If you are a property owner that is considering monetizing your wireless lease rents or an institutional investor trying to determine the value of lease/easement cash flows under wireless infrastructure, information on street-level, market pricing is not readily available to you. Our Market Data section provides current, real-time insight into the market that could be of use to you as you weigh your options or undertake due diligence.
The various firms that offer to purchase wireless leases from property owners are motivated to do so as cheaply as possible. Having information on current lease offer trends is imperative and TCA is the only firm to publish them. Knowing how much an asset is really worth in today’s market is a must for a Seller. If you would like to maximize your price as a Seller or be sure you aren’t over-paying as a portfolio Buyer, reference the quarterly updated data provided in the tables below at TowerCapAdvisors.com or contact us at firstname.lastname@example.org for more information today.
Full Year 2022 Update – Valuations and Historical Prices for Wireless Leases and Towers.
TCA analysts track (confidentially) the offers for wireless leases and tower purchases made by aggregation firms to property owners that contact us, subsequent offers for the same assets from TCA and the overall trend of value for the leases in the industry. Based on a review of the full year 2022 data, we have distilled the following information and trends:
Note: Averages are calculated by TCA from discussions with both site / tower owners and industry personnel. They are opinion. Unless otherwise noted, most of TCA’s statistics are normalized for perpetual purchase terms and 3% per year (or 15% per Term) escalations as they are the most common in the industry. Lower escalators would result in lower offer prices. Higher annual escalators could result in higher than average offer prices. Data also nets out short-term expiration purchase offers (offers for leases with 5 or fewer remaining years in the lease terms provide a pro-forma rent hike opportunity for the buyer).
TCA Tower Acquisitions and Valuation Data:
Tower Capital Advisors currently performs a regular service as part of our scope of work as a national partner of one of the 4 major carriers that requires us to analyze, structure, evaluate and price numerous tower and rooftop leases being acquired for our own account or for AT&T directly. Our own acquisitions are consummated with one of two well capitalized funds or on behalf of our carrier partner. If you own one or more cell towers with cellular tenants, we believe our expertise in maximizing the value of these assets would benefit any current or future seller of wireless infrastructure.
In addition to suggesting that you view our Recent Transactions page (updated quarterly), below we have provided data from our 2020-2022 tower acquisitions that we hope you find useful:
TCA Commentary – 2022 in Review – A seller’s market as prices continued to rise despite rising interest rates – for now:
Seemingly able to buck the common sense notion that as rates go up, prices come down, the markets and values of both wireless easements/leases and cell towers have fared better than the values of the very properties they reside on. 2022 saw a peak reached over our 22 years in the space for both asset types. Peaks of 21x for leases with the big 3 carriers and 3% or higher escalations was not uncommon. Some single towers we saw (and closed on) traded in the low 30’s. The equivalent cap rates for these transactions were, on average, just under 5% for leases and in the mid-3%’s for towers. As rates rise, however, so has the cost of debt for aggregators of towers and wireless infrastructure – which will mean the party should be coming to and end… but it hasn’t.
As stated in our last update, uncertainty in the capital markets and the COVID-19 pandemic’s effect on commercial property values combined to increase buyers interest in and prices for this asset class and stimulated wireless lease landlords to monetize and tower owners to sell. Few other commercial property types were doing well (think office and apartment buildings, retail, shopping centers, etc.) and, with investment-grade tenant credit counterparties like AT&T, T-Mobile and Verizon paying the rents – new capital entered the market in record amounts.
We noted many of the more seasoned portfolios exhibiting discipline in the latter half of 2022 with a focus on fewer, but more profitable transactions. A select few portfolio buyers did not. Our opinion is that those that did not are working on market share strategy (a land-grab) that may dissuade newer capital and push the less well capitalized funds out in anticipation of a downturn. We saw this exact situation in 2009-2011 – and it inevitably results in very few competitors and much lower prices. Those with high overhead that cannot survive the onslaught of low returns leave and the land-grabbers then more than making up for their past expensive acquisitions by being able to feed on easier, less expensive prey.
