VALUING CELL SITE LEASES
One of the hottest topics we see today is lease buyouts. Cell site landlords are inundated with inquiries from buyout companies seeking to offer lump sum payments. Interestingly, some of these companies make their initial pitch not as a buyout offer but as an offer to bring the landlord additional lease tenants. Now, this is misleading and the subject of another blog entry so I won't digress.
If a landlord considers a buyout, the first question is "what are my leases worth?" Calculating the value of cell site leases properly requires experience with negotiating and drafting such leases, expertise in contract law and real estate law, understanding of how lease buyouts work, and local knowledge about the landlord and cell site.
Perhaps the most important factor in valuing the leases is determining what is actually being sold. Defining the assets purchased by the buyer is at least as important as the price. The sale of an easement is quite different than the sale of the rent. Selling additional space on the property is also crucial to determining the price. Other key elements are who the tenants are and how much time remains on the leases.
In my experience, lease buyouts require a deep understanding of the goals of the seller. The buyout company representatives may claim to be interested in the seller's plans but beware. Clearly, they are not an advocate (despite what they say or do) for the landlord.
Since we work mainly with churches and non-profits, it is our duty to fully understand our client's needs apart from getting a big check. In many cases, the buyout scenario does not make sense. Retaining the increasing monthly income is more important than cashing out. It's also an easier decision for church leaders who may feel intimidated by taking responsibility for a huge pile of money.
Valuations of cell site leases can be tricky. The most prudent sellers take into account the tangilbe and intangible factors. They also get professional help.