There are well over 100,000 cell towers in the United States alone. Most of these were built in the 1990’s when cell phone technology really started to boom. Most cell tower site leases were set for a term of 25 years, meaning there are tens of thousands of leases set to expire over the next several years. Companies invested hundreds of thousands of dollars into each one of these cellular tower sites, and the companies do not want to lose that investment.
Additionally, over the last 2 years alone, more than 20,000 cell towers have been sold from communications companies to tower companies. These companies, like American Tower and Crown Castle, have invested billions of dollars in acquiring new tower sites, and they need a return on their investment. The tower companies make their money from leasing space on the cell tower to wireless communications carriers. However, the wireless communications carriers want to be assured that their equipment will remain on the tower for an extended period of time. This makes tower sites with only a few years left on their term unappealing to potential co-locators.
The result of all of these expiring leases, coupled with the need to attract subtenants, has led to a huge increase in landowners being presented with amendments to extend their lease terms. The tower companies have discovered that 25 years is too short. At Vertical Consultants, we have seen new and amended leases being proposed for terms well in excess of 50 years. In fact, Crown Castle routinely presents their acquired landowners with leases through 2099! At Vertical Consultants, we are here to help you get your optimal agreement, so here are our three tips:
- Maximize Long-Term Lease Structure: Most property owners focus on how much rent they are being offered today rather than focusing on the long-term structure of their lease for the next several years. Getting rent tomorrow is great, but structuring a lease that makes sure you are getting paid correctly not only tomorrow, but for the next 10, 20 or even 30 years is even better. This is not limited to just getting a portion of subtenant revenue, this is also tapping into all revenue that can be derived from the tower site going forward.
- Create a balance of power: When your tenant presents you with a lease extension, they are only giving themselves an option to continue extending the term. Depending on the language of your agreement, your tenant may be able to terminate the agreement at any time. Protect yourself against this by incorporating an early termination fee or granting yourself the right to terminate the agreement. Both are good ways to even the power imbalance between you and your tenant, although other methods are possible.
- Limit the time you extend the lease: Do not agree to a term in excess of 25 years. Your tenant will tell you they need 100 years or else your site will not be profitable to them. This is simply not true and is a tactic designed to scare landowners into signing devastating amendments. If you grant an extension for 85 years, you have lost enormous amounts of negotiation leverage and have severely devalued your asset.
If you have been approached about extending the term of your lease, this means your property has value to your tenant. This may be the perfect time to negotiate a new agreement to take control of that value. Vertical Consultants is here to help, and we get results!
In 2022, Vertical Consultants averaged an immediate 302% increase in rents being received by its clients, and since 2010, has been able to assist its clients in the recovery of over 300 years worth of combined underpaid, and, in some cases, unpaid rents and other expenses that were rightfully due to these property owners located throughout North America.
To learn more about our services, visit https://www.celltowerleaseexperts.com or contact Vertical Consultants at info(at)vertical-consultants(dot)com or 877.456.7552.