If you’re leasing a property or multiple properties to a wireless carrier for cell phone towers, you’re probably being contacted frequently with offers to buy your leases. This can be a sensible and wise decision to make if you’re looking for a larger, upfront payment for your cell site leases—or if you’re planning to sell your property anyway.
You may not be aware of this, but you don’t have to sell your property and your cell tower lease rights to the same buyer as a package deal. In most states, you’re allowed to separate the lease rights for a specific part of the land from your general property rights.
This may sound like a lot of hassle, but there are some good reasons to separate these transactions and sell your lease rights to a company that specializes in buying them.
Banks don’t understand cell site leases
In general, banks and commercial lending companies will not loan against cell tower site leases. This is due to the common 90-day termination risk attached to most leases. While tower management companies that specialize in lease buyouts can reduce the risk of lease termination, individual landowners typically can’t.
Another problem is that many lenders and banks undervalue cell site leases during a mortgage loan analysis for the property, again because of the short termination clause. Your cell lease may be assigned little, or even no value, on a mortgage assessment.
Your lease rights could terminate before you complete the property sale
If you’re planning on selling your property that contains your cell tower leases, you could lose your leasing while your property is still on the market, or even during the sale. This means you won’t be able to make any more profit from your tower lease sites.
Separating the transactions for selling your lease rights and the property itself ensures that you’ll gain profit on your cell lease sites. Tower management companies can arrange lease buyouts quickly—in far less time than banks or lending companies can complete real estate sales.
You’ll make more money by separating
The biggest and best reason to separate cell site leases from property transactions is the ability to earn more money. Most commercial property buyers won’t consider offering a high amount for cell leases combined with the land, because they’re not aware of the potential value.
On the other hand, tower management companies can make you a great deal for your separated cell leases. In many cases, you can sell these leases for 20, 30, or even 50 years’ worth of leasing income in a single payment.
Finally, you can make more money by choosing to subdivide the property, rather than selling the lease rights only. If you have sufficient land to make the property attractive enough to sell without the cell site parcels, you can retain ownership of the leased property and continue to collect lease payments, while also benefitting from the sale of your property.
In this final situation, you should consider any maintenance or other responsibilities you’ll have for the leased property, and balance that against your plans once your commercial property has sold. If the property responsibilities are prohibitive without ownership of the property, or if you’re planning to relocate, it makes more sense to work with a tower management company to sell your cell tower lease and take the lump sum payment with you.
Written by Matt Jones of Wireless Capital.