There are hundreds of thousands of cell tower and rooftop leases on properties throughout North America, but the underlying question is: How many of these leases are “Smart Cell Tower Leases”? What is a “Smart Cell Tower Lease”? The answer is quite simple, but for some reason, up until now, property owners of all types and sizes have ignored it.
A “Smart Cell Tower Lease” is one that looks beyond the immediate future and allows for a structure that will maximize the value of the cell tower lease, not only on day one, but throughout the term of the lease, while, at the same time, minimizing the negative impact the agreement can have on a property owner’s future development, disposition or even financing of its properties.
So, why is it important to have a “Smart Cell Tower Lease” when it comes to the value of that lease? The first question almost every landowner wants to know when it comes to a new cell tower lease or an extension of an existing cell tower lease is what should the rent should be. However, what most landowners are focusing on is what amount rent should be on day one of a cell tower lease, rather than how to construct a lease that gives them value throughout the entirety of the lease, which can be upwards of thirty years in term.
Most property owners rely upon annual or renewal term rent escalators to maintain value of the lease throughout the entire duration of the lease. However, all these escalators really do is keep your lease on track with inflation, which means that, at the end of the lease, you are basically being paid the same amount that you were being paid on day one.
The cell tower companies have done a masterful job of getting property owners to agree to lease terms that are almost a fixed expense, while, concurrently having the ability to increase the profitability of a cell tower site by adding subtenants or upgrading the cell tower site with new technology.
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Simply put, the cell tower on your property could be the most valuable tower site in your city, state, or even in the country, yet you would not see one more dime over the term of the lease than that which you originally agreed to. If you want evidence, look at the numbers-they do not lie. In 2012, the largest tower companies averaged over two billion dollars in revenue. This is quite impressive, but what is more impressive is their extreme profit margins from these same revenues. The tower companies have and continue to rely upon property owners entering into new leases or extending existing ones, based not only on incorrect or outdated methods of determining what initial rent should be, but, more importantly, agreeing to a structure that will ensure the tower companies of continual growth in their profit margins.
How does a landowner make sure they have a “Smart Cell Tower Lease” when it comes to value? The answer is simple, but can be difficult to implement if you are not familiar with the industry. A property owner should have a cell tower lease that provides for rent to be determined based upon value of the cell tower lease to the cell tower company and not based upon the value of the property being leased or what property owners have mistakenly agreed to in the past.
A cell tower lease should also be crafted to allow for re-entry points in the lease for the landlord, based upon not only who is using your property, but the utility they receive from that use. A landowner
should see more rent, not only every time a new subtenant enters the site, but also every time an upgrade at the site takes place, as to allow the tenant or subtenant to get more value from the location. The cell tower companies rely upon property owners viewing a cell tower lease as a simple real estate transaction and not on understanding that it is really a telecom transaction-that is where the value lies to them, and if you are smart, to YOU as well.
The second step in making sure that you have a “Smart Cell Tower Lease” is by recognizing that as important as it is to get the most when it comes to rent, it is just as important not to give up too much in return. Much like a good magic trick where the magician will distract your attention to perform the trick, a cell tower company will rely upon a property owner being focused on rent and not paying attention to the overall terms of the lease.
Remember, a typical cell tower lease is an agreement that is binding upon you, your company and your property for decades, with almost no way for you to terminate that agreement. Think about that for a moment; how many agreements will you or your company sign that will commit you to 20, 30 or more years, with no way for you to even renegotiate? Even if you enter into a bad long-term financing deal, you can refinance; or, on a personal level, even if you marry the wrong person, you can get a divorce. You are not so lucky with a cell tower lease, so you better get it right the first time.
What most landowners rely upon is that the lease is only affecting a small portion of their property, and, as a result, presume that it cannot do them much harm. The truth is that the terms of new cell tower leases and amendments to extend existing ones are now being structured in a manner that can have a negative impact on not only your property, but also you and, if applicable, your business.
A property owner needs to review any agreement presented with an eye on not only the probabilities that may exist as it relates to its property and the lease, but on the possibilities as well. Again, we are talking about an agreement that is going to last for decades, so ask yourself this question: Are you 100% certain what your business or property is going to look like in 5 or 10 years, much less 30 years?
A landowner needs to have a cell tower lease that provides flexibility to adapt to changing conditions. This can include changes to its property that mean a need to not only possibly relocate the cell tower, but, more often the case, the need to relocate access or utility easements serving that facility. It can mean a need to have liability, environmental, insurance, and other sections of the lease that account for the fact of an ever-changing world, especially over a period of 20 or 30 years. It can make sure that it does not enter into an agreement that will not only limit ability to assign, sell or otherwise transfer the cell tower lease, but the parent parcel, which the lease is a part of; and believe it or not, cell tower leases can put you in a situation in which you could be in breach of your current financing terms or limit your potential purchaser of your property the ability to get certain financing.
A landowner can have a “Smart Cell Tower Lease”, but it must realize that no matter how many real estate transactions it has been a part of, a new cell tower lease or an amendment to existing one is really a telecom transaction. The cell tower companies want property owners to continue to look at cell tower leases the same way as they have since the late 1980’s, and why not, as it has and continues to be extremely profitable to them. A “Smart Cell Tower Lease” is your way to start leveling the playing field between you and the cell tower companies.
The experts at Vertical Consultants work not only to increase the value of your cell tower lease, in 2012 immediately increasing rents by an average of 142%, but also work to get you a “Smart Cell Tower Lease”, which will mean optimal value throughout the term, and, at the same time, maximum protection for you and your property as well.
Remember, the cell tower companies have experts on their side, shouldn’t you as well?
Contact us today at 877-456-7552 for a free review of your lease and follow-up consultation to discuss how you too can have a Smart Cell Tower Lease.