* Financial aggregation firms are companies that acquire the assets with the intent of either just collecting the cash from the lease as is and holding it or, more often, firms that buy with the intention of ‘flipping’ to tower companies or into securitizations. Despite often requiring that they buy an expanded easement area with a ‘sharing’ arrangement back to the seller for any new tenants that come to the site, financial aggregation firms have little to no history of being able to ‘lease up’ a property. Note that Sellers should be very cautious of letting any financial buyer expand their easement as part of the purchase process. See the Recommendations for Sellers in the Lease Buyout section of TCA’s website.
** Strategic aggregation firms are companies that own and operate thousands of assets across the US and are capable of bringing additional tenants to a property that has their own tower on it.
Market Outlook for 2023 for Wireless Leases and Cell Towers:
While many employers big and small are demanding their employees actually come to work in the office once in awhile, many of their employees seem to have missed that email. As a recent survey suggested, only 34% of US workers returned to the office full-time in 2022 with 40% of employees still working remotely at least once a week while claiming they’d quit if their employer mandated a full-office return. This does not bode well for cap rates associated with commercial office real estate in 2023. In general, alternative commercial real estate investments are unlikely to again become as (or more) attractive than wireless infrastructure in this coming year – meaning a continuation of low relative cap rates for the sector.
What does the future look like for the value of wireless leases and tower assets? Here are some of our thoughts:
- A Seller’s Market: In the short-term, prices are likely to have stabilized at the current level. We can see some of that in our Q4 2022 data – but the level at which they have stabilized is quite high. 2023 Q1 and Q2 are likely to continue favoring seller’s, but with a decreasing number of buyers being willing (or able) to play.
- With Tower Values – Fantasy pays more than Reality: The number of possible investment-grade carrier tenants a tower owner might solicit to their structure is and always has been countable on one-hand. Tower owners very much want these tenants and their rent. But what happens to price and value of the asset once they you get them? In that regard, we have noted a continued negative correlation between the multiple of current tower cash flow buyers are willing to pay for a tower and the number of premier tenants the tower has on it. Higher multiples (but of course based on less cash flow) are paid for towers with 1 or 2 tenants (but that have the HOPE of getting more) than are paid for towers that have achieved perfection by leasing up the structure to 3, 4 or more premier tenants (i.e. that have the HISTORY of actually doing it). Management financial models projecting potential upside have always worked magic on investment committees – initially. History is harder to argue.
- Pricing Projections: In the near term (1-2 years at most), and based on our opinion only, it is our belief that prices for the assets we track will come down for the following reasons:
- Inflation, and the resultant increase in the cost of borrowing for the buyers of these assets is a likely result of undisciplined monetary and spending policy. With resultant increases in the cost of funds of the buyers of these assets, will come decreases in prices to the sellers.
- Commercial real estate businesses and values will be negatively affected. Properties reliant on rent from retail establishments, offices and apartment buildings will likely see significant reductions in their cash flow. This will result in defaults and reduced debt-service-coverage ratios that may mean banks that hold mortgages on commercial properties that have cellular revenue will be less likely to attorn (consent) to the sale of those assets. Such consent is a requirement of 97% of all closed lease sales and by all buyers in the space.
- The number of buyers may eventually be reduced as firms that are not capable of competing exit the business or fail. Less competition will mean lower prices. This happened in 2008-2009 and will happen again, especially with new, less experienced capital entering the market.
Our recommendation is that landlords and tower owners consider monetizing these assets while the market continues to be hot. Further, if a property owner is also looking to sell the underlying property / business / building that wireless infrastructure is on, they should sell the wireless leases/tower first and THEN look to divest the actual property. This is because the cap rates on wireless leases are typically much lower (meaning higher prices) than they are on the underlying property.
Other Valuation Considerations:
Buyer Focus is on Possible Upside via expansion of the size of the easement being purchased and shorter remaining terms on the leases:
The most significant (positive) differentiation in pricing for both rooftop and tower ground leases can be seen in offers structured with upside potential (real or perceived) for the buyer. The highest prices in the market today for lease/easements are available to sellers if;
- Their lease and all renewals expire inside of 20 years,
- Their escalations are at 3% per year or 15% every 5 years or higher,
- They are willing to accept a general or expanded easement purchase structure.
