Does your current wireless tenant or a 3rd party wants to buy out your existing cell site lease? Be careful before you sign on the dotted line so you don’t leave money on the table.
As a wireless site Lessor, it’s very likely that you’ve been approached by firms offering to buy out your your existing lease, usually for a single lump-sum payment.
National firms engaged in this business area include Unison, Wireless Capital Partners, Landmark Dividend, TriStar, AP Wireless.
Why do these firms want to give a bag of money today?
Because most often the company making the offer has several goals, all of which you should understand. These goals often include:
- The desire to lock in a 99-year or perpetual easement control of your property so that they can bring more wireless carriers in without paying you additional rent.
- To lock up all of your entire property, not just the existing leasehold, so that no other wireless carriers can lease different land at the same property from you.
- To offer you a single lump sum now (typically 10 to 12 years of rent at your current rate) in lieu of your wireless tenant paying you increasing rent over the years
- To be able to renegotiate your existing lease for their benefit at renewal time (when the biggest rental increases typically occur), or before if some major changes need to be made in the lease.
So, what’s in this type of deal for you, the wireless site Landlord?
Usually, these deals are attractive to Landlords facing financial difficulties, or anticipating the need for a chuck of cash in the future. Examples include paying off hospital bills for some unplanned or uninsured medical treatment, retirement needs, or funding a child’s college education.
For those who need to free up cash, and the deal will seem tempting. But simply be aware…the discount rate for deals like these is typically high (i.e., you’re paying a lot of money later to get a lot of money now.) That means that if you took out the cash now, the interest rate you’d have to receive on that money to produce the same income over time would be fairly high. Also, you’re likely to be subjected to state and federal long terms capital gains tax on the amount you receive for your lease rights. On the other hand, if you can invest the money you take out now in yourself and you think you’ll receive a greater benefit now and in the future from doing this deal, then that may make sense to you.
All that said, if you find yourself in the position of having to consider one of these offers, let us help to maximize the value of your wireless lease when you sell it, minimizing your current pain and helping to protect the future revenue potentials of your entire property. There are a number of lease sales issues that can be negotiated to bring greater value to you. Give us a call and let’s discuss your situation.
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