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Easements & Property Values

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
I own some industrial property. Sitting in the corner of the property is a cell tower. I jointly lease the cell tower portion of the property with a partner.

I've been offered a buyout of the cell tower lease equal to 10x my annual rental income. Factoring in the differential long term capital gains taxes and ordinary income taxes, the effective payment to me is about 22x my annual rental income.

But it comes with a catch. To get the favorable long term capital gains tax rate, I have to grant a perpetual communication easement across my property to access the tower.

So here is the rub. How much will the property be 'devalued' due to the granting of an easement. If the value drops only 5% then the deal is a bad deal for me. As my partner does not own the property, but does own 50% of the beneficial lease, he is obviously in favor of me granting the easement. But I wonder if I stand to lose more by devalueing the property?


Any thoughts?
 

DaveNay

Klaatu barada nikto
SUPER Site Supporter
B_Skurka said:
I own some industrial property. Sitting in the corner of the property is a cell tower. I jointly lease the cell tower portion of the property with a partner.

I've been offered a buyout of the cell tower lease equal to 10x my annual rental income. Factoring in the differential long term capital gains taxes and ordinary income taxes, the effective payment to me is about 22x my annual rental income.

But it comes with a catch. To get the favorable long term capital gains tax rate, I have to grant a perpetual communication easement across my property to access the tower.

So here is the rub. How much will the property be 'devalued' due to the granting of an easement. If the value drops only 5% then the deal is a bad deal for me. As my partner does not own the property, but does own 50% of the beneficial lease, he is obviously in favor of me granting the easement. But I wonder if I stand to lose more by devalueing the property?


Any thoughts?

Does the property already have buildings on it? Are the buildings likely to be torn down and replaced? Would the easement interfere with potential future buildings?

If the land is vacant, can the easement be placed so that it is not interfering with prime building sites? Is there already a utililty easement that could be shared?

Are you contemplating selling it within the 22 years? What's the balance of a slight de-valuing right now, vs 5% appreciation over the next 20 years?
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
The property is fully developed and leased. But what worries me is if it is sold in the future (which is likely) the new owner who occupies the main buildings may not want a perpetual lease that allows access to the back of the property. It is a reasonable security issue for some people to consider. Under the current arrangement, at the end of the lease, the rights to access the tower are eliminated, and the current tenent of the buildings has no conflict with the minimal tower repair traffic.
 

Jim_S

Spammer Hammer
GOLD Site Supporter
Couple of things to consider.

If you agree to the buyout will the carrier have the right to add equipment at no additional charge? Will they have the right to add equipment for other carriers at no charge? (known in the industry as a co-location)

You should try to make the equipment list, building and tower a part of the agreement. At least prohibit co-location unless additional payment is made.

The carrier most likely has something like this planned for the future. It is becoming extremely difficult to obtain building permits for communications sites.

I would also make the easement very specific. My neighbor is having easement problems with a developer who bought the lot to which the easement is granted. The easement is very loose so the developer bought some land behind the lot and is trying to use the easement for access to an additional 20 lots.

Jim
(I actually am a Communications Engineer and I DID NOT stay at a Holiday Inn Express last night):D
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Jim, the tower is a co-location now. It is fully developed or nearly so. There is no available land for additional communication buildings under the tower currently and that will not change. The tower is a 260' unit with antenna arrays at about a half dozen points starting at the top and coming down the main body for at least 100' of the tower. Not sure how much more they could develop it?
 

Jim_S

Spammer Hammer
GOLD Site Supporter
There's always a way to shoe horn more equipment in. We began deploying a "quad" radio a few years ago. 4 transmitters in the space one usually takes. Some carriers in low density areas only need one rack to deploy, sometimes in a small outdoor enclosure that hangs either on the side of a building or the tower.

Is your lease with a carrier or a tower company such as Pinnacle or American? You might consider checking around and seeing what the going rate is for your area. Does the carrier have an odd color of yellow in the background of their logo?

Jim
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
The lease is with SBA out of Florida, they are offering to buy it out with a lump sum payment.

But again, my question is how will the easement affect the value of the property? I suspect that the adverse effects to the property value are enough to not consider the buyout.
 

Jim_S

Spammer Hammer
GOLD Site Supporter
I can't say how much but there is a good chance it will devalue it to some extent.

Is there an existing easement that could be continued to include this area? As Dave suggested is there an existing right of way or easement that could be shared?

Jim
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Currently the access to the tower is down the main driveway of the property. This drive continues through a gate to he rear of the building (loading dock area) and continues to the tower at the extreme back of the property. There is absolutely NO other way to access the tower (creek on one side, train tracks & ditch on the opposite side, flood retention on the back side.

The only thing I wonder is how much the property would devalue if an easement is added.
 

DaveNay

Klaatu barada nikto
SUPER Site Supporter
B_Skurka said:
Currently the access to the tower is down the main driveway of the property. This drive continues through a gate to he rear of the building (loading dock area) and continues to the tower at the extreme back of the property. There is absolutely NO other way to access the tower (creek on one side, train tracks & ditch on the opposite side, flood retention on the back side.

The only thing I wonder is how much the property would devalue if a

GOOGLE EARTH COMPETITION!!!! Find Bobs property!
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Yup that's it. You can see there is only one way to get to that tower. That is the concern. With only 1 ingress/egress point for the tower, does that lower the property value if I lease the buildings to someone else because they may have secruity issues? Or if I sell the property to someone else?
 

riptides

New member
Does your county/state even access value based on ROW or easements present? Mine tries, but very rarely has success.

-Mike Z.
 

Junkman

Extra Super Moderator
Easements are like selling the rights to the property, but you still are responsible for the taxes. I wouldn't do it under any conditions. The tower location is only going to go up in value, so you might as well keep that value in your pocket. As for the long term, they have it figured out where it is beneficial to them in the long term. Lease it, but don't sell it. If your partner wants out, then buy him out. Why should you give an easement that will devalue your land to sell the tower sight and your partner benefits, but doesn't share in the costs? One more reason not to have partners..
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Junk that is where I am strongly leaning. Initially when I got the offer presented to me I looked at it like a pot of gold under the end of the rainbow, but the more I consider it the worse the situation sounds.

It seems that if I do go forward with a buyout, I should get at least 70% to 75% of the proceeds rather than a simple 50-50 split. I have all the downside.


I guess I just decided. Thanks guys!
 

Junkman

Extra Super Moderator
As your financial advisor, you owe me 10% of one years rental income. As for the other guys that posted, it is up to them to collect from you. Guido will be by to pick up my share....... Junk....
 

Jim_S

Spammer Hammer
GOLD Site Supporter
Junkman said:
As your financial advisor, you owe me 10% of one years rental income. As for the other guys that posted, it is up to them to collect from you. Guido will be by to pick up my share....... Junk....

I discussed payment terms with Mr Skurka BEFORE I gave my advice. . . . Didn't You?
 

Junkman

Extra Super Moderator
jim slagle said:
I discussed payment terms with Mr Skurka BEFORE I gave my advice. . . . Didn't You?

Knowing what your advise is worth, I don't doubt it..... :yum: :yum:
 

Jim_S

Spammer Hammer
GOLD Site Supporter
Junkman said:
Knowing what your advise is worth, I don't doubt it..... :yum: :yum:

I didn't say he payed me. I had to pay his secretary to let me talk to him and them pay him to listen to me.

I've been in the consulting business since I retired but I can't seem to make any money and I can't figure out what is wrong.
 
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