The first characteristic (nearer term expiration) provides an opportunity for the buyer to increase rents. Note that this is in spite of the fact that in more than 50% of the cases we have seen in the last 20 years, rents are REDUCED at lease expiration.
The second characteristic that optimizes a sellers price is the escalation provision. For a given price, yields to the buyer are, of course, lower if the escalation in the lease being acquired is low and that is reflected in a lower price.
The third opportunity for buyer upside comes from expanding their easement area. The highest offer prices for tower ground leases and rooftop leases are coming with general and/or expanded easement areas that hope to capture either new tenant or expansion needs by existing tenants down the road. Offers to share with the seller in this potential future upside tend to only be structured for new tenants and range from 50/50 to 70/30 in the sellers favor.
Despite this uptick in value and price, initial offers made by the firms that use outbound calling and mail to contact landlords with wireless leases on their property continue to lag the pricing available from firms without marketing staff.
We recommend sellers who have been ‘cold-called’ by prospective buyers of their leases reach out to TCA to determine both the pedigree of the buyer (are they brokers or actual buyers?) and whether the price being offered represents the true value of their asset. Tower Capital does not make outbound calls to try and buy leases or towers. In addition to working with AT&T at their request to acquire their towers or leases, TCA responds to inbound inquiries only.
While landlords to the carriers and tower companies are enjoying this recent sizable uptick in prices based on a buyers potential upside potential, do not expect such offers to be simply crafted. Many require general telecom easements across the entire property allowing the buyer to ‘market’ the property for additional tenants while offering sharing arrangements back to the landlord in any new rent ‘found’ (or more often fortuitously happened upon). The probability of finding additional tenants for a site remains low as there are both fewer viable ones (AT&T, T-Mobile and Verizon) and the tenants themselves have a strong preference as to who is managing a property with most preferring to avoid properties managed by tower companies (particularly public ones) altogether. We also continue to believe that strategic acquisitions of rooftop leases that offer seller’s sharing in new tenant revenue can be conflicted with the buyers interest in locating new tenants on their own towers rather than on a rooftop that requires a split with the property owner.
Additional information for wireless landlords and prospective sellers:
Tower Company offers for their own ground leases: The public tower companies have demonstrated that they are quite interested in protecting their tower assets and in defending against 3rd party acquisitions of ground leases under their towers. As you can see from the above chart, TCA has managed to stay ahead of most of their initial offers for their own leases as they are made through their vendors who must be compensated. We continue to recommend that landlords to tower companies who are approached by their tenants to extend, amend or sell their current leases seek professional advice before doing or signing anything. TCA offers a much simpler closing process, documentation and shorter closing time (absent a need to get the consent of a mortgage holder, closing time should be less than 45 days vs. times 3 to 5 times longer to close with some of the public tower companies). Shorter closing time means lower legal costs for the seller.
Near-term expiring tower ground lease pricing: While offer prices for ground leases under cell towers have seen a recent modest increase in price, offers for ground leases under towers with multiple tenants whose final expiration is within a 1-10 year time frame have reached extraordinary levels. TCA continues to recommend that property owners with leases whose final expiration is coming due in the next few years not sign extension amendments or lump sum offers without consulting with an expert. We provide pro bono estimates of value for tower ground leases meeting this criteria to all property owners.
Who is a Buyer and who is a Broker?: The influx of formerly employed sales staff from now departed acquisition firms into the market has reached astounding proportions. The number of ‘brokers’ or intermediaries operating in the market offering to either advise sellers for a fee or seeking to broker their transactions to one of the few actual portfolio buyers for a fee is now well into the double digits. We have seen a number of these brokers attempting to arbitrage huge profits at the expense of the seller, so caution when dealing with them is advised. Note TCA does not charge private property owners for our advice, regardless of whether we do a transaction with the seller or not.
In 2019, we continue to see a number of the formerly capitalized financial aggregation platforms that have lost their own funding become ‘straw’ buyers for the tower companies. This type of relationship may require the ‘straw’ buyer to sell the assets directly to your tenant after closing or assign the rights they have obtained to your tenant, thereby making any promised revenue-sharing arrangements hollow at best. If there is a Right of First Refusal clause in your lease and someone other than your tenant is making an offer to buy it, a seller needs to understand that this buyer is almost certain to have a relationship with your tenant and will be ‘giving’ something to them to get them to waive their rights under this clause.
