If you own a cell tower lease that could be worth $500,000+, would you sell it? Many property owners can reach this value if they apply the right strategy and patience. After holding onto a lease for 20+ years, letting go can be tough, but if your lease is nearing renegotiation, you’re in a prime position to secure a payout of $500,000 or more. This blog will offer insights on how to achieve that goal, though luck plays a role too.
Many cell tower leases increase by 2-3% annually. By contrast, the S&P 500 has averaged a 10.6% return per year over the last century. Imagine selling your lease for $600,000 and seeing that amount double every seven years—that could provide substantial retirement savings.
Now you may say I’m not getting anywhere near those kinds of offers. If you signed a lease in the 1990’s or early 2000’s you have probably been asked to renegotiate your lease depending on how long you signed for in the original lease. This renegotiation is crucial to get into the magic number of $500,000-$1,000,000. I’d imagine that 80% of property owners have already renegotiated and extended their lease out or sold the lease. How did you do, and are you satisfied with how you negotiated? The tower companies have vendors constantly looking to extend leases out even 20 years from expiration with small one-time signing bonuses. It’s imperative to avoid any sort of negotiations after 10 years from expiration unless you can get significant value now or shortly thereafter.
The value of your lease also depends on your tower’s location and tenants. Even a single-tenant tower (like AT&T or Verizon) holds great value if the lease expires in 2-5 years. However, if your tower has multiple tenants, the lease value grows significantly. It takes discipline to wait for the right deal, especially as tower companies regularly push for extensions or sales.
The impending lease renegotiation is so crucial to get right. If you have two major tenants on your tower, you should be able to get a lease rate that supports my claim of receiving $500,000-$1,000,000 for a buyout if you eventually choose to sell. However, you will need to be close to five years from expiration to realize this scenario. This is where an experienced consultant can help you set the stage for your future opportunity.
Currently, the cell tower companies don’t want to pay massive lump sums to secure their sites. I see that they are more inclined to increase the rent to a higher monthly rate in a lease renegotiation. In the past, when I worked at American Tower, we had told our account managers to align the rent increase with the buyout. It was very common that these account managers would make the buyout amount more enticing as they’d get paid more for doing a buyout than a lease extension. Removing the monthly recurring off American Tower’s books had immense value as it increases AFFO (Adjusted Funds From Operation) which is how Real Estate Investment Trusts (REIT) are measured. The tower companies may switch up and start paying higher amounts for buyouts on these sites especially if third party lease buyout companies start getting more of these assets. The third-party lease buyout companies typically can’t compete with the tower companies which is why in certain scenarios it makes sense to extend the lease first and then sell the lease. That all depends on what the perceived monthly rental will be on the buyout when you negotiate with the tower company.
As a consultant, I work with most of the third-party lease buyout companies. I’ve seen some that are nowhere near what the value is of the lease so it’s important to work with those that price it accordingly. In certain situations, it’s best to take the deal to a certain few that you have confidence in that will pay you market but will also close the deal. I’ve heard horror stories of certain third-party lease buyout companies that run their due diligence and then try to renegotiate the price. Those companies I will never work with.
If you’re looking to maximize your lease buyout, contact JP Tower Consulting. With years of experience approving thousands of deals at American Tower, I understand the value of leases as they near expiration. Whether you have an SBA, Crown Castle, or American Tower site, I can guide you toward a $500,000+ payout. Tower companies are eager to lock down these high-value sites, and with carriers reluctant to move, property owners have leverage. Reach out, and I’ll help you get on that path of $500,000+.
