Project Lighthouse – Potential Sale of Real Estate Interests

The Telecom industry in 2023 has seen its fair share of twists and turns, and a recent development caught my eye. A U.S.-based tower company aims to raise $2 billion by selling approximately 3,000 leases on sites where they hold perpetual easements under cell towers. The article delves into specifics like average tenancy ratios and lease financials, strongly suggesting that Crown Castle is the likely interested party, given its status among the top three publicly traded companies.

With recent CEO changes at Crown Castle set for January, I'm left wondering about the feasibility of this plan. Is Crown facing financial challenges prompting the need for capital? And is selling leases the optimal route? This perspective is based on my experience securing assets for the nation's largest publicly traded cell tower company.

Purchasing these cell tower sites can be advantageous for the tower company, eliminating their primary expense—ground rent to property owners. However, paying monthly rent again seems counterintuitive. The article highlights improved financial ratios, tax benefits, and full control over asset usage.

For the potential buyer, the deal offers a base rent of $80 million with 2.75% yearly increases. Moreover, adding new tenants to these towers results in a 30% revenue share, especially lucrative in the 5G era where carriers may invest heavily in network expansion. Towers with multiple tenants, often located in high-demand areas, stand to benefit from increased carrier interest, potentially outperforming single-tenant assets.

The unanswered questions surrounding this deal pique my interest. How are these assets selected? Is there a list of 4,000 to choose from, and are they in areas challenging to zone for new towers? Concerns about competition from adjacent tower developers and potential tenant migration add layers of complexity. As Crown undergoes leadership changes, the fate of this option remains uncertain, leaving room for speculation.