2019 Cell Tower Lease Rates | 5 Things To Know
1. How Much Of An Option Payment Should You Ask For?
In 2019 the request by tenants to be granted an option to lease your property is a common one. I want to start out by stating that granting no option, is better than granting an option. An option ties up your land for an agreed upon period of time in exchange for compensation. Often tenants are proposing multi-year options and offering to pay landlords small sums such as $500.00 for one year.
Tenants need to have skin in the game. If the prospective tenant will not agree to pay you a multi-thousand dollar option fee in exchange for tying up your land for a minimum of one year, than how serious are they? It typically takes hundreds of thousands of dollars to construct a cell tower, so another few thousand dollars payable to the landlord is a drop in the bucket – if they are serious.
2. How Much Rent Should You Charge Your Tenant?
Cell tower and cell site lease rates continue to rise year after year. Typically, we are seeing higher rental rates on rooftop in urban markets and lower rental rates to lease raw land in rural areas. Rates will fluctuate depending on the following: (i) the site build, (ii) who the contract is with (ie: Verizon or American Tower Corporation) and (iii) how many options are in the area. When constructing a new site, a builder typically identifies a few candidates, however, they usually have their sights set on one location. The other two are typically back-ups in case the first location falls through.
3. How Often Should Your Rent Escalate?
We continue to see tenants present contracts to landlords with ridiculously low rent escalators. Lately i have seen contracts presented with no rent escalator, or 5% every five years. As Mr. Wonderful on NBC’s Shark Tank says, “Stop the madness”!
Inflation has historically trended at 2-3% annually. The whole point of a rent escalator is to maintain the value of the dollar paid from the tenant to the landlord over the course of time. Why should you accept a rent escalator that is less than the annual rate of inflation? The value of the dollar you receive would just be less and less over time.
4. How Long Of A Contract Should You Agree To?
Over time tenants have become more aggressive with the terms they present to Landlords. Years ago, tenants would present contracts that were a maximum of 20-25 years, which is a very long time. Now we are seeing some tenants get as bold as to present 100-year lease agreements. Basically, you would be selling that piece of land to your tenant and they would pay you monthly payments until either they voluntarily terminate their agreement, or you pass away.
It is important to keep in mind that term in cell tower lease agreements locks in the landlord. The tenant typically has the right in the termination provision of the agreement to terminate the contract with 30 days’ notice. So really what your tenant wants from you is to remove your ability to renegotiate a better deal for decades into the future. Meanwhile they are not giving you a guarantee in rent, instead they can walk away in 30 days’ notice and that income disappears.
5. What Else Should I Need To Know?
A lot. You are about to enter into a multi-decade agreement with someone who does this for a living. To create leverage on your side, you need more information and a cell tower lease expert in your corner to advise you of pitfalls and what is market with cell tower leasing. Give us a call today to discuss your cell tower lease opportunity further.
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