Prior posts have addressed buying and owning property with a cell lease. In this post, I’ll cover some major points about the process of selling a building or other structure that has cell antennas on it, based on our representing clients on the sale of over one hundred cell leases. Selling land with a cell tower on it is similar. A later post will cover selling property but keeping the cell lease, rents and future cell antenna leasing rights. All my cell lease posts are here.
In brief, there are three key things to know: First and most important is that if done properly, the proceeds from selling the cell lease before you sell the building will add dollar for dollar to the building’s sales price. Currently the additional amount is around 19 times annual cell lease rents. Second, to achieve this the lease sale can’t materially affect the future use, value, repair, etc. of the building. The two go hand in hand; we’ve been brought in after the fact where failure to do the second reduced the value of the building by more (sometimes much more) than the lease sales price. Third, a good way to achieve all this is to go out for bid; it will get you the best price, and putting the terms that need to be present to protect the building in the bid package will make it much easier to get them in the final documents.
A cell lease sale goes best if at the very start – when you are getting ready to sell – you involve both telecommunications counsel, such as us, and your local real estate lawyer. (At the closing you will be assigning the lease and granting an easement, which are real estate issues). Both attorneys are needed for a successful sale, so we work with a local real estate attorney. Involving both of us early on helps avoid mistakes and delays.
Typically, we mainly work on the bid process and the “easement” (which is the document by which the cell lease is assigned and future leasing rights to the roof/sides of your building for cell antennas are conveyed). We’ll prepare the bid terms, bidders list and package that gives the bidders the information they need.
Usually you contact the bidders and we help you evaluate the results, often with two rounds of bidding. Sometimes clients short-circuit this by having us put them in touch with high bidders from similar transactions. Or the client may contact us after they have already selected a purchaser. If desired, in these latter two cases we can help you decide whether the price being offered is good enough that going out for bid is not warranted.
Next we negotiate the terms of the actual easement with the high bidder. Often, we’ve dealt with the high bidder on prior lease sales where we negotiated documents very protective of the building and seller, have a good relationship with their attorneys, and can easily adapt the previous documents to your situation. This is quicker, less expensive and leads to a better result than trying to mark up their standard documents.
The local lawyer mainly handles the purchase and sales agreement and latter portion of the transaction, such as the closing and all the matters leading up to it (title insurance, any resulting title issues, survey, bank subordination agreement, etc.). This approach gives you the best of both worlds: our cell lease sales experience, and the local lawyer’s knowledge of you, your organization, your state’s real estate laws, local practice and often how to structure the transaction so as to avoid significant transfer taxes, increased property tax assessments and the like.
Lease sales generally take longer than expected so plan accordingly, particularly if you need to close by year-end. Sales reps for purchasers sometimes say they can close in 30 days. I have not seen that happen.
A recent closing, which went more quickly than some (no mortgage, so no need for bank involvement), occurred just over two months from selection of the high bidder. To which must be added six to eight weeks if you are going out for bid. Typical items requiring additional time include missing lease amendments or exhibits (a complete lease package is desirable for bidding, and typically needed to close); bank subordination agreements (if there is a mortgage); delays in getting title insurance, surveys or environmental studies, particularly at year-end; title problems; last minute changes for tax reasons; and rights of first refusal.
This a general outline of the cell lease sale process. How any particular sale proceeds depends in large part on the value of the building with the lease (and thus the effort to be expended to protect it), its unique aspects, the current rent (and thus likely sales price at a 19 x annual rent multiplier), and whether the seller is a city, county or other unit of government for whom additional procedures apply. We’ll be doing webinars on cell lease sales in February and March 2022 which will go into detail on these and other points. Contact me for more information.
Varnum represents clients nationwide on cell tower leases, including on the sale of over 100 cell leases. If you would like to discuss an initial cell lease or retention, sale or renewal of an existing lease, please contact John Pestle or Peter Schmidt.
John Pestle is a telecommunications attorney who, for decades, has represented property owners, including municipalities, on cell tower leases and sales. He is a graduate of Harvard, Yale and the University of Michigan Law School and held an FCC license to work on radio, TV and ship radar transmitters.
Pete Schmidt is a real estate attorney who has represented clients on numerous cell lease sales, including the Detroit Public Schools on the sale of approximately 24 leases. He is a graduate of Albion College and the University of Wisconsin Law School.