucket of minority investments, but they are very important to Boston Omaha. If you add up their earnings power, it's quite material. First, on LOGIC Commercial Real Estate, which is our real estate services business in Las Vegas, as you can imagine, one, it's been a phenomenal investment for us over time. I think our share of earnings is almost two times our cost basis, just about. Yet we still own approximately 30% of what is a much larger, very well-run operation. Capital value is well there in addition to distribution. It's worth considerably more. Unfortunately, it's a small dollar investment, which is bigger.
It is worth more than our startup cost basis. No doubt about that. Las Vegas, as many probably know, is probably ground zero of this COVID-19, both health and economic event. Vegas is going to slowly open its casinos, I think, here soon, from what I read. Unemployment is, I think, [audio distortion] of 30% now in Las Vegas. It is a tough, tough market. You are having transactions and things like that dry up. Property management should hold in there, although if people are not paying all their rent, you are having less property management business as well. What we have there is Brendan Keating and his team. His top guys there are just phenomenal, as you can see by the results over time. They will adapt and get through this.
I think what they work on basically right now, I presume, in the service business is to maybe make a little bit of money or just break even and get through this for now. You can do, they can adapt by taking on distressed assets, helping transact in those. There is so much expertise in Las Vegas that I'm confident that even—I mean, they might make a lot more than they even think because if transactions start to pick up. Everybody's been frozen for several months. Even in a tough market, eventually volume picks up. We will be monitoring that. They have the Reno operation as well, which is important. Hopefully, they can go out of the financial position to expand. Maybe they're able to add more team members or maybe add a new geography. We stand ready to help if they desire.
24th Street Asset Management is our newest business, asset management business in commercial real estate. I know in the letter we wrote, Brendan and I ran some partnerships years ago before Boston Omaha existed, buying distressed commercial real estate, mostly in Las Vegas during the last financial crisis and after it. We had good success in doing that. Here we are again. It is really time to shine for 24th Street. This is how we think about investing in commercial real estate: it is cyclical. There is a lot of complexity now. You do have new facts. Are people going to go back and work in their offices as much as they were before? Is retail real estate destroyed forever, or at least the destruction of it expedited? We will see. I count us as more skeptical on those forecasts than most.
A lot of that has to do with the supply. There's the demand side, which is what I just referenced, of how much demand will there be over time. The supply side, and I'm not talking about Las Vegas and Reno, I'm talking about this countrywide supply of retail real estate and office real estate. It is quite large relative to present demand, but there hasn't been a huge boom in building for the last decade. I mean, if you go back to the 1990s into the 2000s, you had 250 million-plus sq ft a year built of retail for years and years and years, even 300 million-plus. After the financial crisis in 2008, 2009, I mean, it's been a trickle, really. If the demand's fallen through, and same with office, there hasn't been massive square footage gains.
Where there has been huge gains is in warehouse and industrial, which makes sense with all the internet retailers and that growth. We'll see. We'll be paying attention and deciding how to invest capital within 24th Street. I believe our first fund closes tomorrow, actually, in terms of capital coming in, and then we'll begin to work. Crescent Bank & Trust is another position where we own 15%. Our share of their earnings pre-tax has been about $1.7 million to date on a $19 million investment. Crescent Bank, there's nothing new there in terms of our view of its advantage. We maintain the view that they have a very real competitive advantage in their deposit funding as a bank relative to their mostly non-bank peers.
That advantage is showing up right now when other players are having a hard time doing securitization or they have to renegotiate their term loans with their banks or whatever else. Crescent Bank simply has mostly deposit funding. They will take their loans like everyone else in auto lending, depending on how unemployment plays out over the next several quarters, as well as used car pricing. They are very well capitalized, very well run. They have been spending a lot of capital on getting more efficient on every side of their business. That should, in our view, lower costs at least over time when they are able to grow quite a bit. Maybe the most important factor of all will be the competition.
I think Alex and I have been pitched a few different—we've sent a few different deals in subprime auto non-banks in the past year. Almost every time, there's the loan side. They have the loans on the asset side. On the liability side, they have their securitizations, generally, maybe some bank debt. They have this little sliver of equity. We've asked multiple times, "So where's the equity? Is it the loans? Or where's it held?" Almost every time, it's some junior, junior tranche within the securitization, which is effectively what makes up most of their equity. To us, that's kind of pretend equity. It may be there. It may not. It'll depend on a whole host of things that are somewhat out of your control, including the way the securitization works.
