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One of the biggest mistakes that most property owners make is they continue to rely on “Market Rent” figures when determining how much to charge a cell-tower company.
To be crystal clear, there’s no such thing as market rent when it comes to a cell-tower lease. If you try to use comparable rents in your area, you’re using data that will only cause you to perpetuate under-valued rents that have been paid to property owners for the last few decades.
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Simply put, what another property owner may have been paid doesn’t determine the value of your cell-tower lease. Vertical Consultants achieved an average of a 322% immediate increase in rents for its clients and it was not because we used Market Rent.
Why? Every cell tower lease has an individual value and as well has a different impact on every individual property.
Doubt Us-The Numbers Don’t Lie?
If you doubt that relying on Market Rent figures is the wrong way to negotiate your cell-tower lease, look at the revenue and profit garnered by the companies that owned the majority of North America cell towers in 2013.
The largest companies averaged almost $3.0 billion in annual revenue. More impressive is the gross profit margin on this revenue was approximately 74%.
How can a cell-tower company achieve such profit? It’s a simple formula that has been used since the beginning of time: knowing a lot more than the other guy.
This doesn’t mean that property owners are good at what they do, but at its core and especially when it comes to value, a cell-tower lease is not a real estate deal, it’s a telecom one. The cell-tower companies understand that and so should you.
Think Long-Term Strategy
So how does a property owner get the best deal when it comes to cell-tower rent?
The first step is turning the mirror toward the cell-tower company and looking at the value it gets from either building a cell tower on your property or continuing to have the right to lease your land.
The cell-tower company will try to get you to agree to rent with an escalator that will (hopefully) keep the rent growing at a rate that maintains with inflation.
In doing this, it will have achieved exactly what it set out to do. If it can get these terms, it will have fixed the expense of leasing your land for the next couple of decades at minimum, and no matter how valuable the site becomes, you will never achieve any increase in rent received.
Focus on structuring a lease that allows you to capture a portion of the value the cell-tower company derives from your land. This can be difficult if you’re unfamiliar with the telecom industry, particularly when you’re attempting to forecast how a cell-tower company will derive revenue in the future.
You may think this only means subtenant rents, but a cell-tower site may greatly increase in value without another wireless carrier even using the site.
The Definition Of Insanity
They say the definition of insanity is doing the same thing over and over again and expecting a different result.
That is basically what property owners of all types have been doing since the first cell-tower lease was consummated back in the 1980s. This will continue unless property owners look beyond Market Rent.
Contact us today and we will answer your questions and see what you should receive as rent not only on day one but throughout the term of your lease.
Vertical Consultants is always open to provide you not only references from clients we have assisted but we will let you speak to them directly and learn how looking beyond Market Rent was the best decision they made when it came to their lease.