Cell Site Lease Consultants
As a cell site lease consultant, I’ve had the opportunity to review lots of offers from cell tower buyers. Most lease owners go into a lease negotiation with only one thing in mind, that is the purchase price. They may calculate their price using a monthly multiple or they want what they heard that another cell site lease owner got. By the way, neither of these methods are going to get you the highest price. There are a dozen or more aspects of a lease that will determine what a cell site lease buyer will pay. We’ll address these at another time.
Cell Site Lease Negotiations
What astonishes me is, how much is left on the table even if an equitable price is reached on purchase price. In many lease transactions there are opportunities for additional income that could potentially be as much as the lease’s sale brought. I’m talking about the re-negotiation of the original lease with the cell phone carrier and sharing the sub-lease rents that the carrier may have.
Often times the greatest selling point to a lease is not its income or even its escalations, but when the lease expires. You’ll never hear this from a buyer because they want you to believe that as a seller you are in a weakened position because you are about to lose the lease because it is just about expired. In most cases, nothing could be farther from the truth.
Let’s use hypothetical Verizon lease that has 5 years left on it and presently is paying $1,000/month. You will hear from a cell site lease buyer, “we are taking a chance that Verizon will continue that lease beyond the five years”. What he is saying to him or herself is, “Wow, if I can pull this off I’m going to get a big commission and maybe a bonus to boot.
Here are the statistical facts: that lease will be re-negotiated; the lease will be re-negotiated for more money; the carrier is in their most vulnerable that they have been in. The carrier has probably spent North of a quarter million dollars and may have sub-leased their site to additional carriers. They need a new lease.
To take advantage of this a lease, seller should negotiate with a buyer, after agreeing on a price, a percentage of any new lease that is more than the old rent figure plus the normal escalation. A Verizon lease should normally be somewhere between $1,300 and $1,800/month. Let’s say you are successful in negotiating 50% (or more) of this increase and the buyer of your lease is able to get $1,500 or a $500 increase, which you are then due 50% or $250/month. You can either keep the income or turn around and sell that income for 150 (or so) times that figure or $37,500.
In these negotiations you should also ask for a portion of any sub-leases the buyer is able to get from the carrier upon the new lease’s terms. Remember, the lease that is presently governing the cell site is the rule and only a lease expiration or a re-negotiation can change that. Like the percentage that I spoke of with regards to the increase in rent per month, any participation in the sub-leases the carrier has can also be achieved by the buyer and shared with you. Again, the percentage of sub-lease rent can be kept or sold.
Not all cell site lease buyers are equipped with the desire, talent or determination to negotiate beyond an extension of the present lease. They just don’t want to rock the boat. The problem comes when they promise you that if they are able to renegotiate at a higher rent figure or add carriers to the site they will pay you 75% (or anything) you ask because if it happens it would be an accident because they are not going to go and try and improve the lease’s economics. They are going to package a bunch of leases and sell them to Wall Street.
There are cell site lease buyers that have no interest in raising the rent due to an affiliation or contractual obligation prohibiting them from rent increases. All in all, the advice is that you need to determine if your cell site lease has the potentials we’ve covered, if so there are buyers that will either pay more for the lease or buyers who can actually deliver on these promises.
Andrew G Kellerman’s financial experience includes: VP, Thomson McKinnon; Stocks; US and Corp Bonds; Insurance; Commodities; Options; Real Estate; Mortgages; Telecom Lease Consulting and Sales
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