Cell Tower Lease Buyouts - What Is The Real Value Of My Lease?
A cell tower lease buyout is when a company pays a property owner a lump sum for the right to future cell tower rents. Property owners needs to understand the “Real Value” of their cell tower lease before any buyout deal. The wrong lease buyout deal can cost you money and possibly devalue your property.
Cell tower lease buyouts are a necessary part of the industry. Cell towers have been raised all over America, and each tower stands on someone's land. The land owner has the ability to control the lease, or the lease may be handled by a separate entity. You may read further to learn about cell phone tower leases and their management.
Does a Cell Tower Lease Buyout Also Sell My Land?
No, a cell tower lease buyout does not sell your land, just the tower. Every land owner has the right to accept a cell tower lease buyout without selling their land. It is important to understand in a cell tower lease buyout, you will still own the land. The land owner likely was the first leaseholder, and the lease was passed on to someone who wanted to manage the tower.
The tower itself is valuable to the company that owns it, but the land owner is the person who holds the rights to the lease. You may not be the land owner, but you may hold the lease on the cell tower if it is sold to you. The parcel where the tower sits is private land. The land owner has simply allowed a company to build a cell phone tower on it.
Leasing or subleasing the tower is the only thing that may be done on the property, and the property is likely developed in other ways. A cell phone company is not leasing the land along with the cell phone tower. The tower is a single entity that is leased to the interested party.
Are Cell Tower Lease Buyouts a Good Idea?
A cell tower lease buyout refers to a telecom company offering to pay a property owner a lump sum up front in exchange for the right to receive all future cell tower rents. A property owners needs to understand the “Real Value” of their cell tower lease before accepting a buyout deal. The wrong lease buyout deal can cost you money and possibly devalue your property.
Who Can Make a Cell Tower Lease Offer?
A cell tower lease buyout may be conducted by any company that wishes to manage the tower. The lease could change hands several times over the years, but the owner of the land may transfer the lease to anyone they please. The owner of the parcel is paid for the tower leasing rights, and the company that makes the purchase must pay the land owner for the rights to the parcel.
How Are Cell Tower Buyout Prices Determined?
The sale value of a cell tower lease buyout is determined by 3 main factors:
- The price of the land where the cell tower sits
- The network location of the cell tower
- The fluidity of cell tower lease market prices
Market prices for communication technology such as cell towers can change daily. A cell phone tower value changes with the market demand. As market prices or market demand increases, the value of a cell tower leases will also increase, and as market demand falls, cell tower lease values will also fall. Due to the changes and advancements in mobile phone technology, and the strong growth in the data plan usage, the market demand has continued to remain very strong.
Are Cell Tower Leases Revisable?
Leases are typically renewed every year, and you may choose to approach your lessee with new prices every year. You are in control of the rent paid for the rights to the tower on your property, and you must find a company that is willing to pay for the rights to the tower.
Every land owner with a cell phone tower must understand how leases are transferred. You are not selling your land, but you are selling the rights to control the cell phone tower. Since the market impacts lease prices, you could make extra income from the tower lease moving forward.
I Have A Cell Tower Lease Buyout Offer, Now What?
The first thing you should ask yourself is: what is your bargaining power? If you are currently leasing space to a cell tower company or cell phone company, more than likely you have been contacted by a private company like: American Tower, Wireless Capital Partners, Unison, AP Wireless, or other similar companies looking to buy your cell tower lease.
You are most likely asking yourself, “Why are these companies contacting me?” and “Why won’t they stop calling?” Let us shed some light on that for you.
Companies like the one mentioned above are looking to purchase the cash flow from your cell tower lease at a discount. They make money the old fashioned way, by making money off the assets of others. These companies offer deals that are usually structured based on a one-time, lump sum payment, to be paid to you, the landowner.
How do cell tower lease buyout companies structure their agreements?
- Buyout companies want the right to collect the cell tower rents you are currently receiving under the terms of your present cell tower lease
- The cell tower buyout company will expect the right to control your current leased area by way of a long term or perpetual easement.
Why a Cell Tower Lease Buyout Company Incites Panic?
Many lease holders we've spoken to have told us the buyout companies tries to create a state of panic. This is one of their tactics. Their goal is to make you more likely to dispose of your cell tower lease.
How Cell Tower Lease Companies Create Panic?
- They suggest future technologies such as mini or micro cell phone towers will make your cell tower or rooftop equipment obsolete;
- The end is near, meaning that a near term termination of your tower lease is eminent; or
- These same companies seeking to buy a property owner’s cell tower lease will imply there is a pending cell tower consolidation.
If you do wish to sell your cell tower or rooftop lease, we can work on your behalf to optimize the net value you receive. We have years of experience in determining what the true value of a cell tower lease is, and what a third-party should be paying for such an asset.
Vertical Consultants will provide you with expert representation that will include not only negotiating on your behalf the maximum buyout for your cell tower lease (in some cases we have been able to garner up to 100% more than originally offered), but we will also assist you in the negotiation of all documentation associated with such a transaction to make sure you not only get the most, but give up at the least. The company buying your lease has experts on their side trying to make the best deal for them, shouldn’t you have the same?
