Cell site leasing information (1) (2) (3) (Help with cell site lease questions) (Government agencies) (Selling a lease?)

Selling a cell site or ground lease?

Many companies buy communication ground leases, most commonly cell site leases. These firms typically pay five to six years of lease payments in advance. They don't buy all leases, though, usually just cell sites secure enough to last. That might mean 12 years. The site management group looks to the future, trying to get a higher rental each time the carrier's lease comes up. Escalator clauses in your contract and ground space issues are also thought about, they influence the value of a lease. The most attractive cell sites are those with many tenants, have towers in competitive locations, feature solid land leases, or are in areas where eminent domain is not likely.

There are many good reasons to sell a cell site lease. And a few bad ones. Good ones? You might want your money now. Or you are selling your property and you want to take the future payments before you leave. Government agencies may want out of the cell lease business or sell for different financial reasons. Great. But what about the bad reasons? And are there other things to think about?

1) I'm told the carrier can walk out at any time, often with only sixty to ninety days notice. If I sell out I can get my money now and not worry about the future.

That's a risk but usually a small one. What's the wireless carrier going to do with their equipment on your property? Rebuild somewhere else? Do you know how expensive that is? A single cell site now costs between half a million dollars to over a million. In 95% of the cases the infrastructure will remain in place for 10 years or more. Quite a bit longer for broadcast towers. And sixty to ninety days notice is quite rare. And usually done near the end of a lease. Most leases are one year renewable for X number of years. With X usually being 5 or 10 years. Have Ken Schmidt (internal link) check your contract if you are really concerned.

2) New technology will make the cell site on my property obsolete. I'm told the best thing is to get out now.

The moderate but steady growth for wireless should mean a similar demand for cell sites and increasing numbers of tenants at existing locations. Five to twelve tenants might be possible at some sites.Take a look at the table below, the future looks good to me. There are two caveats: consolidation or decommissions.

Towers may be pulled down and cell site leases cancelled when two carriers merge and both have rural sites next to each other. If your buyer discovers there is another cell site nearby he may no longer be interested in your lease. He may not want to risk having the companies merge in the future.

A much smaller risk is decommissioning. Mark van der Hoek gives some rare examples. "Qwest Wireless decided to shut down their network and become a reseller on Sprint's network. Some of the sites were sold to Sprint, some to Verizon, and some were decommissioned. That's a unique event in wireless. Sometimes a carrier will have a 'boomer' site -- a site that was put up early in the network, at a high elevation. Now it covers too far, and a half dozen sites are built to replace it and the boomer is eradicated. That's a 'time to time' kind of thing."

North American cell sites to late 2003

3) I'm still worried about the risk, about the carrier turning off the site.

Well, these buyout companies do offer risk aversion, that's what they are all about. They assume the risk, although a small one with careful purchases, that the tower will be removed. As long as they don't scare you to sell on a elevated risk of termination, it is a business proposition. If they do hype the risk or start mumbling about future developments like satellites or alternative technologies making your site obsolete, then become wary and get another opinion.

4) Anything else to keep in mind?

Wireless is a cyclical, up and down industry. It's been that way since cellular began. Companies merge, companies go out of business. America is two years or more behind developments overseas; we're all waiting for 3G cellular which was promised years ago. Broadband wireless? Much talked about now. But when?

Have other questions? Get your lease or buyout offered reviewed by contacting Ken Schmidt (internal link). His hourly fee will be very low considering how much money five years worth of payments will come to.

Good luck. Tom Farley

Cell site leasing information (1) (2) (3) (Help with cell site lease questions) (Government agencies) (Selling a lease?)