A Landlord Asks: Should I Accept a Lease Extension Offer?
Cell site landlords today are confronted with various challenges. They are being barraged with buyout offers, 4G upgrades, renewal offers, site decommissions, lease "optimization" schemes, terminations, and mergers. Now, add lease extension offers to the list.
SBA and American Tower are sending landlords letters offering to extend the current lease by 25 to 50 years. In some cases, a signing bonus is offered. Recently, one of our landlords asked whether the church should accept such an offer. In arriving at a decision, several issues should be addressed.
First, when does the lease expire? The closer to the expiration date you are, the more it makes sense to take a look at extending the lease. However, a lease expiring soon usually put the landlord in a better position to negotiate new and better terms. Second, who is the occupant on the site? If a tower company recently acquired the lease from the cell carrier, they want to extend the lease as long as possible to ensure their subtenant cell carrier stays put. Third, are the terms of your lease good or bad? Bad leases should not be extended. Finally, can you commit to an extension of 50 years? Think it through and be cautious.
Another important consideration is the compensation offered to extend a lease. A few grand is an extremely small price to pay for locking in a lease for half a century. Keep in mind most leases have unilateral termination rights for the tenant only. Following a long-term extension, there are few, if any, ways to for the landlord to get out.