A cell tower lease buyout typically involves a one-time lump-sum payment (however, some investors offer a structured payment plan to lessen tax obligations) to the property owner in exchange for the rights to the lease revenue over a specified period. The payment is made upfront as a single, often substantial, sum of money. Here’s how it typically works:
- Negotiation: When a cell tower lease buyout is being considered, the property owner negotiates with a third-party company, often referred to as a lease buyout company or lease acquisition firm. These companies are interested in acquiring the future income stream generated by the lease.
- Offer: The lease buyout company evaluates the value of the lease based on factors such as the remaining lease term, the monthly or annual rent, and market conditions. They then make an offer to the property owner.
- Agreement: If the property owner accepts the offer, a formal agreement is drawn up. The property owner agrees to sell the rights to the lease revenue for a specified period (e.g., 10, 20, or more years) in exchange for the lump-sum payment.
- Payment: Once the agreement is signed, the property owner receives the agreed-upon lump-sum payment. This payment represents the buyout amount, and it is typically non-refundable.
- Lease Continuation: Despite the buyout, the cell tower lease generally continues to operate as before. The wireless carrier or tower company continues to pay rent, and the lease buyout company collects those payments for the duration specified in the agreement.
- Expiration of Buyout Agreement: At the end of the agreed-upon period, which is typically the duration of the original lease or a negotiated term, the lease buyout agreement expires. The property owner regains the rights to the lease revenue, and the wireless carrier may continue to pay rent directly to the property owner.
It’s important to note that the lump-sum payment received through a cell tower lease buyout is a one-time transaction. It provides the property owner with immediate financial liquidity and eliminates the risk associated with future rent payments but also means that the property owner forfeits the future rental income for the duration of the buyout agreement.
Property owners considering a cell tower lease buyout should carefully assess their financial needs, long-term objectives, and the terms of the buyout offer before entering into an agreement. Consulting with financial and legal professionals is advisable to ensure that the terms of the buyout align with their financial goals.
