ARTICLE HIGHLIGHTS
- Aligning Objectives: A Cash Influx For Club Improvements
- Conclusion: A Straightforward Win-Win Transaction
Lars Edgerton, the club’s President, was contacted by Symphony Wireless Acquisition Advisor, Josiah Cobbs. Josiah, an expert in creating value for site owners, was calling to give Lars a valuation of his assets at the club. As the new club president, Lars was just getting his feet wet and saw this as a great opportunity to learn and make his mark.
The Conversation with Lars Edgerton: Exploring Lease Buyout Opportunities
Following the initial outreach, Josiah set up an informational session with Lars. In this session, Josiah and Lars talked through the existing leases, what an easement is, rights of first refusal, tower maintenance, adding existing assets, and the future of wireless equipment as Symphony sees it.
- Leases – Carriers, ISPs & general communication companies enter agreements with the landowners to rent space on the asset. These agreements have tons of industry language & clauses that only industry experts know how to work to their advantage.
- Right of First Refusal – A very popular clause in tower build contracts, this clause allows tower builders the right of first refusal (ROFR) when the landowner tries to sell the asset. Allowing the builder to match any offer from a prospective buyer.
- Tower Maintenance – While tenants are responsible for maintenance on their specific assets, many facets of tower maintenance require routine attention from landowners. The steel, the electricity, the access paths, security, and weather infrastructure all have routine maintenance.
- Existing Assets - These are current tenants and their equipment on the cell tower. The payments, space, and tenure are all detailed within your contracts with each tenant.
- Future of Wireless - Cell phone usage is only growing, coverage will become more necessary, and providers will have to act on that. Providers are companies after all, and they will seek to make the most money possible. Meaning that decommissions, consolidations, and upkeep of the latest technology are all factors that site owners need to be on top of with their assets. It is not as simple as riding the wave.
Aligning Objectives: A Cash Influx for Club Improvements
Recognizing the potential for unlocking value for the Country Club, the discussion evolved around the idea that while the low monthly rent from the tower might not have a significant impact, a six-figure lump sum could provide a much-needed cash influx for the club’s improvement initiatives.
Lars Edgerton recognized the immediate benefits this deal could bring to the Country Club. Part of the reason the club decided to go with Lars as the new president was for him to oversee the expansion of the club’s facilities and capabilities, looking to expand the wedding venue and build an onsite driving range for more revenue streams. This alignment of objectives laid the foundation for a mutually advantageous collaboration, emphasizing Symphony Wireless’ ability to understand and address the unique financial needs of its clients.
Selling Points: Security and Streamlined Cash Flows
As negotiations progressed, Symphony Wireless highlighted key selling points to Lars Edgerton. One pivotal aspect was assuring the Country Club that everything would remain in place with the property and the existing agreement. The lease buyout was framed as a straightforward exchange of cash flows, providing the club with immediate financial flexibility without disrupting the current operational landscape.
Another compelling selling point was the mitigation of risk associated with potential decommissioning. By opting for a lease buyout, the Country Club secured 18 years of rent upfront, eliminating the uncertainty linked to the possibility of losing income due to tower decommissioning. This strategic move not only addressed immediate financial needs but also provided the Country Club with long-term stability.
Finally, to maximize the asset’s value, the club was able to Harness a 1031 Exchange to defer taxes in the short term to begin developing their new projects. Additionally, in a long-term purview Symphony’s alignment on adding value to the asset over time and sharing that revenue with the club meant this deal could continue to fuel business at the club. Most telecom acquisition companies have their eyes set on 3-5 years after the transactions, waiting for the market to build back up and sell at a perceived peak. Symphony, rather than cooping short-term gains, opts to take a longer approach building gradual growth and earnings with an ever-growing portfolio.
This view makes Symphony’s assets more favorable to carriers and other providers/tenants and they know they have a long-term partner to deal with. Thus, bringing more opportunities for growth for both seller & buyer.
Conclusion: A Straightforward Win-Win Transaction
In the end, Symphony Wireless successfully executed a seamless lease buyout for the Country Club, providing them with a six-figure lump sum that could be directed toward much-needed improvements. This case study showcases Symphony’s ability to identify opportunities, communicate effectively, and tailor solutions that align with the unique financial objectives of its clients.
DISCLAIMER
The foregoing case study has been fictionalized in certain respects to protect the identities of the parties. Past performance is not indicative of future results. Symphony Wireless does not provide tax, accounting of estate planning advice. Interested parties are encouraged to consult your own legal and tax advisors.
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