What Makes a Cell Cite Lease Most Valuable
What Goes Into a Great Lease?
Let's clear up the myth. "ease buyout firms will pay almost anything to get your cell site." This myth is patently false. Many wannabe sellers have passed up great deals due to expectations that aren't viable.
Let me breakdown the perspectives of cellular lease buyout companies. First and foremost, these firms measure risk/reward when looking at a cellular site's value to them.
The risks are real:
*Redundancies due to technology advances;
*Newer and cheaper tower sites becoming available.
*Mergers and acquisitions
Although thousands of new cell sites are built yearly, 1 to 3% of present sites are terminated early each year.
After your cell lease has is sold (transaction closed), and the carrier chooses to cancel the contract, you are not liable. The cellular buyout firm loses, not you.
The Risk: Termination
Redundancy can occur when two carriers merge, AT&T and Cingular, for example. A tower that houses both of these carriers has a 'redundancy' or duplicated sets of equipment or frequency. You can bet that either the AT&T or the Cingular site lease will be terminated. In this case, it was Cingular. Thousands of Cingular lease owners got their contracts canceled.
The Reward: Better Than Average Yield
The reward is a purchase that achieves a cash flow of 10 to 12% gross or more for the buyer. Some firms offer a gross purchase price, and some submit a net figure. The bottom line is where you should be looking.
Selling a Cell Lease
The cost involved in selling a cell site is very much like selling real estate. A cell site typically includes a long term lease and 'right of way.' The seller will pay normal pro-rations, such as real estate taxes and prepaid rent. The buyer is looking for an IRR (Internal Rate of Return) that have been targeted by their investment policy. This calculation is the bottom line.
Tower Site Location
The location of your site will have a dominant effect on pricing. Maybe not for the same reason that general real estate has, but for the amount of cellular traffic that is carried by your site. High traffic and high population locations increase the desirability of other carriers that wish to co-locate on the tower.
Measuring Your Lease's Value
Monthly rent multiples are often used as standard verbiage to compare values. An offer of up to 200 times the monthly rent is a considerably generous offer. An offer of this magnitude depends on all the best scenarios. Location we talked about, but there are others equally important, such as who the carrier(s) is.
Who Are Your Tenants?
The mobile carriers are split into 3 categories as far as the gravitas of the buyers are concerned: ‘Tier 1’ - top cell carriers such as Verizon and AT&T; “Tier 2’ - carriers who are small enough to be bought out and ‘Tier 3” - those carriers who are in financial trouble or who have been bought out or are rumored that a merger or buyout is in the offing.
The security or creditworthiness will affect the value of the lease.
Tier One Carriers
An offer of up to 200 times the monthly rent is a considerably generous offer. An offer of this magnitude depends on all the best scenarios. Location we talked about, but there are others equally as important. Who the carriers are.
Leases made with ‘Tier 1’ carriers will garner the highest offers as they are considered most 'creditworthy' and will more than likely be around years from now. The lease with these buyers will bring pricing up to and in rare cases of 210 times the equivalent monthly rent.
Tier Two Carriers
'Tier 2’ carriers are considered a slight risk because they are more likely to be bought out. A duplication or redundancy may cause their lease to be terminated. Depending on the industry outlook for a particular company, the leases with these can bring between 170 and 190 times monthly rent.
Tier Three Carriers
Leases for ‘Tier 3’ cell carriers may or may not be worth an offer to a buyout firm as the risk is just too high but may be valued by some at 160 to 170 times monthly rent.
Cell Lease Terms
Lease terms are another essential factor in valuing your cell site. There are three that are most important:
*The present rent;
Cell Site Type
The structure that the carrier's equipment is attached to also determines a significant and important element in pricing. All else being equal, a 180' tower is going to bring more of a purchase price than a rooftop structure. The initial investment plays a part.
The cost of decommissioning a cell tower (usually the carrier's responsibility in case of termination) is much higher than a rooftop site. There are other factors with regards to fiber that increase the value of either. Even though the landlord doesn't have any right to the equipment, a significant investment in equipment shows serious intent to maintain the site.
Pricing a Cell Tower Lease
There are dozens of various combinations that can affect the value. Without a more than working knowledge of these, you will be at a significant disadvantage and will more than likely not make the optimal deal or worse yet, 'get taken to the cleaners.'
Multiple Bids for Your Site
Setting up simultaneous bidding where the top creditworthy firms are invited to participate, consistently brings the highest offers.
Municipalities have been doing RFPs (Request For Proposals) for years. When cities want bids on their properties, a sure way to receive the highest bids is this formal bidding process. This is what I can do for you.
1st-CellTowerBroker.com, Inc. can act as your advocate to make sure your cell tower site lease is going to be sold for the very highest price the industry will offer.
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