How Real Estate Owners Can Maximize the Value of Their Telecom Assets While Minimizing Risk

While these assets can be valuable over time due to their regular lease payments, real estate owners and landlords should be aware of an additional opportunity to maximize their value, as well as mitigate potential downside risk.

Maximize value of existing assets and retain flexibility

An effective tactic real estate owners can implement to maximize the value of their existing telecom assets is a telecom lease buyout, where a third party “buys out” the remaining years of a lease and takes over the relationship with the carrier.

Instead of a trickle of revenue paid out over decades, a telecom lease buyout enables real estate owners to unlock the full value of their current cellular assets up front via a lump sum payment and access that capital for other uses. The owner can then deploy these funds as needed – a building may need critical upgrades, a loan may be coming due, a time-sensitive expansion opportunity might present itself, or cash may be needed for personal reasons.

Additionally, selling a telecom lease can be a tax-advantaged transaction. Leaseholders can use a 1031 exchange to reduce taxes by reinvesting proceeds from the telecom asset sale into another qualifying property, allowing them to defer capital gains taxes. Selling a telecom lease also doesn’t interfere with an owner’s ability to sell or redevelop the property in the future, allowing them to retain full control of the core real estate involved.

According to a wireless industry survey, Americans used 36% more wireless data in 2023 than in 2022, and almost double the of data used in 2021. This trend isn’t slowing down. Whether in rural or densely populated urban areas, telecom infrastructure is vital to maintain and expand quality cell service and internet connectivity. This will become even more critical as new technologies such as 5G continue to be deployed by the industry – in turn requiring even more sites to support higher bandwidths and increased data transmission. The majority of this infrastructure will need to be sited on real estate.

Owners should consider adding additional telecom infrastructure to properties as a strategic way to capitalize on this trend and enhance real estate investments, enabling them to generate steady, passive income. Telecom assets generally require minimal maintenance, with the carrier handling direct repairs to the equipment in most cases. Owners can then pursue creative monetization strategies that support their individual business goals, including a telecom lease buyout to access capital more quickly if needed.

Reduce tech obsolescence and contract cancellation risk

Telecommunications technology constantly evolves with carriers updating their equipment to improve cell service quality, connection speed, and energy efficiency. Most contracts with carriers or tower companies include a cancellation clause, often found in the original agreement, allowing the carrier to decommission or cancel their contract with the site owner, leaving ​the tower or rooftop asset worthless.

For example, following the 2020 merger between T-Mobile and Sprint, the combined company integrated its networks and by 2022, had decommissioned 30,000 macrocells and 31,000 small cell/DAS sites. While “efficient” from the new company’s perspective, each of these was a source of revenue for a property owner that suddenly halted. 

With older network sites continually being decommissioned, telecom lease buyouts can eliminate the financial risk related to tech advances or network redundancies, as well as unfavorable lease terms, or other renewal uncertainties.

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At a time when real estate owners are facing a number of financial challenges, they can significantly enhance the value of their properties by leveraging telecom assets – both the ones they may already have, and the ones that will need to be built to support the exploding demand for data and bandwidth. They can employ tactics such as a telecom lease buyout to maximize their value, access capital quickly if needed, and reduce downside risk.

Bernard Borghei is the CEO of Symphony Towers Infrastructure.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

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