TCA cautions prospective sellers that offers by buyers to ‘share’ in rent increases above ‘scheduled rent’ at lease expiration or renewal should be viewed with suspicion or ignored when evaluating purchase price and structure, especially if there is a Right of First Refusal in your lease. Those transactions are highly likely to be favorably amended for the tenant by the buyer post closing.
Extension amendments and ROFR clauses: The sale of most of the towers previously owned by AT&T, T-Mobile and Verizon to the large public strategic tower companies created a furious ‘amendment and extension’ initiative by the tower companies that continues today. This initiative centers on an attempt to lock-up the rent on leases that would expire in the near future and remove the possibility of the property owner negotiating a higher rent at lease expiration. Just as importantly, your new tower company tenant is very interested in obtaining Right of First Refusal (ROFR) clauses in leases that did not previously have them. This is done to prevent other firms from purchasing the leases and, in turn, looking to increase their rents. We strongly suggest that sellers contact TCA if you are being pressed to sign extensions or amendments with ANY tenant.
Having a ROFR in a lease with a tower company tenant reduces the value of your lease because it also reduced the number of firms willing to make an offer to purchase it – leaving mostly the ‘straw’ buyers to make offers. ROFR’s in carrier leases are much less of a concern as carriers often do not have the capital to exercise their ROFR rights.
Tower Company entrance into the rooftop lease acquisition space – 2019 has seen many middle-market tower companies enter the rooftop lease acquisition space as an expectation that the addition of these assets (assuming the purchases are structured with upside and the ability to market the property) to their portfolios will lift the values to the same levels their tower assets trade at when their portfolios are sold. While the offer prices tended to be slightly higher than non-strategic buyers prices for rooftop rents, the offered structure have proven to be complex and result in difficult documentation and closing processes.
Offers to share in the rent from additional tenants are usually part of the offered structure with 50/50 having become a common sharing arrangement. While many sellers ARE interested in having additional revenue put on their property that they can benefit from, TCA cautions sellers that any sale structured with the promise of additional rent down the road needs to be carefully reviewed. Financial buyers have no ability to bring tenants at all and in reality employ no one to do any marketing and the larger tower companies, with tens of thousands of sites across the U.S., almost always have their own towers nearby that would be much more profitable for them to place another tenant on vs. your rooftop. If you are seeking additional revenue, consider selling to a more nimble strategic buyer with fewer locations near your property.
TCA recommends that property owners approached to sell the rights to their rooftop to any firm obtain professional advice. We would be pleased to review these offers for you, at no cost.
T-Mobile Consent Requirements – If a property owner ever wants to monetize their lease either for additional working capital or to de-risk the possibility of losing the revenue in any de-commissioning, etc. due to mergers among the carriers, we strongly recommend you find a way to eliminate any ‘consent to assign’ or ‘consent to sell’ from a T-Mobile lease. Removing it is NOT possible once the lease is established (why would they?) but if you are negotiating a new T-Mobile lease, it would very much benefit you to strike any such language. While T-Mobile has no history of purchasing their own leases back, our understanding is that they will only consent to a sale if the buyer gives them a sizable reduction in their rent and agrees to make it difficult to impossible for them to re-sell or re-finance the lease as part of their own portfolios. This results in much lower prices or, worse yet, a complete inability of the better capitalized buyers to make an offer on your lease at all.
AT&T Tower and Right of First Refusal buy-back initiative – In 2018 AT&T quietly announce the availability of a significant pool of capital to proactively purchase their own rooftop and ground leases as well as towers from their landlords who are interested in selling or monetization. This program was put in place to prevent both the landlords and AT&T from being taken advantage of by unscrupulous buyers and has continued to this day and TCA manages this process for them performing valuation analyses at their request.
TCA is a national partner of AT&T. We honestly explain the pros and cons of monetizing a lease or selling a tower and can provide a quote directly from AT&T if a seller is interested in selling either. Given the current pricing available in the market, we are definitively pro-‘sell’.
