Are you considering selling your cell tower lease? You are not alone. We have helped property owners like you find the right answers to their tough cell tower lease buyout questions. To help you get started we want to share with you six things to consider when you are thinking, should I sell my sell tower lease.
1. Immediate Cash vs. Long Term Value
By selling your cell tower lease you typically will receive a lump-sum payment of cash or an installment plan on the lump sum amount. In this article we will not be discussing installment buyouts in detail, however, if you would like to learn more regarding installment buyouts, please read our article “Why Installment Cell Tower Lease Buyouts Net You Less Money“. Regarding the lump sum cash, the value of the money you will receive will be at a discount rate of the potential total lease value.
Example – If your cell tower lease pays you $1,000.00 a month in rent and it escalates at a rate of 3% annually, the potential total lease value over 25 years is $437,511.00 (if the tenant does not terminate the lease over the 25 year period).
If you cash out today, you should receive a minimum buyout purchase price of $120,000.00 (however, Airwave Advisors can obtain an a significantly higher offer for you).
As you can see above there is a large discount a seller takes when accepting a cell tower lease buyout, if they believe in fact that the tenant will not terminate the cell tower lease over the 25 year period.
However, even with this discount, a cell tower lease buyout may still may be a good deal for the following reasons:
2. The Cell Tower Tenant Has The Right To Terminate With 30 Days Notice.
There is no guarantee that your cell tower tenant will be paying you rent twenty five years, or even five years from now. While it is unlikely some of the major tenants will cancel their cell tower leases anytime soon, we have seen carriers decommission entire networks such as Nextel, or entire US markets such as Metro PCS and US Cellular.
Cell tower income is not guaranteed for any amount of time. By taking a cell tower lease buyout you are doing the equivalent of taking your chips off the table and walking out of the casino. You have hedged your risk against a possible termination of your cell tower lease and put money in your pocket.
3. Cell Towers May Not Be Needed In 20 Years Or More.
Analysts predict that we will need cell towers for at least the next five to ten years, however, a disruptive technology could replace the need for cell towers in the near future.
Qualcomm recently developed a technology called LTE Direct which will allow phones to talk to each other, without the need for cell towers. Elon Musk of Tesla and Space X fame is working on a network of thousands of low orbit satellites to deliver the internet to consumers back on earth.
While it does not appear that either technology will be disruptive enough to replace cell towers entirely, the bottom line is the long-term future for hundreds of thousands of cell towers is uncertain.
If a replacement technology is developed to save cell tower lease tenants billions of dollars on cell tower lease rent, you can bet it will be deployed – as fast as possible.
4. You May Not Receive The Full Potential Value Of Your Lease.
Where will you be in ten years, or in twenty-five years? Will you still own your property?
According to the US Census Bureau only 37% of Americans have lived in their homes for 10 or more years.
Many property owners will not be holding the property they own today, ten years or more into the future. If that is the case, it may make sense to sell the cell tower lease now to capture as much of the future rent as possible.
5. How Would A Transaction Affect Your Property Going Forward?
Is your property your residence, an income producing property, or owner-occupied commercial real estate?
Each specific type of property ownership is affected differently with a cell tower lease buyout transaction. Having closed over 100 cell tower lease buyout transactions across every property type imaginable Airwave Advisors is uniquely positioned to help guide you through your cell tower lease buyout transaction.
In the sales documentation will you be structuring the transaction as a lease assignment or granting an easement to the cell tower lease buyout buyer? It is best that you understand the deal structures available to you with a cell tower lease buyout, and what structure would best meet your needs.
6. Are You Using Experienced Representation?
A cell tower lease buyout is a major transaction that will affect your real estate for decades to come. Make sure you have experienced representation on your side to avoid common pitfalls and to ensure you are not leaving any money on the table!
Airwave Advisors has successfully closed over $50,000,000.00 in cell tower lease buyout transactions helping property owners like you. Contact us today to discuss your cell tower lease buyout opportunity.
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About Nick G. Foster
Since founding Airwave Advisors® in 2014, Mr. Foster has added value to over 400 clients ranging from the State of Nevada, City of Beverly Hills, to Habitat For Humanity. Mr. Foster focuses on cell tower lease renewals, buyouts, new lease negotiation, and cell site lease management. Prior to starting Airwave Advisors® Mr. Foster founded and led the Cell Site Services Group within nationwide commercial real estate services leader Cassidy Turley (now known as Cushman & Wakefield).