A cell tower lease, & A billboard lease

You see cell towers almost every where. In Houston, Texas the quantity is over 3,500 towers.

Here is some interesting information on a particular cell tower site.

You can draw some conclusions form this real life example.

Towers are typically put up by the cell phone companies.

• Site size is 30' x 30'
• All site improvements provided by cell tower company.
• Time from contact to construct was six months.
• Rental rate is $1000.00 per month with a 3% annual escalation clause.
• Term is five years with five, five year renewals. For a total of 30 years.

The cell tower company hired the engineers to do test borings for the foundation, design the site, contact the utility providers, get the permits, complete the environmental study, construct the site improvements, erect the site and get it operational.

The lease covers use of the ground space, access to the tower (right of way) and utility easements to power the tower. In the event the tower attracts additional users and they need additional ground space the land owner gets an opportunity to lease more ground space.

Selling the income stream:

Unison company one of many I presume, Unisonsite.com buys cell tower site income streams from land owners. This particular site was offered a cash payment of $86,000 for the life of the site. The land owner gives up all rights to future income in exchange for cash now.

Typically a lease will bringing a cash price offers of between 60 and 100 times the monthly cash flow. Each lease is judged based on the terms of the lease and likely hood of longevity and length of time left on the lease as well as other risk factors. From the point of view of the lease buyer wanting a high return on their money, pricing them is a risk factor and time value of money
calculation.

The offer was declined because in 6.7 years the land owner collects the $86,000 after taxes the $86,000 leaves $73,000 that could be reinvested elsewhere. Other then using the money as down payments to buy four rental properties (at a discount) and holding them five years, I can not think of an alternative investment that would allow the $73,000 cash to earn the $1,000 now coming in from the lease.

The income stream of $1000 a month is equivalent to having $200,000 in a CD at 6% interest rate.

Other types of ground leases ( bill broads, towers, parking lots, building sites) work in similar fashion.

Billboard ground lease:

I had a billboard ground lease that paid $641.00 per month.

Ground leases for billboards in our town are less prevalent then in past years because the city discourages them. For every new billboard that is erected, four older one have to be taken down. That city ordnance has reduced the number of billboards and reduced the amount of ground rent that can be charged. At the same time it has increased sign rental income to the billboard companies as the supply is less.

My site was chosen because of the high traffic count and because it was on the going home side of the road which appealed to the sign companies preferred customer base, which at the time was home builders.

I would have liked to have gotten a higher lease rate but as there where many other land parcels available from which the billboard company could have chosen, and because of the lack of anyone else offering anything, I took the offer to lease the ground with little negotiation. $7,700 a year with a 5% increase every five years on a twenty year lease.

There was no additional cost to me, and the lease payment was extra income. I was offered $36,000 cash for the lease income rights by an investor who looks for signs and towers he can buy the income streams on, he wants a 20% annual return. I turned the cash offer down as being insufficient. I added $60,000 to the land's sales price and sold the billboard lease with the land. Buy selling the lease with the land I got eight years of lease income in advance and I collected monthly for two years, until the land was sold.

Jim Glasgow admin TowardsWealth.com