For Steel in the Air, Inc. and Cell Tower Attorney, September and October are always busy months. The reason for this is that landowners with leases are getting bombarded by the lease buyout companies and tower companies who want to buy or extend their leases. Because the typical transaction can take 45-90 days to close, if the deal is to be done by the end of the year, the actual negotiating has to be completed by mid-October or it may not be possible to get the deal completed by year end. You may be asking, “Why is it important to close by the end of the year?”
For the public tower companies, the main reason is for reporting purposes. Every quarter, the tower companies announce through earnings calls what they accomplished during the quarter. Furthermore, every year, the tower companies provide an annual report detailing the same accomplishments for the entire year. As a result, the tower companies always push closer to the end of the year to make their “projected” numbers come through. While the quarterly report is important, the year-end report is significantly more important. One specific metric that the tower companies report is how they invested their capital. In the case of lease buyouts, the tower company is essentially buying future debt. That is, they are pre-paying the rent obligation to landowners. Another metric that is reported is what percentage of their tower sites have been either acquired through a lease buyout or have long term ground leases in place with the landowner. Both of these scenarios protect the future income from the tower. While nearly all of the tower companies are public, the lease buyout companies are all private. Nonetheless, those companies still need to demonstrate to their investors that they have been effective with the equity or debt that the investors provided. They need to document whether they were effective or not over the past year.
Equally important is that individual salespeople at the lease buyout companies and tower companies are paid performance bonuses based upon the number of deals or the total amount of rental income they have purchased over the previous year. This past week, one of the tower company salespeople was willing to pay a signing bonus out of their own pocket to one of our clients because the deal would help the salesperson meet their “numbers for the year”.
The result is that the tower company and lease buyout firms know that the clock is ticking and that if a deal is to be done, it must be done now. Thus, the calls to landowners increase in quantity and the incentives to landowners to close the deals increase as well. In addition to getting better terms, there is another reason that a landowner might wish to pursue a deal at the end of this specific year- the possibility of higher capital gains tax treatment next year.
If you are planning to sell or extend your lease in the short term, you need to make that decision soon. However, if you are on the fence about selling or extending your lease, don’t get caught up in the increased pressure and deal-making frenzy from the tower companies or lease buyout companies. The deals aren’t going away just because of the end of the year. If you need assistance in making the decision of whether you should extend or sell before the end of the year, please contact us as soon as possible. We can give you the advice you need to make an informed decision, but we need time to research your site in order to do it.