company buying out before end of contract

by AT
(Texas)

If we have been approached about a company buying out our current lease, how do we know what is the right price to ask? We definitely want it to be in the best benefit for us. We still currently have another 12 years left with current contract. What is considered too high? If our current contract will still pay $100,000 in 12 years... Will asking for $800,000 be too much. We have to consider they still owe us $100,000, plus they will forever have our land and have taken our future opportunities.

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Sep 13, 2012
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starstarstarstar 		Clarification...
by: Tower Genius

RE: "Question
by: Anonymous

Your statement is confusing...my expectations that are $700,000 more... Can you elaborate please? Thank you for your help."

* * * * * * * * *

OK, let's break it down...

Your current lease will still pay $100,000 in 12 years.
That's equal to $8,333 per year or roughly $694/month.

Will asking for $800,000 be too much?
Yes. these lease buyout companies will likely pay you between 9 to 10 years of revenue up front as a lump sum on average. Some may pay a little more, some a little less.

Let's say you got an amazing offer of 11x yearly revenue, then you would get $8,333 x 11 years = $91,663. It's still less than the $100K that you have left on the lease, and that's all you are entitled to. There is no guarantee that the carrier will need your site forever. Maybe they can lease a parcel of land from your neighbor across the street for $300 per month if the economy gets really bad, and you lose the deal. They take the risk and reap the rewards on the back end.

So, you are looking to get $800K for a cell tower lease that only pays you $8,333 yearly, your expectations are about $700K out of the range of what you can expect to receive.

We suggest that you do not sell your revenue stream if you really do not need to at this time, that is unless you take the money and buy a few dozen ounces of gold as a hedge. (Just our opinion, please do not take it as financial advice.)

If you are looking for assistance with your buyout offer please give us a call to discuss.

thanks,
Tower Genius
888-313-9750
Sep 10, 2012
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starstarstarstarstar 		Question
by: Anonymous

Your statement is confusing...my expectations that are $700,000 more... Can you elaborate please? Thank you for your help.
Sep 10, 2012
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starstarstarstarstar 		Sorry to burst your bubble, but...
by: Tower Genius

Give us a call to discuss, we can explain the telecom lease buyout market and buyout values to you to help manage your expectations that are approximately $700K more than what you can expect to get if you sell today.

Tower Genius
888-313-9750

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