Virtually all cell tower leases contain a clause that allows the tenant (cellular carrier) the right to cancel the ground lease with a 30 day written notice. The probability of that happening is pretty low, but it does happen. Nextel ground lease landlords would be witness to, “but it does happen”. Tens of thousands have or will have their contracts cancelled.
I’m going to guess that possibly, everyone of these Nextel ground lease landlords have had, in the past, a substantial cash offer that they turned down. These offers were probably in the range of 90 to 120 times the monthly rent. Still, only a small percentage of all lease holders were or will be affected.
The enemy of all cell tower lease owners will be inflation and the rise in interest rates to combat it. The inevitability of of inflation puts the feds with a real dilemma of dammed if they do or dammed if they don’t. They have stated that they will keep rates low until unemployment is greatly improved.
I believe the real reason the feds will keep rates down is that if rates go up, it could be possible that the United States could not pay the higher interest on the trillions of dollars of our debt. For now, let’s rule out the rates going up scenario.
The dammed if they don’t [raise rates to combat inflation] scenario could put the US in a far greater dangerous scenario. The dollar could become a second class currency. Think about it for a minute. If rates are not raised to fight inflation, why would anyone want to buy dollar denominated assets? Countries that do fight inflation through higher rates would benefit. Currency exchange rates would sky rocket against the US dollar.
What would either of the two scenarios do to cell tower leases? Either inflation eats up their value or international exchange rates eat their value.
The problem with cell tower leases is the fixed lease payment, even though they do average an increase of 3% yearly, and all fixed income assets get butcheerd in an inflationary environment. And keep in mind that there are only a handful of cell tower lease buyers. They will keep buying leases, but at what price?
My guess is that there will need to be a price that is at a big discount to today’s pricing. Maybe a real big discount.