Recently, more and more municipalities are being contacted by third-party lease buyout companies with offers to purchase a municipality’s existing cell site agreement, whether that agreement is a ground lease, rooftop lease, water tank site or other similar agreement whereby the municipality is granting rights to either cell tower companies or wireless carriers to occupy/use their asset.
If a municipality is approached to sell their cell tower lease, one of the primary concerns that a municipality may have is that they will lose control of their land, building, water tank or other asset. However, a carefully crafted agreement can solve some of these concerns, especially when those concerns include retention of certain areas for municipal-owned equipment.
Unfortunately, even when a municipality does decide to pursue selling their cell site agreement, our firm continues to observe municipalities take the wrong steps resulting not only in these municipalities undervaluing these assets, but entering into an agreement that cost them down the road.
Most municipalities pursue selling their cell site lease on their own by trying to auction them off like a piece of real estate; however, by doing that, they actually leave a good deal of money on the table by not understating the true value of their cell tower lease and other alternatives that may exist.
Most third-party lease buyout firms suggest that they will market a municipal cell tower site they are purchasing to wireless carriers and share upwards of 50% of the rent they receive. However, most of the time, this is more of a “sales gimmick” and not a reality. Even in the situations that extra revenue is generated, the buyout companies require the municipality to agree to a right of first refusal to additional revenue that reduces the value of actual revenues generated for the municipality.
One alternative that a municipality may consider is selling the right to municipal owned cell towers on an outright basis to a cell tower company rather than just selling the rents only to a cell tower lease buyout. The main advantages of pursuing this path are the following:
- The sale of a municipal-owned tower to the tower company results in substantially higher purchase prices;
- The sale of a municipal-owned tower to the tower company, as compared to a buyout company, releases the municipality from future liability, maintenance, repair and management obligations regarding the cell site;
- If a municipality just sells the rents received from the cell site to a buyout company, they would retain the operational obligations and expenses related to the day-to-day operations of the cell tower, while no-longer receiving the rents derived from that asset;
- A sale of the cell tower outright to a cell tower company can be structured so that the municipality retains not only current use of space on the tower, but also retains future usage; and
- Lastly, a well-crafted sales agreement with a cell tower company to purchase their cell tower can provide for the municipality to share in future revenue garnered by additional wireless carriers being added to the site.
Municipalities who are looking to raise capital to fund ongoing operations or special projects should explore what options they have regarding the monetization of their cell site assets.
Vertical Consultants works with municipalities throughout the United States and Canada to optimize the value of their cell tower, rooftop, water tank and other cell site agreements. Our mission is to make sure your city, town or village knows all the alternatives that are available to not only render them the highest purchase price for their cell site agreements, but the best overall terms that will benefit them today and well into the future.
If your municipality is looking to determine the true value of your cell site, contact us today for a free consultation about the value of that asset. Vertical Consultants will review your municipality’s situation and provide direction on what are the most advantageous pathways to reach the municipality’s short and long-term goals
Remember, the cell tower companies have experts working for them, shouldn’t you?
