Property owners with cell towers on their buildings or land are routinely approached to sell their cell lease and future leasing rights, which typically sell in the range of 15 to 20 times annual revenues, sometimes more.
Common questions we get are: ‘How do we get the best price for our cell lease?’ and ‘How do we know we’re getting the best price?’
Based on sales of over 70 cell leases, our experience shows there are two things property owners should do to be assured on these points.
First: Go out for bid. There are around a dozen national companies that buy such leases. Getting a bidding war going is the way to get the best price — and be assured that you are getting it.
Second: State that you will only accept a one-time, all cash offer. No payments over time or percentages of revenue. Why?
- Only with all cash offers can you easily compare offers to see which one is best. Otherwise you have apples and oranges.
- It forces bidders to “put their money where mouth is.”For example, they may tell you that getting a percentage of rent from new tenants will be a great deal (because with their marketing of the tower, there will be lots of new tenants).If that’s the case, then they should build it into their all cash offer.
These are the major things; now for some other points.
Put together a request for bids to send to all prospective purchasers, and make sure it does several things. One is that it should contain all the documents and information needed for finance staff at purchasers to easily evaluate the lease, location and make a bid. This includes accurate copies of all leases, amendments and rent checks, whether there is a mortgage on the property and whether a Phase I environmental review has been done.
Also, it should “dress up” your lease, and put it in the best light possible (such as indicating that it is located near a university or thruway, if that is the case). To that extent, the bid request should to be a sales document, in part.
Finally, it should contain some of the key terms you want to be in the final documents. Some of these may be site-specific, such as preserving the development of the balance of the property or use and redevelopment of buildings on the property. Others may be more general, such as specifying terms that will not be accepted (such as the buyer getting the right to install all future wireless facilities on the property).
By following these steps, property owners can get the best price for their cell lease, know they are getting it, and better protect their rights in the sale.