It Is Not Your Imagination. The Offers Are Better.
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, and lease 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.