One of the most frequent questions we get from leaseholders is “Why do they want to buy my lease?” If you’re curious about this topic, I highly recommend reading a recent article by Eric Overman, CEO of Telecom Infrastructure Partners (TIP). It’s a deep dive into what he calls the “Third Wave” of telecom infrastructure — specifically the global rise of cell tower lease buyout companies and their evolving relationship with mobile network operators (MNOs) and tower companies.

The piece does a good job explaining the history and mechanics of the lease buyout industry, particularly how some lease buyout companies like TIP position themselves as “financial partners” to landowners, promising large upfront payouts in exchange for long-term lease rights. Overman’s article is well written and offers insight into the aggregator mindset.

That said, there’s one big point where I disagree: the idea that “in a rational world, 100% of landowners should sell.” That may be rational for a lease aggregator like TIP — but not necessarily for you.

Lease Aggregators Don’t Always Offer Maximum Value

Companies like TIP often pitch lease buyouts as a win-win — stable, bond-like returns for them and upfront capital for you. But here’s the catch: they tend to work closely with wireless carriers, often agreeing to lease terms that favor the MNO. As a result, their offers may be lower than those from aggressive aggregators who push back on rent reductions or restrictive clauses.

So, while their business model may be “carrier-friendly,” that doesn’t always translate into “landowner-friendly.” If you’re going to part with a high-performing asset like a cell tower lease, you should know you’re getting the best possible price — not just an offer that works for the MNO and the lease aggregator.

Undervalued Leases Close to Expiration? Proceed with Caution

Landowners with leases nearing expiration or currently below market rent need to be especially careful. These situations represent an opportunity — not for you, but for the lease buyout company. If you sell now, the lease buyout company typically gets the right to negotiate a favorable lease amendment — and collect significantly higher rent going forward. That’s additional rent or a higher purchase price you could have realized yourself. Instead, you’re accepting a discounted lump sum today and giving away a more valuable asset tomorrow. This is one of the most common ways landowners inadvertently leave money on the table.

Watch Out for Expanded Easements and Overreach

One of the more troubling trends we’ve seen — and that isn’t often discussed — is how aggregators structure these deals. Many don’t just want to buy your lease. They want more: general easements, expanded rights, and future control over your property or rooftop. And they don’t pay significantly more for it. For a small increase in present value, you may be handing over the future telecom potential of your property — especially as 5G densification, small cells, and private networks become more valuable. That’s long-term upside you’ll never see again.

Control, Flexibility, and Future Use

TIP positions itself as a “passive financial counterparty,” but their agreements can be anything but passive. Selling your lease often limits your flexibility, especially after TIP agrees to carrier-friendly provisions. Want to redevelop the property? Lease rooftop space to another provider? You may find out in the future that you gave up that right — or at the very least, you’ll need permission from a third party who’s now in the driver’s seat. Over our 20 years in business, guess how many lease buyouts we have seen unwound? (ONE!)

The Bottom Line

Selling a cell tower lease isn’t inherently bad — in fact, in some situations, it makes perfect sense. But don’t sell just because a cell tower lease buyout company like TIP tells you it’s the logical thing to do. That logic serves their portfolio strategy — but may not serve your best interest.

If you’re considering a telecom lease buyout, make sure you understand the full value of what you’re selling, how the offer compares to others, and what rights you’re signing away — not just now, but for decades to come.

Want help evaluating your options? That’s what we do. At Steel in the Air, we work solely for landowners. We do not work for lease aggregators or tower companies — we work solely in your best interests. Please call us or contact us. We will gladly walk you through your specific situation and advise as best we can – even if it doesn’t result in us earning a dime.

Back in the late 1990s, Nape was helping a larger tower company “buy out” their cell tower ground leases from landowners. At that time, the tower company was offering 4-6 years’ worth of rent to buy a 15-year term. It’s hard to believe these days that the average purchase offer is in the 18–19 year’s worth of rent range. 

Why do I bring this up now? In going through old files, I came across a spreadsheet that had the first 500 leases that one of the early lease buyout companies purchased in the 2002–2007 range. Back then, there wasn’t much competition, and there wasn’t as much “expert” content available on the web (SITA didn’t exist until 2004). So, landowners really didn’t know much about the value of their leases. It was easier and cheaper to purchase leases in those days. 

