In the case of tower sites, the tower owner is the one who has the right to lease space on the tower. The tower owners actively market the tower to get other tenants. Unless your lease specifically states that you will get a share of the revenue from other wireless users on the tower, it is very unlikely that you would ever receive another dime because the lease buyout company is “marketing” your tower. Some of the lease buyout companies provide nice projections showing how much revenue the landowner is likely to receive because of their marketing of the tower. We have reviewed these projections for our clients and they are laughable. In fact, we have asked the lease buyout companies how many employees they have on staff whose sole job is marketing their acquired sites to add other wireless carriers and we have yet to find that any lease buyout company has a single person dedicated to marketing your tower. The buyout companies make these offers because they have found that people are uninformed enough to believe them. Landowners are often enticed to sell a lease for less than what they should because of the possibility of future revenue.
In the case of rooftops, the lease buyout company is trying to buy part of the future revenue of the site without paying for it. Building owners often call us claiming that because they don’t have more wireless carriers on their roof that they need help marketing those properties. We advise them that if their properties are in good locations and have existing wireless carriers on the site, they will likely see additional growth in the future EVEN IF THEY DO NOTHING TO MARKET THE PROPERTY. The wireless carriers seek out qualified sites when they need them. They don’t look at marketing lists- they send someone to the area that will see that your property is superior and approach you directly. Why share revenue with the lease buyout company if they aren’t going to pay anything for it? What most landowners don’t know is that the lease buyout companies will make the same offer for the lease even if they don’t get the revenue sharing.
In either case, we recommend that you don’t enter into any lease buyout agreement that offers to share revenue at your site.
The old adage, “You get what you pay for,” is never truer than in this situation. The lease buyout companies prefer that you don’t contact a consultant who works solely for you, because you might find out the true value of your lease. So by calling their offer a “valuation”, the landowner might believe that they don’t need a separate paid valuation. Feel free to get an offer or even a free consultation from the lease buyout company, but don’t ever assume they are acting in your best interest. You would never let a person who is buying your house act as the appraiser as well, so don’t trust the lease buyout company to consult on the value of your lease unless you prefer to leave money on the table.
There are three primary reasons. First, the lease buyout companies are buying thousands of leases and can therefore divest the risk of termination across the portfolio. In that regard, diversity of leases is good for them. The more diverse the portfolio is in type of lease and which carrier, the better for the buyout company because it is harder for any single event to cause the termination of a large number of leases. Secondly, the lease buyout companies don’t really care about the long term risk because they will attempt to bundle and sell the leases within a few years. Thus, their only concern is that they can assemble a portfolio that doesn’t have theappearance that it will be subject to higher than expected terminations. Lastly, they don’t actually believe that the leases will be terminated. However, we have found that less skilled salespeople tend to try to scare landowners instead of emphasizing the positive aspects of selling the lease.
The answer is that it depends upon the actual offer and your financial situation. There can be tax related reasons why you would prefer to take ordinary income because you have a loss against which the sale proceeds can be applied. You may not want to receive all the income in one sum. Furthermore, in some cases, the paid over time offers are higher than the lump sum offer even when one accounts for the net present value/time value of money. Generally speaking, though, we are opposed to situations where the payments are made over more than a few years. In those situations, you are essentially betting that the company buying the lease will still be there for that amount of time and that they will have the money to pay off their commitment. That isn’t necessarily a good bet.