When wireless carriers identify areas where they need to build new cellular towers, they are often located on private property. If a property owner agrees to let a wireless carrier install a tower, the carrier and property owner enter into a long-term ground lease agreement.
Under the terms of the cell tower lease, the wireless carrier pays the property owner monthly rent for use of his or her land. The monthly payment for the cell tower lease is based on the type of tower installed, the location (urban, suburban, rural) and also how critical the location is to the carrier’s network.
A cell tower lease buyout occurs when a property owner agrees to sell his or her lease to a ground lease acquisition company, such as Landmark Dividend, for a lump sum of cash. While the lump sum is often a significant amount of money, it is less than the cumulative value of the monthly rent over the life of the lease.
Why do property owners seek a cell tower lease buyout? For some, it’s a matter of needing cash to cover an urgent financial need such as medical expenses, college tuition, debt reduction or a tax bill. Others liquidate their lease for investment purposes and use the cash to buy real estate, or buy/expand a business. Many of our clients realize that investing their proceeds from a cell tower lease buyout often generates significantly higher growth over the long term than their cumulative monthly rent payments.
Some cell tower lease buyouts are eligible for a 1031 exchange, which allows for the deferral of capital gains on the sale of a property held for productive use in trade or business or for investment. They can’t be used for residences or for second homes unless the property is used only for rental to third parties. To achieve full tax deferral, property owners must reinvest all of their proceeds in a “like-kind” replacement property and have the same or greater amount of debt on the replacement property. If you are interested in learning more about a 1031 exchange click here .
If you are interested in a cell tower lease buyout, please call Landmark Dividend at 1-800-843-2024 or click here to submit your information online. There is never a cost or obligation to receive a site valuation from Landmark Dividend. We are happy to answer any questions you have and freely share our knowledge of the ground lease acquisition industry to help you make the very best financial decision for you and your family. Even if you don’t complete a transaction with Landmark Dividend, our discussions will leave you better informed regarding your cell tower lease, especially its market value.
IMPORTANT TAX NOTICE: Landmark does not provide advice on any income tax, capital gains tax or other tax requirements or issues related to any transaction in which Landmark is a party or participant in any fashion. Use of any information obtained from Landmark or its affiliates or agents or referral by Landmark or its affiliates or agents is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for tax questions and assistance. The information above is provided as a general introduction to the 1031 exchange process. Prospective sellers and buyers of real estate should always consult their attorney and tax advisor prior to entering into a 1031 transaction.