In analyzing those early lease buyout deals, a couple of things caught my eye. First, the average lease buyout purchase price at the time was just over $120,000, and the average lease rate being purchased sat at just under $1500/mo. That meant the company was buying leases at approximately 7.5 years’ worth of rent. Notably, the purchase term for those leases was much shorter, at under 19 years.

Contrast this to today’s cell tower lease buyout market:

Looking back, I can’t help feeling like I did about the tower industry—if only I knew then what I know now. I probably would have purchased a bunch of leases and towers and waited for them to grow in value—and purchased AMT and CCI stocks in October 2002, when they were both under $2 per share!

If you are considering a cell tower lease buyout, please see our helpful content about cell tower lease buyouts here. 

In just the last week, we have received five separate inquiries from past and potential clients who had recently received a cell tower lease buyout offer that was noticeably better than ones they had received from the tower company previously. Those who reached out felt that there must be something going on in the industry. They are asking the question, “Is this related to 5G?”

Yes – Offers Are Related to 5G

There is so much hype about 5G out there now – it is hard to pick up a newspaper or browse the web without seeing multiple articles on what 5G is and what it can be. The investment community has definitely taken notice. We are seeing more new entrants with serious funding ready to purchase leases than we have since 2012-2013. We have been contacted by multiple financial groups who desperately want to “get in” on 5G and are seeking our consultation on how to do so. These groups sometimes have more conservative Return On Investment criteria and are willing to make higher offers as a result.

Tower Company Valuations Are Up.

It doesn’t hurt that tower company stock prices are up as well. Both American Tower Corporation ($AMT) and SBA Communications ($SBAC) are at all-time highs as of the end of May 2019, and Crown Castle ($CCI) is near its all-time high. When tower company stocks are up, they have more capital to purchase leases. Coupled with the low cost of capital and their recent conversions to REITs, tower companies have every incentive to convert leases (long-term operating expense) to easements (upfront capital expenditure).

Make No Mistake – It Is A Seller’s Market.

As new buyers come into the industry looking to acquire assets (leases or towers), the tower companies are forced to be more aggressive in their offers to purchase or extend their own leases lest they lose the lease to a third party that looks to capitalize on the lease in the future. Tower companies do not want to have to deal with a third-party owner, who is better informed than the landowner in most cases. The net result is that landowners are receiving escalated offers from the tower companies for lease buyouts and for lease extensions. One downside, though, is that the efforts by some of the outside agents who are trying to close these deals are getting more egregious, with some outright lying and suggesting to landowners that towers are going away due to 5G and small cells. (HINT: they wouldn’t be buying or extending if the towers were going away!)

Landowners now have more options than ever to sell their lease or to extend their lease. Tower companies and third-party lease buyout companies are becoming more creative in their offers. One of the techniques that they use to inflate their offers is to use payments over time. By showing you the overall amount they will pay, they hope that you aren’t smart enough to understand the time value of money and the additional risk you take on by doing a lease buyout under an installment payment plan. Either way, the offers are getting better, which is encouraging landowners to consider selling or extending. Clients we advised years ago are getting offers that are at or above what we recommended they ask for.

But It May Not Be The Perfect Storm.

We previously thought that the market couldn’t get much better given that interest rates are so low and tower company stocks were high at the time. Candidly, we don’t know. It remains to be seen whether the new entrants to the market are capable and serious. In Steel in the Air’s 15 years, we have seen multiple investors look to enter the sector but bow out when they realize how hard it is to scale the acquisition of leases or towers.

There are other factors that could influence offers positively or negatively. Will interest rates climb and cost of capital increase, thereby making it more expensive to buy leases? Will the tower companies continue to be the darling of the stock market as investors chase anything related to 5G? Will Sprint/T-Mobile be able to pull off a merger? If they do, will a fourth wireless carrier enter the market?

Need Help Deciphering Your Options?

We can help. We have advised 3,000 clients over the last 15 years with over 4,000 assessments. We track data from thousands of lease buyout and lease extension offers. Our breadth of data allows us to identify trends in the market when they start, not follow them after they have already changed direction.

We can provide consulting services on lease buyouts, andlease extensions/expirations. We can broker your lease(s) or tower(s) to maximize your sale price. We can help you determine whether you should consider selling, consider extending, or simply keep the lease as is for now. Our clients run the gamut from individual landowners to large multi-national corporations to large cities.

