Cell Tower Lease Buyout Services
What is a Cell Tower Lease Buyout?
If you currently have existing cell sites on your property, you are probably getting tired of the weekly postcards and phone calls from old and new lease buyout companies that are interested in buying your leases. Some may contact you and offer to provide free advice on the value of your lease. Others will send you a postcard stating that they are placing antennas in your area and are interested in your site. Some will offer “free” lease analysis to review your lease agreement. All of these offers companies want to buy your lease. A lease buyout is the payment of a lump sum to you from the buyer in exchange for your giving them the right to receive rent from the lease as long as it is in effect (perpetual term) or for a fixed term (specific number of years). The buyer gets the right to the rent for the term of the purchase agreement, but you still have the obligation to allow the tower to operate for the term of the buyout.
If the buyer of the lease is the tower owner or a tower company that owns the rights to the tower, the buyout is a direct lease buyout. If the company making the offer to buy the lease is a company that has no affiliation with the tower, then we call that a third party buyout.
How is the purchase price calculated?
The purchase price is calculated based what the industry refers to as a “multiple of monthly rent” or a “multiple of annual rent.” The rent is just that the current monthly or annual amount you receive. The multiple is typically between 100 times and 300 times the monthly rent or 8 times to 25 times the annual rent. This multiple of monthly or annual rent is somewhat subjective, determined by a number of factors that include the following:
- 1. Identity/credit worthiness of the lease tenant(s)
- 2. Number of sublease tenants on the structure
- 3. Length of the purchase term of the buyout
- 4. Escalation in purchased leases
- 5. Length of time remaining until expiration
- 6. Perception by buyer that there will be “upside” in negotiating a better lease in the future
- 7. Type of lease being acquired (ground lease, rooftop lease, etc.)
Why does anyone want to buy my cell tower lease?
If the buyout offer is being made by the tower owner, their objective is simply to reduce their operating expenditures (rent) in the future by paying a lump sum today. Furthermore, they will have the opportunity to control the lease and prevent 3rd party buyers from buying the lease and possibly holding them hostage in future negotiations. The tower company buyers also reduce risk in the future related to the lease because they don’t have to worry about the landowner terminating or deciding to significantly up the rent.
If the buyout offer is being made by a 3rd party buyer, in 9 cases out of 10, the objective is to acquire a sizeable group of leases and then sell the entire bundle or securitize them (somewhat like mortgage companies were doing prior to 2008). These buyers simply want to buy leases cheaply and then “flip” them to another buyer.
Why would I sell my lease?
Here are the pros and cons of selling your lease or leases. (See the video at the top of the page for more information.)
Pros of Selling Lease?
- 1. Reduces risk of future termination
- 2. Reduces possibility of renegotiation
- 3. Because you don’t have other easily accessible assets to sell
- 4. Because you can reinvest proceeds better in alternative investments
- 5. Because you plan on selling the underlying property and want to maximize the proceeds from the sale
Cons of Selling Lease?
- 1. Extends lease obligation on property for the purchase term
- 2. The buyout agreement ties up the property and prevents future development
- 3. Future buyers are subject to lease but don’t receive rent payments
- 5. Sale to a 3rd party limits rights in enforcing the non-rent provisions of the lease
- 6. You forego future rent upside from either modifications or expansion or renegotiation at expiration
How Can Steel in the Air Help?
We have served over 3,000 clients, reviewed over 10,000 cellular leases, and tracked over 2,000 lease buyout offers to date. We have helped other landowners in your exact situation. So whether you need help determining whether you should sell or know you want to sell and need help maximizing the sale price, we can help.
If you need help figuring out whether you should sell, here’s what we can do for you:
Review the Lease – We will evaluate the terms and language of your current lease and any buyout proposals, and answer any questions you might have.
Audit the Cell Site – We will perform a cost-benefit analysis of the proposed cell site to determine the likelihood of the cell tower being relocated, which will include an investigation of zoning regulations, current tenants, and usage, and expected replacement costs vs. profit flow to the cell tower owner.
Evaluate the Buyout Proposal – We will evaluate the lease buyout proposal and perform a lease valuation using comparable lease rates data comprised of previous offers and sales. Our goal is to determine the fair market value of your lease in the present and what it will likely be in the future, while simultaneously assessing the relative value of your lease to the buyout company (and the company they are working for).
Recommend a Strategy – Based on our analysis of the unique factors that can influence the value of your lease, we will provide a recommendation on whether or not you should sell, and if so, for how much. We will also explain to you the upsides and downsides of entering into an agreement with a 3rd party cell tower lease buyout company. If you determine that you want to sell, we will recommend other buyers who might pay more for your lease. If you decide to accept the proposed offer, we will help you negotiate favorable terms.
If you already know you want to sell and want to get the best deal possible, here’s what we can do for you:
Review the Lease(s) – We review the leases to confirm any unique characteristics of the lease(s) that would influence value positively or negatively.
Evaluate the Buyout Proposals – We review the proposals you have already received and advise on whether these are at fair market value. We compare your situation and leases to those for other clients we have helped in the past and determine what the maximum sale price will be. We then either:
Help you Sell the Lease – We recommend other companies that will be interested in buying your lease and recommend specific terms that you should require as part of requesting an offer. We help you evaluate additional offers that come in and tell you when you have pulled out the last nickel.
Broker the Lease – nIf you prefer that someone else procure the offers for you, we are happy to do so. We can cut out the sales calls and the pesky salespeople and cut through to the best offer. We get multiple offers for you and then negotiate them up to their highest points, after which we present you with a summary of the various offers and the pros and cons of each.
Our fee structures are reasonable. We don’t take 20-25% of your lease in order to give you recommendations on what to do. We don’t take commissions from both you and the buyer like some other consultants do. We can be retained on a flat fee basis or a contigency basis with either a flat percentage of the purchase price or a specific percentage of the increase that we procure over the best offer you already have. Please contact us and we will be happy to review your situation, tell you whether we think you will receive a benefit from our services, and then provide you with a specific quote.