Current Cap Rate Equivalents – 2022 YTD Update:
Tower Capital Advisors offers have remained ahead of most all buyers for both specific easement purchase structures as well as expanded easement purchase structures. Our financial aggregator competitors continue to attempt to come in low and slowly rise to meet competitive pressure and our strategic competitors continue to offer structures that are involved, over-bearing and difficult to document and close. We offer the same structures (and associated higher pricing) with a much shorter timeline to funding and less complex documentation.
Sellers should be very wary of offers to purchase general or expanded easements on their property that attempt to capture new tenant revenue and promise to ‘market’ the site to the carriers. Carriers put sites where they need them, not where they want them, and few of the buyers in the space have any actual initiatives or personnel dedicated to marketing at all. Their goal is to capture a piece of unforeseen rent, without having done anything to deserve it. Finally, note that no one can ‘bring new tenants’ to a tower they don’t own and few can bring on to a rooftop. Ask for statistics and references from any buyer offering to bring new tenants to you and, when you do not get any, you are likely to agree.
TCA’s best-foot-forward offers still surpass the initial offers of all of the aggregation firms. TCA does not ‘start low’ and work our way up to match competitive bids. We do not believe that property owners looking to sell their leases should want to deal with buyers that initially try and take advantage of them and, in the face of competition, increase their offers after the fact. TCA has been able to keep ahead of the market with our offer prices after having entered into a facility arrangement with our institutional funding partner. TCA is not a ‘broker’ and we close directly onto the balance sheet of our funding partner. We would be pleased to arrange a call explaining the process of selling a lease with our closing and legal department at your convenience.
TCA’s objective in providing you and the public with this data is that we hope you will allow us to bid on your site when you choose to sell.
2022 Full Year Update: Average Cap Rates offered by TCA for Wireless Leases:
Note: While TCA continues to provide carrier level statistics on cap rates there is no real significant differentiation between the three remaining investment-grade carrier tenants – the differences shown above between AT&T, T-Mobile and Verizon are likely based on sample size and TCA’s relationship with AT&T (provides superior pricing). Dish, being newer to the market, is priced less aggressively.
About Tower Capital Advisors – Services and Acquisitions:
TCA is an institutional advisory firm, an acquirer of wireless leases and cell towers for two financial institutions and a national partner of AT&T that manages AT&T’s own acquisitions of lease and tower assets. While we charge institutions for our services (we have been buy-side advisor on multiple portfolio purchases totaling more than $1 billion in the last 4 years), we do not charge individuals, small businesses, municipalities or religious entities for our advice. We also publish quarterly valuation statistics for wireless leases and towers to benefit landlords who are interested in monetizing their assets and need a place to go to assess value.
With respect to those landlords that are interested in lease monetization or physical tower asset sales, we provide offers from one or both of our funds (as well as from AT&T if they are a tenant on any of the infrastructure). We have no sales personnel calling to try and buy leases or towers at below market value and no ‘call center’ pestering landlords. Our principle was one of the founders of what has become the industry of buying cell tower and rooftop wireless leases and easements and have been acquiring these assets for 18 years. Finally, we have learned that a good business doesn’t have to be based on outbound ‘selling’. It can be built on the provision of truthful, useful information and some of the best pricing in the sector.
TCA Offer Prices:
TCA offers remain ahead of initial offers from other aggregation firms and have an average just now surpassing the 235 x the monthly rent mark (just under 20 x annual rent) over the last 3 months (normalized for 3% escalators and 99 year purchase terms).
Ours (and others) prices for 3 of the major tenants (AT&T, Verizon, T-Mobile) had remained somewhat undifferentiated other than for T-Mobile leases with ‘consent to sell’ clauses. Those leases are not attractive to buyers and result in prices significantly below market.
Tower Capital’s Near Term Lease Expiration Purchases – In the most recent quarter, Tower Capital has undertaken an initiative to acquire wireless tower leases whose renewals end within the next 10 years. This program is specifically designed for cell towers (vs. rooftops) and prefers towers with more than one tenant. Our prices for these leases are NOT included in the above statistical report and have ranged from 200 x to 400 times the current monthly rent (or more). Pricing is calculated based on how far in the future the lease expires and the number of tenants on the tower. In addition to lump sum purchases, TCA is also offering a structure that would pay additional rent UNTIL the lease expires and then share in a partnership arrangement with the seller based on how the lease is renegotiated at expiration.