We welcome the opportunity to discuss your situation with you further. There is no cost for the initial call, and we do not pitch you services that you do not need. You may be worried about getting added to a mailing list or being called repeatedly if you take us up on our offer of a free initial consultation. Don’t worry! Just let us know up front and we will make sure you never hear from us unless you want to.

Call us for a free initial consultation.

The City of Akron has decided to sell its cell tower and water tower leases to Everest Infrastructure Partners. Curious who they are? The founders are previously from Tristar Investors- a company that purchased easements under tower company towers in order to sell them back to the tower companies. I can’t say whether Everest has the same business model. What is interesting though is that Everest paid a pretty penny for these assets.

Why Cities Should Think Hard Before Selling Leases

Typically, we advise cities against selling their leases because the sale limits the ability of future city councils to use the underlying properties as they see fit. For example, in this case, the City of Akron won’t be able to tear down these water towers at the end of their life or redevelop the underlying properties where the towers sit. That may not be an issue in this case depending upon the location and age of the properties/water towers. We also advise against selling of leases because the buyout offers for the leases aren’t nearly as high as what Everest Infrastructure Partners paid here. With this type of multiple of cashflow, this transaction is more like that of a tower acquisition than a traditional lease buyout. That’s because Everest gets the current and future revenue from these structures and properties that were sold and the City gets none.

But Cities May Not Have a Choice

Of course, there are many cases where cities like Akron don’t have another immediately accessible source of funding that doesn’t require raising taxes and must turn to liquidating assets like these cell tower leases. Here the City of Akron was facing a significant cash crunch. We have worked with two other Ohio cities that also ended up selling their leases. In both cases, they evaluated whether the location of the tower or water tower would potentially impact future expansion or development plans. After evaluating the potential sale, they determined that they could live with the future obligations.

The Lease Buyout Market is Back

Another point of interest is that the lease buyout market is getting frothy- we are seeing more entrants and higher offers than at any time in the last few years. For example, we just received a call from a company that had shut its doors and has now found funding to buy leases again. If you are considering selling your lease, it may make sense to look at doing it now. If you need to know more about lease buyouts- we have a very handy and complete website about the subject- www.celltowerleasebuyout.com.

Give us a call and we can help you ascertain the market value of your lease and walk you through the options related to selling.

We applaud Verizon for their interest in preventing their leases from being sold to third parties like lease buyout companies.  It is understandable that Verizon (along with other wireless carriers) would prefer not to have an informed third party purchase the rights to a Verizon ground or rooftop lease.   Having to work through a lease aggregator or whomever that lease aggregator sold their tranches of leases is difficult and time-consuming and likely exposes Verizon to increased cost because the aggregator is incentivized to maximize the rent.   To that end, we have heard of litigation between wireless carriers or tower companies and third party buyout companies who unreasonably withhold consent for modifications.  

However, in Verizon’s newest template lease, they have gone too far.   For some time, Verizon has had a Right of First Refusal (ROFR) clause in their lease which prevents a landowner from selling the lease without giving Verizon the right to match the offer.  While we don’t like the Right of First Refusal clause, we can accept it with some changes that limit the scope of the ROFR.   In their most recent lease template though, Verizon has added language that would make it difficult if not impossible for a landowner to assign the lease or sell the lease to a third party EVEN IF Verizon chooses not to match someone else’s offer.  

Without any approval or consent of the other Party, this Agreement may be sold, assigned or transferred by either Party to (i) any entity in which the Party directly or indirectly holds an equity or similar interest; (ii) any entity which directly or indirectly holds an equity or similar interest in the Party; or (iii) any entity directly or indirectly under common control with the Party.  LESSEE may assign this Agreement to any entity which acquires all or substantially all of LESSEE’s assets in the market defined by the FCC in which the Property is located by reason of a merger, acquisition or other business reorganization without approval or consent of LESSOR.  As to other parties, this Agreement may not be sold, assigned or transferred without the written consent of the other Party, which such consent will not be unreasonably withheld, delayed or conditioned.  No change of stock ownership, partnership interest or control of LESSEE or transfer upon partnership or corporate dissolution of either Party shall constitute an assignment hereunder.  LESSEE may sublet the Premises in LESSEE’s sole discretion.

