“We need a Cell Tower Lease Expert! Help!”
We often receive this phone call from attorneys, property owners – anyone who has been contacted regarding a cell tower lease. Even individuals who have a strong understanding and years of experience in real estate. They understand that they can still benefit from a cell tower lease expert who can show them common pitfalls and where they can capitalize within a cell tower lease.
Here are 7 reason why YOU should consult a cell tower lease expert!
1. Cell Tower Lease Agreements Are Unique
Cell phone companies do not use AIR (Industry Standard) forms commonly found in commercial real estate leasing. Instead cell tower lease tenants prefer to use lease agreements drafted by their attorneys. As you can expect, their lease agreements have rights slanted heavily in favor of the cell tower lease tenant.
These agreements are more of a telecommunications agreement instead of a standard real estate agreement. While they do lease a specific area from the property owner, it is important to understand that their primary use is for telecommunications.
Therefor most individuals who specialize in real estate, without having a specialty in the niche of telecommunications, will be insufficient to serve you in maximizing your opportunity.
2. Cell Tower Lease Rents Are Apples and Oranges
Per square foot rental rate negotiations, commonly used in office, retail, and industrial leasing, does not apply to the leasing of property for a cell tower. If you are trying to nail down a cell tower rental rate on a per square rate basis, you will be leaving A LOT of money on the table.
Another common pitfall is for landlords to call other landlords and ask what they are getting paid for their cell tower. Every property is very unique. Landlords who do not engage expert consultation often agree to below market rates thereby making bad deals. The phone-a-friend method may give you bad information, bad information that you may now duplicate. You need to know how to maximize cell tower lease rates! That information is at your finger tips with the help of experts in the field.
3. Yes, There Is A Market!
There are many factors that go into how high you can push cell tower lease rates. We will start with the difference of new vs. existing leases.
With a new cell tower lease the cell phone company typically identifies three candidates in what is known as a “Search Ring”. Having more than one candidate gives the cellphone company other options if the property owner is too aggressive in lease negotiations. It is important to understand no matter how much a property owner values their property, there almost always is other options nearby.
4. Coverage Gaps
To understand how high you can push the cell tower lease rate before the tenant goes away you need to understand the tenant’s needs.
- What are the tenant’s coverage objectives?
- Why have they picked your property?
- How tall of a cell tower are they planning to construct?
- What is their desirability to use your property, and how do they value your property?
5. What Is A Trigger Event?
With existing cell tower lease agreements the opportunity for the property owner to raise rents typically comes around with “trigger events”.
Trigger events are events such as site upgrades, site expansions, or lease extensions. If a tenant is adding equipment, expanding their lease area, or asking for additional lease terms, it’s time to talk about increasing the cell tower lease rent.
In addition to rent anytime you amend a lease you can also open the door to renegotiate, or add other terms, in the lease. A commonly added term when working on lease amendments is redevelopment or relocation language.
Maximize The Value Of The Lease…
6. Cell Tower Current Lease Value
The three most important variables to the value of a cell tower lease are:
- The current lease rate
- The rent escalator
- The remaining term of the agreement
If you can increase the rent, or the rent escalator, the value of the cell tower lease will be worth considerably more.
If a landlord is thinking of selling a property with a cell tower lease, they need to know the value of that lease. In addition to knowing the value of the lease it may make financial sense to sell the cell tower lease separately than the property.
For example, in commercial real estate terms, if the property will sell at a 9% cap rate and you can sell the cell tower lease at a 7% cap rate you should sell the cell tower lease separately.
Another example is if the property has an owner-user building and the buyers of the property will not give full value for the cell tower lease in their offer, then it makes sense to sell the cell tower lease separately.
By packaging the cell tower lease in with the property the property owner could be leaving hundreds-of-thousands of dollars on the table.
7. Market Knowledge is Power
The only way to determine the true value of the cell tower lease is to contact a cell tower lease expert who has experience closing over one hundred of cell tower lease sales transactions.
Optimize Cell Tower Lease Rates…
Nick was able to more than double the monthly rent we had previously negotiated for a cell tower on our property…plus a significant signing bonus! There are several aspects to these deals that only someone with a detailed understanding of the market can explain.
Sam H., President, Cal-Sorrento
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About Nick G. Foster
Since founding Airwave Advisors® in 2014, Mr. Foster has added value to over 400 clients ranging from the State of Nevada, City of Beverly Hills, to Habitat For Humanity. Mr. Foster focuses on cell tower lease renewals, buyouts, new lease negotiation, and cell site lease management. Prior to starting Airwave Advisors® Mr. Foster founded and led the Cell Site Services Group within nationwide commercial real estate services leader Cassidy Turley (now known as Cushman & Wakefield).