HomeSmart BuildingsFinancing7 Tips for Cell Buyouts

7 Tips for Cell Buyouts

1) Know your lease Terms – You would be surprised by how many of our clients do not know the details of their cell site lease terms before speaking with us. Here is a list of the basic information you will need to know before dealing with anyone.

  • Length of the term of your cell site lease
  • Current Rent
  • Who currently pays you, AT&T, Verizon, American Tower…
  • Escalation Clauses – usually this is a % or a flat dollar amount per year or per term.
  • Does the lease contain a Right of First Refusal or Consent before the lease may be assigned?

Secondly if someone has quoted you a purchase price without this information then they are guessing and there is a high percentage that they will not be able to honor the proposal quote. Unfortunately, this happens more than you might think but it is standard practice in the cell site lease buy-out business.
2) Know whom you are dealing with – Usually you are getting called by a commissioned based sales person in a California or Chicago call center. There is nothing wrong with this except they are very inexperienced and work in a high-pressure sales environment. Call center sales people generally will stretch the truth to get you interested and use terms like “site marketing” and “75% upside” in the hopes of getting you to sign their documents. Chances are you will never see them face-to-face; unfortunately, they know that so you sometimes are told half-truths. Worse yet, they like to “re-trade” deals. Meaning they get you to sign for a certain transaction but when it comes time to close the deal, they “re-trade” you down on price. Surprisingly this works and is done more than you would believe. Please take the time to research whom you are dealing with. You might be surprised what you might find about someone with a quick Google search or if you have access to a business profile on a sites like LinkedIn you can verify working experience, these are two great places to start.
3) Site Marketing – Chances are that unless you already have a clause in your current contract that states you will receive a “rent increase” or “revenue share” for any additional carriers that are added to your cell site location, do not count on additional revenue as a reason to take a cell site lease buy-out. Most companies use this, as a “carrot” to get you to sell; however, the reality is that everyone knows about your cell site location. Lease purchase companies have no influence on where the next cell site gets located. Do you think Verizon, AT&T or T-Mobile does not already know where they have a lack of service in a given area? Yes, they do and those people are called RF Engineers and they dictate where the new sites get located not a cell site lease buy-out firm. There is a large firm that claims they have added over $6 Million dollars in added rent to their locations. The reality is that almost none of that revenue has been shared with the landowners. Most of this additional revenue is due to amendments to the current contract and never is passed back down the landowner. The second issue with “additional revenue” is that if you have a compound size that is more than 50×50 square feet you will not see additional revenue. A majority of sales people are telling clients that they can add additional rent on a 100×100 sq. ft. compound. This is flat out a false statement and a good indication that the salesman is not experienced or ethical. A land owner should run the other way if someone is presenting the fact that they have more carriers ready to come on to your site. Yes, our industry has had tremendous growth over the past 5 years and will continue to do so but don’t complete a transaction based on future promise of added tenant income that will not happen.
4) Don’t buy-in to the fear based selling; a.k.a. “Your site can go away at any time”. – Factually, most cell sites leases have clauses in them that state the lease may be terminated with a notice as short as 30 days. The better question is why would they want to purchase it if it is going to go away? There is always a slight chance of a tower company exercises their termination rights but usually it does not occur.
5) Lease Extensions – If your lease will expire within 10 years you have probably been called by your tower company or an “authorized agent” to extend your lease and modify some of the terms. What looks like a good deal on the surface might really be a below market standard proposal. When we consult with landowners for a new site or a lease extension we use our resources and industry knowledge to validate current values. Having a complete picture will help you make the best decision for your site.
6) Pay-out over time option – if you have been offered a “pay-over time deal”, be aware it just maybe a math trick. Many tower companies have been using pay-over time to make a buy-out proposal look larger. It is much cheaper for the buyer to pay-over time and allows them to purchase more sites with the cash on hand. The truth is that usually it is better to take a fair all upfront payout and re-invest the money. We use a time-value of money calculation to compare all options. We include examples for you to take to your account or financial advisors for comparison. Our free proposal includes tools that will help you to make the decision on what works best for you.
7) Where does your lease end up? – This is a question you should be asking the representative. The reality is most of the larger firms sell your lease directly to Wall Street or in a “securitization”. They really don’t keep a long-term interest. Large private equity groups back most of these larger lease purchase companies. They need to bundle your site up with hundreds of others into single large portfolio and sell it to raise money or cash out profits. There is nothing wrong with that model but it is good to understand where your lease will end up.
*Reprinted with permission

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