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Optimizing Tower Lease Extensions

Many cell tower companies are now aggressively seeking out extensions to their current cell tower leases. Vertical Consultants has assisted property owners throughout North America who have been contacted about negotiating extensions to their existing cell tower lease agreements.

So, why are these tower companies contacting the landowner if there is still time left on the lease? The answer:
Time and money.

  1. Time-A cell tower company needs to secure additional time to both better market the tower location for future subtenants/co-locators it may be seeking out as source of additional revenue at the site, and, more importantly, to satisfy existing sublet commitments it may have already made as it relates to the site, its current revenue source at the site; and
  2. Money– A cell tower company benefits financially in that securing a site long term calms the nerves of investors, as it acts as a form of guaranty that a site’s revenue stream will not be interrupted. This especially holds true for those companies who are publically traded (Crown Castle &  American Tower).

Vertical Consultants can assist a property owner in interpreting the claims that a cell tower company presents, which include the following:

  1. Claim #1:  “Due to the value of the long term relationship we have with you, the landlord, we are willing to extend the current lease for the cell tower with you.”  What they aren’t telling you: In reality, they need the extension of time more than you do.
  2. Claim #2:  “We are willing to pay you a ‘signing bonus’ if you agree to extend the lease.” What they aren’t telling you: While a signing bonus is great, it is usually only a small fraction of what should be offered for the landowner’s consent to an extension of the lease.
  3. Claim #3:  “We are willing to allow the lease to continue to escalate as provided for under the current terms of the lease agreement.” What they aren’t telling you: This is basically giving you something that you already have a right to, and, in some cases, the tower companies are actually seeking to effectively reduce a landowner’s annual rent escalations by having them agree to certain things like a Consumer Price Index (“CPI”) rent escalation. What the tower company is not telling you is that while your current annual rent escalations could be 3% or greater, agreeing to a CPI escalation could lower your annual rent increase to less than 1%. This would cost you tens of thousands of dollars over the life of the lease.

So, Why Do Most Landowners Agree To An Extension Of Their Lease?

Why do landlords agree to an extension? The answer may be the illusion created by a cell tower company representative or agent. One façade that is created is that a landlord is securing  revenues for the lease by agreeing to an extension. What is the true story? A majority of all tower and rooftop leases have extremely liberal tenant termination clauses, and, as a result, any extension agreed to by the landowner basically provides the tower company with a long term commitment from the landowner, with no reciprocal agreement from the tower company.

A landlord’s decision to agree to an extension of its lease is an important negotiation and should not be taken lightly. The structure of this transaction may mean hundreds of thousands of dollars over the life of is lease.

The cell tower companies are not on your side, as they benefit by securing the best deal they can make for their company. They will not look out for your interest just because they have been paying you rent all these years. The cell tower company’s top priority is to make the best deal for their bottom line, shouldn’t yours be as well?

So, How Can Vertical Consultants Be of Help With a Proposed Extension? 

We work with landowners to make sure that if they are open to extending their current cell tower lease, they “get the most, but give up the least”.

The decision a landowner makes today as it relates to an extension of its current lease may mean hundreds of thousands of dollars over the life of is lease, as a few hundred dollars more a month means a lot when paid over 10, 20, or more years. This is an important transaction and should not be taken lightly, as, at the end of the day, as noted above, it could mean a lot if not structured correctly.

The cell tower companies, as much as they would like you to believe otherwise, are not on your side, nor will they look out for your best interest, as their primary interest is to get the best deal for their company, not for you. Their first concern is their bottom line, shouldn’t yours be as well?

Contact us today so we can assist you in reviewing your proposed lease extension and work on your behalf to make sure you get fair value for allowing a tower company to extend their lease. Our initial review is free of charge.

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