We encourage you to contact us today to discuss any cell tower lease buyouts you receive. We will be glad to discuss what services Vertical Consultants can provide you.
Assisted with American Tower - Cell Tower Lease Buyout offer
How We Can Help With Your Buyout
We are not here to advise you to sell your existing cell tower lease, although, if that is a choice you wish to make, we will make sure you get the true value for your cell tower lease. At the same time, we will make sure you do not enter into an agreement that will have a negative impact on your property.
The goal of most companies that buy cell tower leases is to re-sell those same leases to other companies, including the same tower companies and wireless carriers that are your tenants.
Review the Lease – We will evaluate the terms of your tower lease and determine what the real value of your lease is and what options you have to maximize its value.
Assess Your Cell Site – We understand that the value of your cell tower lease should not be determined by the rent you’re being paid, but by the value of the cell tower site to your tenant. We don’t rely on historical data to determine value. Why? Because this data is historically “bad” when it comes to determining true value of the cell tower site to the cell tower company. We analyze your cell site to determine how much the tower company has vested in the site, the revenues being derived from the site, and the replacement costs for the cell tower owner if they can’t secure the site long term.
Evaluate Buyout Terms – Vertical Consultants will evaluate the buyout proposal and determine how much your lease is really worth. We assess the value of your lease not based on what others have been paid. Why? Because your cell tower lease and tower site is unique and the impact of such a transaction on your land is different than it may be to another property owner. We understand that you want to maximize the value of your cell tower lease, but also realize that you want to limit what you are giving up in return.
Implement a Strategy – Based on our analysis of the unique features that can affect the value of your cell tower lease, we will recommend a strategy of how you should proceed. This will include whether or not you should continue with a lease buyout, and if so, for how much. We will clarify the pros and cons of entering into an agreement with anyone looking to purchase your lease.
If you determine that you want to sell, we find the best company to purchase your lease, negotiate terms on your behalf, and structure all agreements related with the transaction so that you are are protected now and into the future. The buyout companies have experts on their side, shouldn’t you?
Vertical Consultants has been contacted several times regarding the tax implications of a cell tower lease buyout. One of the most asked questions from a cell tower or rooftop landlord is, “What are the tax implications if I accept a buyout offer?” The two (2) most common tax issues associated with cell tower lease buyouts are as follows:
- What is the potential tax treatment of proceeds received by a landowner?
- Are proceeds received from a cell tower lease buyout open to placement in a 1031 like-kind exchange transaction?
Capital Gains: Lease Buyouts
Representatives for a cell tower company and/or a lease buyout company looking to buy out your cell tower lease will tell you what the advantages are of selling your lease. One of the advantages they will promote is that proceeds garnered from a cell tower lease buyout transaction will be subject to capital gain tax treatment, which is subject to a considerably lesser rate that your current monthly rent payments, which is commonly treated as ordinary income for taxing purposes.
Vertical Consultants has experts on staff who can assist you in structuring a transaction so that you can optimize the probability that such proceeds will be subject to the most tax-advantageous treatment.
We do recommend to all cell tower landlords that they consult their accountant or tax advisor before they enter into any buyout transaction. Also, please visit the following link to get more information about lease buyouts and their capital gains treatment. (http://www.irs.gov/newsroom/article/0,,id=106799,00.html).
1031 Exchanges: Lease Buyouts
The 1031 Exchange is also known a Like-Kind Exchange and sometimes referred to as a Starker Exchange.
Landowners should be aware that in the sale of an investment property, landowners are able to defer paying capital gains tax until a future date by purchasing a like-kind property within a given time frame. Landowners should recognize that the 1031 Exchange is not a tax-free exchange, as taxes are not able to be avoided. They are simply deferred until a future date. For non-simultaneous exchanges, proceeds from the sale are held in escrow by a qualified intermediary until closing on a new property that meets the requirement under the 1031 Exchange standards.
Vertical Consultants has experts on staff who can assist you in structuring a transaction so that you can avoid making a costly error that could prevent you from taking advantage of this tax deferring filing. We do recommend to all cell tower landlords that they consult with their accountant or tax advisor before they enter into any lease buyout transaction. Also, please visit the following link to get more information about lease buyouts and the ability to defer proceeds received:(http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html).
Before you decide to move forward in considering a lease buyout, you need to obtain certain information. The following are questions you need answered before you agree to any lease buyout:
- If the cell tower or rooftop lease can be terminated, why does the tower company want to buy it from me?
- What are the major differences in a lease and an easement, and how will this change the rights and obligations of both the landowner and the cell tower company?
- The cell tower company wants a perpetual easement. What are disadvantages to do this, and how can I avoid any pitfalls surrounding this transaction structure?
- I have been offered a 50/50 split of any new rents. What are the odds I will receive anything, and how do you monitor going forward?
- After I sell the lease, does the purchaser pay any real estate taxes on the property?
- What are the income tax advantages and disadvantages to a lease buyout?
- Can proceeds received from a lease buyout be used in a 1031 exchange?