I have some properties in my portfolio with cellphone tower leases and have been seeing a flurry of activity from operators trying to negotiate early renewals and buyouts. Their poker faces have not been great and there's clearly some untapped value to be realized...
Curious if anyone on here (cell tower pros or those with random negotiation experience in their own portfolios) have thoughts on using consultants/advisors to engage on lease renewals and preferred groups to work with assuming that's the best route to take. Also, any high-level insight or advice on handling these rent/value negotiations is appreciated.
How much time is left on your lease?
Depends. If it's one of those shops that buys out those leases and bundles them, the obvious answer is that it's a bad deal. I've had this conversation on assets (a couple years ago now, so numbers to be taken with a grain of salt) where we were being offered ~6.5% cap to buy the lease. Why would I do that when I could sell the revenue stream from the entire building at a 5% cap? Or borrow against it and not pay taxes?
If you are renegotiating with the actual owner of the cell tower... well, that seems too situationally dependent, so you're mileage may vary. If it's a renewal of an existing income stream, then obviously I'd hold out for some inflation-adjusted number. If it's someone approaching you about putting one up, well, that seems like found money and maybe doesn't require as much negotiation.
Also, from experience, check the lease terms (obviously!). Removing the gantries or platforms on which these things sit (or hang) can be really damaging to a roof, and going after the cell companies for damages they don't adequately repair may be more expensive than it's worth.
Tenant (one of the top 3 cell tower owners in the US) reached out pre-emptively ahead of their lease expiration in about 2 years. At that point they only have 5 year fair market value options, so I have all the leverage here and they want to cut a longer term extension early (or buy the tower).
Also its a free-standing tower, primo location adjacent to major highway interchange in a large southwest MSA. I have a lien notice the tenant is actively working on the tower and doing upgrades. Definitely a contract with a carrier in the background getting worked out.
Ah. Then ignore me. I'm used to dealing with rooftop cell towers in urban areas, which doesn't seem like it's very relevant to your situation!
Hah no worries, you and me both. I hold all the cards on this one but CoStar/RCA/typical broker networks aren't much help vetting out true celltower lease rates
A few years and then it switches to FMV 5 year extensions. They (top 3 tower owner in the US) reached out early to negotiate a longer term extension early and also threw out a purchase offer as well...
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