Symphony Wireless serves as a way for landlords to realize decades of potential value today
From towers in cornfields, antennae on rooftops, and fake trees that aren’t fooling anyone, cellular infrastructure is a ubiquitous and ever-changing piece of our national landscape. This critical infrastructure relies on a complex web of agreements between property owners and cell carriers, who lease space from landlords through a series of discrete easements and leases that together represent a substantial dollar amount paid out to site owners each month. These leases are a double-edged sword: while being approached by a cell carrier is like winning the lottery, each of these contracts is terminable at any time without much warning, making any reliance on that income turbulent for a property owner. This is where Symphony Wireless comes in; an investor in and operator of cell sites around the nation with a viable solution.
The Real Deal recently had an insightful conversation with Josh Cymbalista, Anthony Tabbacchino, Andrew Clements, and Nicholas Tzavis from Symphony Wireless. During the discussion, they shared valuable insights into how their firm empowers landlords to promptly unlock the inherent value of their properties today, rather than waiting for it to accumulate over decades via rental revenue alone.
The Cell Lease Paradox
Cell site leases hold a unique and unpredictable position within the real estate landscape. On one hand, a single lease can yield property owners up to five thousand dollars or more per month. However, on the other hand, these leases possess limited value beyond their monthly income due to the short-notice termination clause, which allows carriers to decommission the site and cease payments at their discretion.
“Underwriting income from these cell leases becomes a challenge for most lenders due to the termination language,” explains Cymbalista, Director of Underwriting and Partnerships at Symphony Wireless. “Neither banks nor real estate investors would value it as highly as Symphony Wireless does.”
The legal and financial uncertainties surrounding cell leases put leaseholders in a challenging situation. While their cell lease generates income today, they cannot rely on it to remain indefinitely, and it is rarely usable as collateral for borrowing. Decommissioning risk and the challenge of adding new leases pose additional concerns for single-site owners. These concerns are not merely theoretical; Cymbalista recalls how the merger between Sprint and T-Mobile resulted in the “overnight termination of twenty or thirty thousand sites.”
This is where Symphony plays a crucial role. “We operate akin to an insurance company,” says Cymbalista. “With a substantial pool of assets, we underwrite and absorb that risk.”
Symphony Wireless offers a solution by purchasing cell leases from landlords and adding them to their growing portfolio. This allows lease owners to capitalize on the full potential value of their leases & mitigate their risk of decommission. Cymbalista explains, “We view these as critical infrastructure. We’re betting a lot on that fact.” Symphony Wireless’s strategy revolves around optimizing the value of existing cell sites within their portfolio, leading to revenue sharing that can benefit both Symphony and the former leaseholders.
Selling to Symphony
The Symphony team outlined two common cases where cell site leaseholders are interested in selling. One occurs when a leaseholder needs an immediate infusion of equity; whether they want to improve their property, pay down the mortgage, refinance, or pay back investors,
The slow drip of money from the cell lease can be turned into a lump sum thanks to Symphony.
The other instance occurs when an owner is going to sell the property on which their cell site is located. Here, Symphony gives landlords additional flexibility and greater value by separating the easement from the building at the closing table, allowing them to sell the lease to Symphony and as the best buyer instead of passing the asset along to the new owner without maximizing the value.
Symphony’s approach presents numerous advantages. They offer upfront funds for an asset that may face future decommissioning, ensuring protection against the sudden loss of the asset. Moreover, Symphony’s flexible terms cater to diverse financial requirements. “We can adjust payment timelines to facilitate gradual rent supplementation, smoothly handle simultaneous closings, and effectively navigate various other financial circumstances that may arise during the closing process” noted Tzavis.