Selling Water Tower Cell Sites

Water tanks serve as ubiquitous collocation structures with sale values akin to conventional cell towers. There are over a thousand water towers in the United States that have wireless equipment attached to them. Most of these water towers are publicly owned with the water utility leasing space to wireless carriers on the water tower. Additionally, many water tanks are former fire suppression towers which are no longer in use and have found new life as robust wireless communications structures where capacity is not in question. The industry calls these leases “tenant improvements” because they are an improvement of an existing structure owned by another party that is not a cell tower.

The primary reason carriers like water towers are that they may not be required to go through a significant zoning process to get approval for use of the water tower. Water tower landlords may charge more than typical tower owners for placement of equipment because, in most jurisdictions, placement of equipment on public water towers is permitted by right or is a path of least resistance. Because of this, it is not uncommon to see water towers with multiple wireless users. The zoning regulations will often require that applicants for new towers demonstrate why they can’t use existing structures like an existing water tower first. This creates a situation where many water towers are the only option for the placement of cell sites within a given area. It also increases the value of the individual leases and the water tower as a tradable asset which can be readily monetized.

However, because the income generated by the placement of equipment on the water tower is ancillary to the operation of the water system, most water utilities do not consider the water tower in a similar light as a cell tower. SteelTree Partners has assisted owners of water towers with selling the “cell tower” component of the water tower. Our clients are often surprised to learn that the “cell tower” component of their water tower has a significant value just like a cell tower.

Water utilities may have been approached in the past to sell their leases. These third party lease buyout firms purchase the lease revenue. They will also attempt to suggest that they will market the water tower to wireless carriers and share 50% of the rent. The problem with these types of proposals to a water utility is three-fold:

1. because the water tower is often the only option for the carriers, there is no need to market it as carriers who need coverage in the area will be forced to use it. Thus, the utility keeps 50% of the revenue when it could have had 100%;
2. by selling the leases, the utility often agrees to more onerous terms and obligations in the lease buyout agreement than it has in its existing lease agreements; and
3. the offers by lease buyout companies are almost always less than what the utility could get if it were to sell the “cell tower” component of the water tower as an asset.

A water utility may not wish to sell its leases or the tower at all. However, if you are contemplating selling the water tower leases, also consider the sale of the “cell tower” component of the water tower. The purchase agreements for the “cell tower” component are no more onerous than the lease buyout agreements and can be structured to eliminate concerns over safety and access. The water utility would receive more money for the sale of the rights to operate the “cell tower” component of the water tower.

If you would like to find out more about possibly selling your water tower assets and the service we can provide whether you are a public utility of a private owner, please contact us. We offer a free verbal assessment of the value of the “cell tower” component of your water tower and have handled the sale of numerous water tower assets in the past at market clearing prices.

Sale of Rooftop Cell Site Leases

If done properly, rooftops are highly sought after cash cows whose value should not be discounted. There are a number of companies that approach building owners with offers to purchase their cell site leases. These companies will typically make an offer to buy a perpetual lease on the rooftop. They will offer a lump sum in exchange for the easement and will also promise to “market” the rooftop in order to encourage other wireless companies to use the rooftop. If the building owner sells their lease(s) to the lease buyout company and another wireless company comes along, the lease buyout company gets 50% of the revenue from the new tenant regardless of whether they did anything to encourage the tenant to use the property.

Under this type of lease buyout agreement, the building owner is essentially selling the existing leases and giving away 50% of the future leases. Since the lease buyout companies pay a nominal amount for the future value, the building owner is unwittingly selling future revenue at a tremendously high discount rate.

There are better options available to rooftop owners. For example, there are companies that would be interested in purchasing the rooftop as a whole. In this regard, they would pay for the present and future rights to the rooftop. The building owner would grant the buyer a fixed term easement to operate the rooftop facility. The buyer would have the right to add additional tenants to the rooftop without further compensation to the landowner. However, unlike with lease buyout company offers, the buyer would also pay a premium for this right. The buyer would take on the burden of negotiating with the existing tenants and future tenants. The building owner would not get future payments from additional users but would also not lose rent if any of the current leases terminate their agreements.

The sale of a rooftop is not appropriate for everyone. It does come with a minimum 25-year obligation. While this is shorter than the lease buyout companies offer, it still restricts the ability of the building owner to tear down the building. The building owner would give up some future rights to the rooftop. However, if there are plans to sell the building in the short term, we believe that building owners would be better off selling the entire rooftop rights provided that there is a low likelihood that the buyer would need to tear down the building.

If you are interested in finding out more about this option, please send us information about your building including the current tenants, lease rates, and offers you have received. A member of our team will contact you to discuss what options are available to you. If you are interested in just selling a lease without the remainder of the rooftop, please refer to our colleagues at Steel In The Air at Cell Tower Lease Buyouts.

If you do not currently have rooftop leases or have not been approached by a tenant, SteelTree Partners cannot assist you in either finding tenants for your rooftop or selling the rooftop rights.

Cell Tower Lease Buyout Valuation

Tower owners and ground owners alike are being contacted by third party lease buyout companies with offers to purchase long term rights for their collocation leases or for their ground leases. If you have been contacted by a lease buyout company to sell your lease, you should consider the following issues related to the sale of your leases. These issues differ considering the type of lease you have.

If you own the tower and you are leasing space to wireless carriers on the tower via a collocation lease, SteelTree believes that it rarely makes sense to sell the leases from the tower. In those rare cases, you are likely better off just selling the tower itself. It is very unlikely that third party lease buyout companies are going to be willing to offer you more for the sale of the individual leases than what a tower company would for the sale of the tower. Furthermore, by selling the leases separately, you as the tower owner still have the liability of the future expenses for maintenance, any ground lease, and utilities. In rare situations, it might make sense to sell a lease separately if a tower owner needs the funds to continue developing other towers but doesn’t have access to capital otherwise. Please feel free to call us for a free initial consultation and we can gladly discuss your situation in greater detail and let you know if and how we can help.

Cell Tower Lease Buyout Valuation

Tower owners and ground owners alike are being contacted by third party lease buyout companies with offers to purchase long term rights for their collocation leases or for their ground leases. If you have been contacted by a lease buyout company to sell your lease, you should consider the following issues related to the sale of your leases. These issues differ considering the type of lease you have.

If you own the tower and you are leasing space to wireless carriers on the tower via a collocation lease, SteelTree believes that it rarely makes sense to sell the leases from the tower. In those rare cases, you are likely better off just selling the tower itself. It is very unlikely that third party lease buyout companies are going to be willing to offer you more for the sale of the individual leases than what a tower company would for the sale of the tower. Furthermore, by selling the leases separately, you as the tower owner still have the liability of the future expenses for maintenance, any ground lease, and utilities. In rare situations, it might make sense to sell a lease separately if a tower owner needs the funds to continue developing other towers but doesn’t have access to capital otherwise. Please feel free to call us for a free initial consultation and we can gladly discuss your situation in greater detail and let you know if and how we can help.