To sell or not to sell? That is the question that many cell site landlords are facing as they are bombarded with offers to purchase their cell site lease income. Although cell sites leases can be quite efficient income producers under the right circumstances, exchanging the monthly or annual payments for a lump sum of cash that you can leverage today could be a much better value proposition for some leaseholders.
You may have noticed that there has been more money being offered for your cell site lease. It may be that your cell site location is highly desirable, but the main driver for lease values is actually the low interest rate environment that allows lease acquisition companies like Wireless Capital Partners to borrow money at a lower cost.
In this particular situation, interest rates for these companies work like most other interest rates, meaning that someone or some company that borrows money will have to pay less to borrow that money if the interest rates are low. This not only makes a loan for that company more desired, but the company can now pay the site owner more because they are saving money on interest, meaning the actual spending amount is higher.
According to recent studies, interest rates are at a low, but they may begin to rise soon. Chairman Ben Bernanke of the Board of Governors of the Federal Reserve System has created several studies and illustrations demonstrating that interest rates may begin to rise. There is a correlation with current data among several countries and past events in which interest rates have followed the same path of low to high. This may suggest an opportune moment to sell if someone is looking to do so.
But like any other market, favorable conditions do not last forever. Those who wait could miss out on an opportunity to gain a financial windfall while the market environment is on their side.
Of course, the decision to sell your cell site should take into consideration a number of factors. Rising interest rates is just one of several elements that can make selling favorable.
Other Reasons You Might Consider Selling
- An alternative source of capital
Most banks do not consider cell site income collateral; selling your lease allows you to tap into a source of capital that is not available through a bank. We will explore this more fully in a future posting.
- You want to maximize profits
Those who plan on selling their property should consider selling their cell site lease and property separately. We will show you why in a future posting.
Other elements including a leaseholder’s financial situation or objectives may factor into his decision to sell his cell site lease. But again, one of the primary motivating factors for selling is the current atmosphere of rising interest rates that will decrease the value or offer price for cell site leases.
Interest rates, in combination with all of the other factors, create a situation where selling may be the best financial choice. It’s never an easy decision, but it’s often a smart one.
Written by Matt Jones, marketing at Wireless Capital.