Municipality Ponders Selling Tower Leases

December 10, 2012

A San Diego-based firm building a portfolio of telecom infrastructure assets is attempting to purchase cell tower leases from the town of Perryville, Md., according to Explore Harford. AP Wireless, an arm of Associated Partners private investment firm, offers to buy leases for a lump sum upfront with large payouts and flexible terms.

“We will pay a large, up-front lump sum cash amount in return for an interest in your cell site. The longer the interest conveyed to AP Wireless, the larger the payout,” according to the firm’s web site. “We offer extremely flexible terms and conditions. You want to maximize the up-front cash amount? We’ll prepay your rent for a perpetual term. You want both a large, up-front lump sum plus cash rent in the future? We’ll structure a fixed-term deal with a rent reversion.”

Jonathan Kramer, an attorney who advises municipalities on such offers, suggested caution be employed concerning selling their cell tower leases.

“It no surprise in this economy that local governments must to find their own gap-filler cash sources when sales tax revenues are be diverted to fund state programs,” Kramer said. “While cell site lease sales can help to narrow today’s local budget gaps, the loss of the long term steadily increasing rents has to be carefully considered.”

State laws can be materially different when a government sells a lease and grants an easement as compared to a private deal, Kramer said.

“The sales process must be open and transparent; compliant with all applicable state and local laws; and not result in an effective gift of public property or impairing public bond covenants,” Kramer said. “These are key stumbling blocks that can swing open the courthouse doors for challenges by members of the public regarding the process and the deal valuation. This is, after all, public property we are talking about.”

AP Wireless sounded a common theme among cell site aggregators, saying that selling the lease protects the municipality from risk of a cell-site decommissioning.

At the meeting where AP Wireless addressed the commissioners, the town administrator, noted that maintaining monthly revenue of the lease might be in the town’s best interests. The mayor said, even if the town were to decide to sell its leases, it would go through a competitive bidding process.