The last thing most municipalities and local governments need is additional pressure to do more with less income. Well that could be coming your way, thanks to new cellular technologies, legislative initiatives to reduce cellular rent rates and pressure from telecoms for future rent reductions on existing leases. This has led many forward-thinking government entities to utilize cell lease buyouts to lock in the maximum value of their cellular ground lease income.
In a recent post on American City & County’s Viewpoint blog, James Kennedy, CEO of SteepSteel, lays out the upcoming challenges and changes facing cell site lease and cell tower ground lease owners. Rather than a future of steady and growing monthly lease payments, governments will be challenged to even maintain their current situation. This perfect storm of technology, legislation and market forces will put great pressure on future cell tower lease rates for a number of reasons:
- Technology – Small cell and 5G technologies will be the growing area of cellular expansion, especially in areas of greater density. This will likely bring cost reduction pressure from telecoms and could trip opt-out clauses in existing tower leases
- Legislative – 14 states have passed legislation that sets lower-than-market rents on small cell facilities on public properties. Many more state legislatures are considering this “consumer friendly” subsidy for the cellular industry. This lower cost alternative could be a big driver for decommissioning older, more costly cellular sites
- Market forces – Cellular site tenants may use the possibility of a lower site lease cost structure to pressure site owners to accept lower rent on new leases and even reduce the rent on existing cellular ground leases
James Kennedy advises municipal site owners to consider eliminating the possibility of a significant future cellular income loss and enjoy the windfall of ready capital that a ground lease buyout can deliver. Instead of receiving smaller, increasingly less secure monthly payments, government entities can receive a very large, immediate cash payment. These payments can even be structured to match the needs and situation of the government entity. So not only does this buyout eliminate risk, it also provides a much-needed influx of immediate capital that is budget and politically friendly.
To read more about this important challenge/opportunity, click here for the entire article from American City & County. Or contact one of Crescendo’s cell tower lease experts at 203.972.3200 or email us.