We cannot stress strongly enough that a landlord to a tower company or carrier should NOT extend a lease that is about to expire without discussing it with us. The initiatives of the tower companies to extend leases on towers with multiple tenants on them are the most important to them – and there are buyers in the market that will absolutely pay MORE, not less, when a lease is about to expire. You should understand that value before signing any extension amendment!
If you have a cell tower lease on your property that has all of the optional renewals ending in the next 10 years, and whose lease does NOT contain a Right of First Refusal, contact us today.
Expected Continuing Trends and TCA’s Advice:
1. As noted above, with the acquisition of Verizon, AT&T and T-Mobile’s towers by the public tower companies, a significant push is on to get the landlords (property owners) under these sites to sign extensions and amendments. One of the main purposes of this effort is to include Rights of First Refusal and other clauses in the amendment that can and will reduce the value of your lease if monetization is an objective. See the Recommendations for Sellers in the Lease Buyout section of TCA’s website.
2. More players and fresh money flew into the market in 2020 and 2021 as alternative commercial property investments with secure revenue streams were reduced by the pandemic. Some were in for a rude awakening as prices have soared (but now seemed to have peaked). Over the long run, many will not be able to keep up with competitive prices and sustain large organizations with high overhead. Working with TCA allows you to take the profit that otherwise would have been made by these firms for yourself.
3. Don’t be fooled by ‘buyers’ that are actually vendors for the tower companies and / or carriers. The services they provide pay them for reducing rents and obtaining Rights of First Refusal and Expanded Use clauses in any amendments. It might also include buying assets with the promise of sharing in ‘above scheduled rent’ only to sell the asset or assign the extensions to the tenant.
4. More and more brokers are entering the market – and it is difficult to tell who is a real buyer and who is only a broker. We do not feel that Sellers should retain brokers that they have to pay in this sector and can, either through direct contact with purchasers or by working through Buyer paid intermediaries, obtain better pricing without doing so. Additionally, TCA does not usually recommend the use of law firms or attorney’s that specialize in the wireless sector as any good real estate attorney can handle the type of documentation associated with these transactions on a more cost-effective basis. It is also unusual for a law firm to be compensated on a percent of purchase price basis. A Seller should want his attorney to be un-biased with respect to whether a transaction closes or not.
5. Reiteration: Marketing caveat venditor (Seller Beware): Site Owners that sell for less than they should are sometimes sold on the promise of the buyer bringing additional tenants to their property. Many if not all of the financial aggregation firms offer ‘sharing’ arrangements for future revenue they claim they can bring to your site. In the case of cell towers (vs. rooftops), only the TOWER OWNER has anything to do with soliciting new tenants – so a pure-play financial buyer of your ground lease cannot do anything to bring more revenue to the property. In the case of both cell tower or rooftop installations, only the strategic firms and the carriers themselves determine where sites are needed and most if not all of the financial aggregators do nothing about marketing your property. Large cell tower companies offering to buy your rooftop may be conflicted with respect as to whether to put the next carrier on your property or on their tower, which would be more profitable. Bottom line: Don’t be fooled by groups that pitch you on how they will bring you more revenue down the road. Few firms actually even try and if it happens at all, it will be purely up to the carriers that need coverage in your area, not the buyer of your lease.
Get an offer from Tower Capital Advisors today and see how it compares to what you have been offered in the past.
Disclaimer: Information is provided by TCA based on public available resources, personal experience in the industry acquiring, holding and selling millions of dollars of these assets since 2001 as well as from frequent conversations with industry players. It is opinion, albeit experienced, and thus should not be solely relied on in deciding whether or not to sell your asset, how to sell your asset or to whom to sell your asset.
Please call us at (800) 675-0144, or e-mail us at email@example.com for more information on either our direct buyout programs or advisory services.
Registration is free. If you have a site, Register today and TCA will value your lease and the economics of any offers you have had. We may even have a better one for you.