If you have a cell tower lease and are wondering how to maximize the value of your tower, you might be looking into selling your lease. Depending on the actual offer or pricing you receive, the decision on keeping your tower or selling through a cell tower lease buyout should be made based on how you might re-invest those funds and the tax advantages you might receive.
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Maximize the Value of your Cell Tower
If you’re not a cell tower company and don’t intend to grow your cell tower portfolio to a point where you can leverage debt (loans) on the assets, it’s often better to convert your lease to a telecommunications easement and then sell that easement to a cell tower company. When you convert your lease to an easement you can do a 1031 exchange and re-invest the funds into another higher performing and more secure real estate investment.
Cell Tower Lease Re-Negotiations
All cell phone carriers employ cell tower lease experts or representatives for cell tower lease negotiations who ultimately seek a rent reduction or often threaten to terminate their lease when it’s time for a cell tower lease renewal. This makes the cell tower lease value drop when carriers renegotiate cell tower lease terms and can hinder selling cell tower leases.
These re-negotiations can often be detrimental to the valuation of a tower. Not only lower the current lease rate but the escalation terms can make even more of an impact value. Before accepting terms to change your lease, contact our leasing experts who can provide the impact the change in terms would make on a cell tower lease buyouts.
Inflation and Cell Tower Lease Escalators
Even if your cell site rent continues unchanged, the cash flow associated with the lease will be distributed in small increments over a long period of time. As inflation grows, the escalation on your cell tower will likely not keep up with inflation. So, in most cases, the comparison between receiving a lump sum amount today versus collecting smaller and uncertain incremental rent payments over a long-term period is the key decision point.
Most leases for cell sites are done on a 25-year basis with a pre-set escalator. As inflation grows higher than 3%, the impact this could have on the value of your tower alone could make it more beneficial to sell your lease and purchase real estate which can have more favorable terms.
Selling Real Estate with a Cell Tower Lease
If you don’t intend to keep your property for the full term of the lease, the value a real estate buyer, who is not a cell tower company, places on the income from the tower may be much less than what you would get from a Cell Tower Company. So, if you decide to sell the real estate it is often better to sell the tower and the real estate separately to maximize your net profit. When selling real estate with a cell tower, a buyer may look at current cap rates to analyze the value of the cell tower. Whereas, Cell Tower Companies will take into account several additional factors which could be more than 25% higher than what a real estate investor would pay.
Unlike most Tower Companies, Wireless Equity Group invests both in Cell Tower Leases and Real Estate. So, if you’re considering selling your property with an active lease, reach out to our experienced team for a free site valuation so we can provide a competitive letter of intent and offer to purchase either your real estate or tower lease.