In other words, Verizon is saying:  “If you get a poor offer to buy the lease that we want to match, we will. Conversely, if we don’t want to match, we will not match and then we will decline to consent to your sale of the lease so you can’t sell it anyway.”   This is a crappy deal and we advise all landowners to remove the anti-assignment language from the lease.  If Verizon doesn’t want you to sell to a third party, great.  They can opt to buy the lease directly; if not, they shouldn’t be able to prevent you from selling to someone else.   Landowners who agree to this language will end up devaluing their leases as buyout companies won’t make offers on leases that aren’t assignable.  

One of our client’s called us yesterday to let us know that they had been beleaguered by a tower company rep who was perhaps too anxious and aggressive regarding a lease extension for a lease that wasn’t set to expire for another 8 years.   This particular client has a Mona Lisa tower- a phrase American Tower used previously to refer to 4-6 carrier towers.   In other words, it wasn’t going anywhere.   For some reason, the tower company rep felt that being aggressive and making all kinds of threats to move the tower and to cease discussions would make the landowner agree to the proposed terms.

The landowner received a survey from the tower company- a generic one that asked about how the landowner felt about the tower company and whether lease payments were coming on time.   The landowner filled out the survey and added comments at the bottom that he didn’t appreciate the rep’s aggressive nature and angry demeanor.   Within a few days, the agent called him and apologized and the negotiations took a decidedly more friendly turn.    Perhaps that was because our client’s tower is a very valuable tower.   Perhaps not.  Either way, if you are having a problem with your tower company rep and their negotiating tactics, fill out a survey or let the company know directly.   While the rep will and should continue to make threats about moving the tower, they should be able to do it in a less aggressive and cordial manner.  Both parties should remember that these negotiations are not personal, they are just business.  Treat the discussion as a business discussion, remove the personal aspect, and if you need help determining the business terms, consider contacting us.

Back in 2008-2013, a company called Tristar Investors was attempting to acquire ground leases under American Tower Corporation (AMT) and Crown Castle (CCI) cell towers. They had some success acquiring the leases using a unique acquisition model where they would “buy out” the tower ground lease by paying the landowner an additional annual or monthly payment above and beyond their current rent through the expiration of the cell tower lease. Tristar would then offer the landowner 50% of any revenue from the operation of the tower after the expiration of the lease. The marketing pitch? At expiration, Tristar assumes ownership of the tower and the landowner becomes a “partner” in the revenue generated on the tower. This was an effective pitch to landowners, and our best guess is that Tristar acquired 300-500 leases under valuable multi-carrier towers.

In 2013, Tristar settled litigation with American Tower and after that, they shut down. We surmise that Tristar agreed to non-compete and non-solicitation language in their agreements that barred them from purchasing leases from under American Tower. We also believe that Tristar executives previously agreed to language with Crown Castle that provided for similar restrictions on acquiring Crown Castle leases.

THE RISE OF EVEREST INFRASTRUCTURE PARTNERS

Flash forward to 2017 and it appears that these non-compete/non-solicitation agreements have expired, because a landlord of ours with a multi-carrier American Tower Corporation tower received a purchase offer from a company named Everest Infrastructure Partners that looks suspiciously like previous offers from Tristar Investors. Upon further review of the signatory and the agent who contacted our property owner, it appears that someone has gotten the old Tristar team together and is now attempting to acquire leases under the Everest Infrastructure Partners name. Both the agent and signatory list previous positions with Tristar in their LinkedIn profiles .

Here is what the offer from Everest looks like:

Everest Infrastructure Partners, Inc. (“Everest”) is pleased to present to you (“Owner”) this offer letter (“Offer”) for Everest to acquire an easement to the cell tower real estate you own at _____________________(“Property”).    

1. Current Lease.  The Offer is based on the following terms of the current lease for the cell tower operated on the Property:

Current Rent:   $xxx.00 /month    Final Lease Expiration: xx/xx/xx

2. Payment to Owner.  Everest will pay to Owner the sum of xxxxx Thousand and No/100 Dollars ($xx,000.00) per year until the expiration of the Current Lease.  Owner will keep all rents generated by the Current Lease until expiration. Additionally, commencing at the expiration of the Current Lease, Everest shall thereafter pay to Owner ongoing payments equal to Fifty Percent (50%) of the rental revenues received by Everest from any lessee(s) of the Property.

 3. Easement. In exchange for the consideration above, Everest will be granted an easement to the property. The easement area shall be the portion of the Property currently leased for wireless telecom use, and shall include access and utility easements thereto. 

