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Selling Cell Tower Leases Can Help with COVID-19 Financial Challenges

July 28, 2020

Businesses, individuals, cities, schools and other entities face financial problems due to the COVID-19 outbreak, including potential cash flow problems, loan defaults, workouts or even bankruptcy. But if the person or entity has a cell tower lease, there may be a solution. 

That is because selling a cell lease and future leasing rights can provide a bridge of hundreds of thousands to millions of dollars to weather the storm until things return to normal. Done correctly such leases/leasing rights (1) can sell for up to 210 times monthly rents, sometimes higher for cities or schools, and (2) not affect current or future operations, property values or development.

There is precedent for this following the 2008 financial crisis: Landlords sold off cell leases to generate immediate funds. For example, some sales were by cities or schools to generate funds but allow them to continue operating essentially unchanged. We have helped clients sell approximately 100 leases/leasing rights. Many of the sales were for such financially related reasons.

Our experience is that there are two important, intertwined aspects to such sales. The first is a bid process with many bidders to obtain the best price and also assure all interested parties that the best price has been obtained. The second are terms in the unique easement used to convey the lease and future leasing rights to the buyer that protect the future use, development and value of the building or property with the lease. The two are intertwined because to best protect the seller, such terms need to be identified at the start and included in the request for bids. 

If the cell antennas are on the roof of a building or other structure, there are additional complications. That is because the easement needs to convey both well-defined (1) space for the antennas on the roof, (2) space on the ground for radios and equipment, and (3) spaces in between for connecting cables and access. If the structure is a water tower or other government building that provides an essential public service, its primacy and protection need to be addressed as well.

Poorly done lease sales easements can destroy or greatly reduce the value of the property with the cell antennas. We have seen this when we represented potential purchasers who walked away from the purchase (or got a large reduction in the sales price) for just this reason.

If a lease sale may be something you would like to discuss, contact John Pestle ([email protected], 616/336-6725) or Pete Schmidt ([email protected], 616/336-6411).

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