(article updated on October 22, 2019)
AT&T Cell Tower Lease Activity
Another headline reads, “AT&T announced first quarter revenues of $32.5 billion“. When AT&T is making billions a quarter, there is no question that AT&T is a financially strong credit worthy tenant.
While many property owners may see dollar signs when AT&T comes their way, it is important not to be taken advantage of when negotiating with this 800 pound gorilla. AT&T hires experts in cell tower leasing who are incentivized to get the best deal for AT&T. They want to secure the lowest rental rate with the most favorable lease terms for AT&T, not you the landlord.
In the spirit of David vs. Goliath, we want to share with you 3 tips on leasing to AT&T:
1. Everything Is Negotiable
All business terms (and even some legal provisions) presented by AT&T and/or their representatives are negotiable. They typically present their lowest offer, by example $500.00 per month in rent with a 10% rent escalator that triggers every five years.
Everything from rent, rent escalators, the length of the lease term, holdover language, taxes, insurance, etc. When you review an AT&T cell tower lease you will quickly realize that there are so many provisions that are negotiable, that you can quickly get in over your head.
This tip also applies to lease renewals and lease amendments. We often see lease amendments presented by MD7 that include provisions attempting to expand the premises or use language in the lease. Remember you always have the right to say NO!
2. Focus On Current Lease Economics
Often AT&T, or their contractors, will try to negotiate a low starting rental rate with a promise to the landlord that there will be rent increases, or more tenants down the road. Don’t get distracted by their sales rhetoric.
Capture the highest rents with the most favorable lease terms today and THEN plan for the future. The reality is additional tenants may or may never knock on your door.
When we reviewed Crown Castle’s 8-k filing in 2019 we found that across their portfolio of 40,000 cell towers their average tenancy was two tenants. That means that there is a large part of their portfolio that are single tenant towers.
It makes business sense to focus on the economics that you can capture today such as one-time option payments, rent that will commence upon construction, and rent escalators. While co-location rent would be nice, it is secondary.
3. Have An Expert Tackle AT&T’s 24 Provision Agreement
AT&T’s cell tower lease and AT&T’s lease amendment both have been drafted by AT&T’s attorneys. They are very one-sided agreements drafted by cell tower lease experts in favor of AT&T. A property owner is at a huge disadvantage when starting from scratch trying to negotiate AT&T’s lease documents.
This is often why we are hired by attorneys and property owners to assist them with understanding what can be changed within the lease. With 24 provisions in AT&T’s standard lease template there are some provisions that can be removed entirely, added-in, and that can be heavily revised.
There is no one more experienced in negotiating AT&T cell tower leases on behalf of property owners than Nick G. Foster, President & Founder of Airwave Advisors.
4. Remove the Right of First Refusal
One notable provision that should be immediately removed is the “Right of First Refusal“ provision. This provision, typically found around provision 23 in the lease, will absolutely kill any market for you should you ever want to consider selling your lease for a lump sum payment.
How does a Right of First Refusal kill your market?
Many potential buyers for cell tower leases simply won’t bid on leases with a “Right of First Refusal” provision. In their experience it is a waste of time to bid on a cell tower lease where AT&T has the final say on if they want to steal the deal from that buyer or not. This significantly hurts your market and to receive the highest most competitive offers, this provision should be removed. Read more regarding “Cell Tower Lease Buyouts” here.
5. Tip The Scales Of Knowledge In Your Favor
Remember that AT&T hires professionals to look out for their best interest. Airwave Advisors can help you secure the highest rents with the most favorable lease terms when leasing with this 800 lb. gorilla. AT&T hires cell tower lease experts to secure them the best terms, shouldn’t you?
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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).