RECOMMENDATIONS FOR CELL TOWER LEASEHOLDERS

There are a few concerns that landowners should have about this offer. First, a landowner who receives this offer should clarify with Everest whether they intend to take over the ownership of the tower at expiration, whether they plan to sell the lease back to the tower company, or whether they expect to renegotiate the lease with the tower company and take 50% of the rent for doing so.

In the first scenario, these types of offers can be attractive to landowners. Our clients who previously sold to Tristar were generally better off for doing so.

In the second scenario, we believe the landowner is better off just selling or renegotiating the lease with the tower company. Otherwise, at expiration, if Everest sells the lease to the tower company, the tower company could just decide to offer below market lease terms and the landowner would get the very short end of the deal.

In the third scenario, we also believe that the landowner is better served by selling to the tower company or renegotiating the lease with the tower company. Unless the “buyout” amount exceeds the present value of 50% of future rent from the extended tower lease, the landowner would be better off just keeping the lease and negotiating its own extension or sale with the tower company.

Accordingly, if you receive an offer from Everest, we recommend confirming with them whether they intend to take over the tower at expiration. If not, we suggest asking Everest about their explicit intentions with the lease. In either of the latter two scenarios, we recommend contacting us so that we can help you determine the value of the lease and explain fully all of your options – not just those presented by Everest.

Please note that we are not affiliated with Everest. Everest Infrastructure Partners may be a registered trademark. If you found this post while searching for Everest Infrastructure Partners, please direct your browser to www.everestinfrastructure.com.

So why the lawsuit and why now?

First, why?  The lawsuit appears to us to be a rather public attempt to get American Tower to come to the bargaining table.   The length and detail of the complaint suggests that Tristar wanted to publicly air those weaknesses American Tower has in its portfolio.  American Tower does not own all of their towers, they sublease some.   If American Tower fails to convince the landowner to extend an underlying ground lease, the tower may revert back to the wireless carriers from whom they were subleasing the tower from.  Perhaps Tristar wants to be a line item on risk in the next American Tower earnings report.  Perhaps they want to have shareholders and market analysts question American Tower’s revenue projections.  Perhaps they want other tower companies and opportunists to see the unshielded underbelly of American Tower’s portfolio- or even landowners who Tristar wasn’t successful at convincing to sell their leases.

Second, why now?   Tristar changed the way that they purchased ground leases from landowners a year or two ago.   They switched from paying a lump sum purchase price to purchase the leases to offering the landowner an supplement to their monthly lease rate.  In doing so, Tristar was able to save a significant amount of capital.   But while they saved capital, they incurred substantial operating expenditures.  As Tristar doesn’t receive any revenue from most of the leases they purchase until the expiration of the lease,  the longer they pay these supplemental payments, the lower their return on investment if they are successful at getting American Tower to acquiesce.   And if American Tower doesn’t buy the leases, then Tristar has to wait in some cases for 20 years before they seen any revenue from these towers, assuming they are successful at taking over ownership.  Thus, it appears that Tristar is gambling that they can force American Tower through this lawsuit to settle and purchase their sites.

Not sure that I believe this is a good gambit by Tristar.  Surely, American Tower will respond with a counter-suit against Tristar.  This will get much uglier before it gets settled.  American Tower will respond in force and with substantial resources.   I don’t see how Tristar expects to continue to conduct business as usual while being involved in a litigation that will undoubtedly involved thousands of man-hour necessary to provide documentation and interrogatories that will inevitably come their way from American Tower’s attorneys.

It seems pretty clear that Crown isn’t willing to buy Nextel revenue share rent but is freely willing to give up a share of the Nextel rent when they are extending a lease.   This indicates that Crown doesn’t believe that these particular Nextel leases will be around much longer.   If Crown is just guessing which leases are going to be terminated, then that may just be smart business on their behalf.  If, however, they know which leases are being terminated, they are taking advantage of landowners’ ignorance by offering to share revenue or declining to buy rent from Nextel leases they know will be terminated.

If you have received an offer from Crown to buy your lease but not your Nextel revenue share, think twice before you agree to it.  There are other buyout companies who are still buying all rent whether from Nextel or not.   If you are considering extending your lease because Crown has offered to share the revenue from a Nextel lease, we suggest that you carefully consider what you are getting if the Nextel rent goes away shortly.    If you need help figuring out what you should do, please contact the professionals at Steel in the Air.   We are happy to provide a free quote for our services.