I think competition declining in that space, if that occurs, is going to be a huge boon for Crescent Bank if it occurs. We'll see how that plays out. Crescent, we really like that investment. I told Gary multiple times we'd buy additional stock if he wanted to grow further. We are capped, though, at 24.9% ownership. Last one, Dream Finders Homes. That's our homebuilder that we own 5.6% of. The path that Zalupski runs and owns a majority stake. He's one of the better entrepreneurs we've ever met. From a standing start, he's built a company that sold over 2,000 homes in 2019. Pretty amazing story. We have a $10 million common equity investment there. Our total share of our pre-tax earnings to date is $2.7 million. Last year was their big year. Our cost basis, in effect, values the whole company at $170 million.
A $170 million valuation, and Dream Finders earned over $40 million pre-tax last year. We hold that investment as of 2019 at cost. We're very happy with that. Now, going forward with our 5.6% ownership, some of those earnings will accrete in our income statement now because we have over 5%. It'll be a change in the accounting aspect of it. We also still own $6 million of the $12 million of preferred we did within the finance growth and acquisition last year. If you recall, we did a $12 million preferred with Dream Finders at 14% interest. A portion of that could be at our option convertible into more equity capital. There's still $6 million of that outstanding earning that 14%. It actually will go up a little bit on the interest front starting June 1. I believe we start turning 17% on that.
Finders earns a very high return on equity capital. Even though those are high rates of return on a preferred, they can afford it. We like our position. Hopefully, they will not pay us that all $6 million back quickly here at present interest rates because we like that. We are happy to look at any growth opportunities going forward as well of what they do. Last thing on Dream Finders is that it could be important in time. It is not immediate. We do have a memorandum of understanding with them. They built over 2,000 homes in 2019 that we could lay the fiber in their new neighborhoods. That is quite important because when you are developing a new neighborhood, one, laying the fiber is very, very cheap because you are moving around the dirt. We do not have to cut and cement and all these other things.
Your cost basis for laying that fiber is very, very low. Also, there's no current incumbent. You would be the only provider, so you'll get a very, very high take rate. The question is, how quickly will the neighborhood develop? That will decide what return you get because you're going to lay the fiber upfront, and then you have to wait for the houses to be built and sold. It is a function of how long that takes. We are very excited about that, and we are hopeful that we can at least get a portion of those homes started on a fiber business there as well over time. That is it, Alex. I do not know if you have anything you want to add to any of those minority investments.
No, no. You nailed it. Again, I would just say our priorities for capital allocation are, as we sit right here today, would be fiber to the home, organic growth, and potentially acquisitions if they meet the criteria we're looking for, billboards and adjacent markets, and of course, easements whenever we can buy them. We also always like to keep a minimum cash of maybe $20 million-$30 million around at the HoldCo. That's just our conservative nature. I do think I have a requirement here to read this. Neil, thank you for forwarding this. Just a forward-looking statement. If we have made any forward-looking statements, these are our opinions only. You should not rely on any forward-looking statements as predictions of future events. Forward-looking statements are subject to risk. Got it there, Neil.
A big congratulations and thank you to Neil Aronson and all of our friends at Gennari Aronson who really helped us out quite a bit to do all these things. We certainly couldn't do it without them. We appreciate their help for everything. I don't really have anything else to add. I just want to reiterate that we really miss our shareholders. This is the one day of the year that we love. Adam and I love getting together. It would have been this year in Omaha at Lauritzen Gardens, which is a beautiful place. I believe, Adam, that was marriage? Got married there?
I did. I've only been married once. I think you were going to say your marriage? Your first marriage.
I went to a second marriage, but it was to the same woman. That's a good thing. You favor a brief.
That's how I usually use Andrea as my first wife, even though she's still my current wife.
Yeah. Anyway, we're sad that we couldn't have been there at Lauritzen Gardens with everybody. We really do value being in the same room with our shareholders who make the effort to come. Quite a few of you do. We've had over 100 people the last few years attend in Boston or in Omaha. We hope down the road to even expand it to other places where we have our businesses, New Orleans for Crescent Bank or Las Vegas for LOGIC, obviously, or maybe even Jacksonville for Dream Finders Homes. Obviously, the current situation has interrupted a lot of those plans and prevented us from all being together. We hope that this could serve both purposes of completing our annual meeting as required.
We do really want you to know we do value that. We absolutely intend to attempt an in-person shareholder meeting where we will stay as long as you like and answer every single question asked, as we usually do in Omaha this fall, hopefully, all pandemic allowing. As soon as it is allowed, we will do it. We hope to see you there. We really hope everyone continues to stay healthy and safe. We cannot thank you enough for spending your Saturday morning with us. We are so grateful for the shareholders we have. We really do love you all. We think we are so excited about Boston Omaha and what we are doing. We cannot wait to see you. Adam, anything else?
No, that was perfect. Thank you.