Many in the cell tower industry ask, “Why a lump sum buyout for the landlord?“
A lump sum deal occurs when an investor pays the landlord 14-16 years of annual rent-worth in a one-time lump sum payout. In exchange, the investor receives the right to the lease.
But what about the landlord? Below you’ll find more reasons how this deal helps the landlord.
How the Buyout Protects the Landlord
A cell tower lease is a risky asset for the landlord.
The buyout deal frees the landlord from the industry threats, including:
- Constantly Evolving Technology
The entire industry is only about 30 years old. Think about how much has changed since then and now, and how much can change within the 5-10 years. With the advent of 5G and satellite service, it’s possible that the tower on a landlord’s site might not be needed sometime in the future.
- Continual Carrier Mergers
Historically, cell carriers have frequently engaged in mergers. The recent T-Mobile buyout of Sprint implies they are placing every Sprint site under review. This means T-Mobile will evaluate whether specific sites need to be eliminated or assigned reduced rent rates.
- Rent Reductions
Carriers often hire special vendors who are versed in renegotiating better deals in terms of rent reductions. These vendors (Md7, Blvckdot / Blackdot) use conniving methods to convince landlords the carrier (AT&T, T-Mobile, Verizon) will pull out and go elsewhere if they do not sign the new amendment.
- High Rental Taxable Income
The tax rate for rental income is expensive. The buyout deal includes accessing an immediate lump as a one-time capital gain with a lower rate than the monthly rental taxable income. Moreover, engaging in a 10/31 exchange following the lump sum deal defers the capital gain and related taxes.
Nexus Towers offers transparent guidance and professional services to empower property owners to leverage the highest value from their wireless assets. Our supportive include PIGEON PATROL (oversight and management), LEASE CONSUTLING, LEASE EVALUATION and LUMP SUM LEASE BUYOUTS.
Summary: Risk factors against your cell tower lease are on the rise. Isn’t it time, you did a lump sum buyout deal?