A Cell Tower Lease Prepayment is when a Landlord decides to sell their lease for a lump Sum of Cash today. The lump sum is a discounted cash flow for a period of term defined in the Purchase and Sale Agreement.
Converting a wireless lease agreement to an Telecom Easement is the safest way to perform a Prepayment for all involved. However, purchases can be structured in many ways, with the most common outlined below:
- Perpetual Easement – These transactions are typically for a period of 99 years, with the option to take additional 99-year terms for a small consideration.
- Term Easement – These transactions are for a period from 35 years through 98 years. Term Easements revert the rent back to the Landlord after the expiration of the then-defined term, typically investors take Right or First Refusal provisions that allow them to re-purchase the agreement should the Landlord decide to sell again in the future.
- Fee Simple Purchase – Basically, it’s a real estate transaction. Fee Simple or Fee Simple Absolute is the most complete form of ownership. A Fee Simple buyer is given title (ownership) of the property, which includes the land and any improvements to the land in perpetuity.
- Rent Assignment – aka LPA (Lease Purchase and Assignment) – Rent Assignments are the riskiest form of investment for an investor because these do not grant an Easement on the property to protect the investor’s interest in the event of Default. Investors historically try to avoid these types of transactions unless the potential for upside outweighs the risk of the Landlord defaulting on the property.