• by Erik Sass  @eriksass1, May 9, 2014

Lamar Advertising's total revenues increased 3% from $276.6 million in the first quarter of 2013 to $284.9 million in the first quarter of 2014, the company announced this week. The gain was attributed to increased advertising demand in both the national and local markets, up 2.4% and 2%, respectively.

In terms of category growth, real estate was the big comeback story, with 18% growth over the same quarter in 2013, while services ad revenue increased 11%, amusement entertainment and sports grew 9%, and automotive rose 6%. By category size, healthcare advertising led the way with a 9% increase, accounting for 11% of Lamar's total business. On the down side, telecom ads tumbled 16%, financial was down 10%, and retail slid 8%.

Lamar CEO Sean E. Reilly also pointed to the company's continuing efforts to build new digital billboards or convert static billboards to digital displays. In the last quarter the company increased its total network of digital billboards by 40 to 1,901, while ad revenues from the previously existing digital billboards increased 3.3% year-over-year (reversing an earlier trend which saw digital revenues flattening out). Digital billboard revenues now account for 17% of the company's overall revenues and up to 40% in some markets. Looking ahead, Reilly said Lamar wants to add a total of 150 new digital billboards in 2014.

Last month Lamar announced that it had received approval for its proposed transition to a real estate investment trust, following the IRS ruling that the sale of outdoor advertising space qualifies as rental income from real estate, satisfying one of the main conditions for consideration as an REIT. Lamar expects to be able to convert itself into an REIT in time for the 2014 tax year. The company first revealed it was considering converting itself into an REIT in August 2012 and submitted a formal request to the IRS in November 2012.

Companies can qualify as REITs if their business is based primarily on real estate holdings and they also distribute at least 90% of their annual taxable income to investors through dividends. The switch to REITs should allow Lamar to substantially reduce its federal tax burdens. CBS Outdoor is also in the midst of converting to an REIT.