What is a Prepayment?
The prepayment of a cell tower or roof top lease is when the landlord in a cellular antenna lease sells the future rent stream and / or the entire lease to a third-party in exchange for a lump sum, prepayment of rent. The lump sum, prepaid rent allows the landlord to put the money to work in a variety of ways.
Md7’s prepayment programs are different than most of the programs out there.
Most buy-out companies work for Wall Street banks and private investors. Md7 works for your existing tenants – the mobile operators and owners of the cell site and equipment that you have been dealing with for years, even decades. When you sign up for an Md7 prepayment program, you obtain the benefit of access to capital while granting the tenant the peace-of-mind necessary to make long-term network management decisions related to the cell site.
- Cash up front Receive your money now and invest or spend it.
- Minimize Risk
- Most leases have termination rights. Your current rent is not guaranteed.
- If the lease is ever canceled, you keep the money.
- Potential Tax Advantages (*check with your tax advisor).
- 1031 Tax Deferred Exchange
- 529 Tax Savings Plan for College Tuition
- Capital Gains Tax
- Net Operating Loss Carryforward or Carryback
What is my lease worth?
The purchase price is typically dependent upon the following factors:
- Name of carrier on the property
- Amount of rent received
- Escalation rate of rent
- Location of cell tower or roof top
- Length of term of prepayment
- Existence of mortgage and ability to obtain a SNDA from the lender
If the lease can be terminated, why are Md7 and its financing partners interested in purchasing it?
Simply put… Portfolio Management. Individual site owners are exposed because if their site is terminated, there is likely nothing they can do to replace it. Md7 and its financing partners are purchasing thousands of sites. If one site gets terminated, they are able to offset the losses against the rest of the portfolio with little adjustments.
What if I don’t need the money?
GREAT! We typically don’t do business with site owners that “need” the money. It’s great to have an immediate “use of funds” but other site owners who are well versed in best business practices understand the value of controlling their financial future and find ways to invest in Guaranteed Returns by taking a lump sum as opposed to holding onto a Terminable Lease with little guarantee.
What happens if the carrier terminates the lease after I sell it?
Nothing! You keep your money. This is a non-recourse transaction, which simply means you keep your money and the investor loses (although it may have a window of time to try and place another carrier at the site).
Will this prevent me from selling my property?
You can sell your property whenever you want. You keep the money from the transaction and you sell the property for its “current use.” People buy property for the “current use” of the property, not because it has a cell tower on it.
Can the buy-out be structured over multiple tax years?
Yes. In fact, these “multi-pay” deals typically result in a bigger payout to the landlord. Payments to you will be guaranteed by a promissory note.
Can I do a 1031 Tax Deferred Exchange?
Consult your tax advisor.*
You may be eligible to invest 100% of the sale proceeds and defer your obligation to pay taxes. Put the full amount of your money to work!
This strategy allows you to “defer” paying the capital gains taxes on the investment property that is sold, so long as another “like-kind property” is purchased with the proceeds.
There are four types of 1031 Tax Deferred Exchanges:
- Simultaneous 1031 Exchange
- Delayed 1031 Exchange
- Reverse 1031 Exchange
- Construction 1031 Exchange
Am I even allowed to sell you my lease?
Some contracts contain language that gives a tenant a “Right of First Refusal” to consent to the purchase of its lease. Because Md7’s program is driven by the tenant, this consent will not be a concern. Our prepayment program provides a win-win situation for the carrier because they are teaming up with an approved contractor to purchase their sites.
How do I get started?
Md7 will evaluate the parameters of you your lease and perform an audit to determine the value of your lease. A member of our capital team will work with you to deliver an option for your consideration and explain the closing process.
What documents and information will I need to provide?
To determine the most accurate pricing, you will be asked to provide the following:
Address of location. We must verify the cell site location and its proximity to nearby sites.
- Name of Carrier. The credit worthiness of carrier is vital for maximum payout
- Current Rent (monthly or annual payment)
- Current Rate of Escalation (annual vs. term; as well as rate of increase)
- Approximate date of next rent escalation
What is the process?
- Deliver required information for pricing
- Sign the prepayment option agreement
- Send in requested closing checklist items for title insurance, etc.
- Investor orders title report and conducts site inspection
- Provide signature authorization documentation
- Money is sent to escrow with a closing / settlement statement
- Money is disbursed per escrow instructions
- Transaction is recorded in the public record.
* Md7 and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own advisors before engaging in any transaction.