“Buy low, sell high” is an axiom to remember if you think it may be time to sell your cell site leases. The challenge is, how do you know exactly when is high and when is low? With cellular sites, the answer is at least partially easy. Cell sites, including towers, water tanks, rooftops, have been selling at record highs for the past year or so. But does that mean prices have topped out and are beginning to soften? Or does it mean there are even greater values ahead of us.
There are some good arguments to be made on both sides, of this query. In the October 2018 issue of AGL Magazine, Tom Engles, director of Strategic Tower Advisors stated, “I believe we will see depressed values of broadband sites in the next 18 months.”He bases this statement on factors that have historically caused cellular lease values to drop:
- Rising Interest Rates – Historically tower prices are reduced when interest rates climb. Reuters reported in September that futures traders expected the Federal Reserve Board to raise interest rates one more time in 2018 and two times in 2019.
- Pricing Pressure From Telecoms – The large telecom companies are seeking to lower their tower costs by a variety of actions. In some cases, they are replacing older towers that have higher cost leases with new towers that can carry more equipment. In other instances, they are bringing pressure on existing lease owners to renegotiate leases or renew leases at less favorable rates to the leaseholders.
- Possible T-Mobile/Sprint Merger – While the government continues to study this merger application, there has yet to be a massive outcry against it in any corner. Sprint and T-Mobile have been making strong arguments that this merger is a necessity for the two companies to compete and that Sprint would be in a precarious competitive position if the merger is not approved. Sprint and T-Mobile have released information that there would be a large number (20,000+) of cell towers being decommissioned if the merger goes through. This reduction in tower expenses would be a significant portion of the operating efficiencies that the companies have projected to gain through the merger.
- The Pluses and Minuses of 5G – As has been noted here and in numerous other articles, meeting the demands of 5G technology will be less dependent on large towers and will utilize small cell technology and equipment, especially in more densely populated areas. It is expected small cell technology will be more economical for the carriers and it will likely replace larger towers where it is viable. 5G technology is also likely to diminish the number of wireless Internet service providers on towers in smaller markets.
So, What Time Is It?
While all agree that the cellular ground lease market is strong now, where we are headed and how fast is up for debate. According to Clayton Funk, a managing director at MVP Capital an investment bank, “While certainly there is a risk the prices will come down for towers that have tenant leases with amendment possibilities, we have yet to see any change in pricing.”
If you are interested in learning more about the current value of your site and some thoughts about its future value, contact the cellular ground lease experts at Crescendo Capital Partners. They are happy to discuss your needs or interest in selling your cell site ground leases. We can even provide you with a free valuation of your cellular site leases. To contact one of our professionals, call 203.972.3200 or email us.