If you’re fortunate enough to have a cell site on your property, you may have been contacted by a lease buyout firm about taking over your cell site lease in exchange for a significant lump sum of cash. If you haven’t gotten such an offer, it may only be a matter of time. While cold hard cash is hard to ignore, it is critical that you understand the true value of your lease before accepting any offer—no matter how sweet it sounds!
Selling your cell tower lease could be the right decision for you. (There are also reasons why it may not be the wisest choice, which is a topic worthy of a whole other blog post. Stay tuned!). If you determine that selling your cell site lease is in your best interest, don’t sell yourself short when it comes to its value.
What are some of the factors driving the price in a cell tower lease buyout?
Location: The number one rule in real estate is location, location, location! This also applies to cell site leases and their economics. Prices tend to be higher for cell sites situated in areas where there is high demand for wireless service and scarcity of available locations. A site on a college campus with increased need for coverage but limited locations to place an antenna, for instance, is likely to claim a higher price than one in rural Anytown U.S.A where there are multiple sites and landowners who are eager to lease at low rates.
Rent: It should come as no surprise that the higher the rent is, the higher the potential proceeds a cell site lease owner could command. Higher rent sites are associated with attractive real estate locations and/or the importance of that location to the tenant’s network.
Escalator: The rate at which your rental income escalates also dictates what a cell site lease buyer can pay as analyzing the contracted cash flow is key for valuation. Most leases escalate annually or at the end of each term, but we have seen less advantageous variations with no escalation at all.
Lease terms: There are various business terms within each cell site lease which could either help or hurt valuation of said lease. For instance, Right of First Refusal provisions provide last look opportunity to the current tenant to match any bona fide offer provided to the cell site lease owner. This may cause a reduction in number competitive offers, which prevents the landlord from obtaining free market pricing.
Knowing buyer community and current market conditions: Even though these are all cell site leases, every situation is unique .By the same token every buyer has their own points of focus. Knowing how to marry the nuances of your particular set of facts with the right buyer is crucial to maximizing proceeds.
While these are good examples of elements that go into cell site lease valuation, they’re broad. There is a lot to evaluate and understand about the exact details and their many possible combinations. How do you wrap your head around it all? The smartest thing you can do to ensure that you’re well informed and properly compensated by a cell tower lease buyout is to partner with experts.
Having been on the other side of the table for many years, The Filo Group has unparalleled, specialized experience in cell tower and rooftop lease buyouts. Contact us today to find out how we can help.