More and more cell towers are being built out in rural American. A common question we receive is, “What are rural cell tower lease rates?” To really understand the answer we need to understand development of cell towers in the rural United States.
Land Is Plentiful.
When cell tower developers are looking to build in the rural United States there is no shortage of land. There is a high level of supply of land and typically there is a significant amount of demand (property owners willing to lease their land).
Just like any market, whenever there is high-supply of land and willing property owners, the rates to lease the land will be on the lower side. The lowest rent we have ever seen was $50.00 per month. Why a property owner agreed to that rent I have no idea, but we have seen an endless amount of bad deals in rural America.
Don’t Give Away The Farm.
A common situation property owners describe to us is, “They low-balled me on rent, but I don’t want to lose the opportunity”.
In negotiations if you are not willing to walk away from a deal, you have already lost (in terms of leverage). There is a lot of poker playing in negotiating and as soon as the other side discovers you are not willing to risk losing the deal, they will be unlikely to make concessions and will likely dictate terms.
That leads us to “Don’t Give Away The Farm” and be willing to walk away. There are many provisions in a cell tower lease agreement that are bad for you and your property. We have seen Crown Castle request 99 year lease agreements. 99 years? With a 99 year deal you are basically selling them the property and instead of them paying you all at once, they are making monthly installments on the land they now control.
Understand Rent Escalators.
The worst rent escalators are often found in cell tower lease agreements on rural properties. A rent escalator is meant to increase the rent to maintain the value of the lease as outside factors such as inflation negatively effect the value of your dollar. Often we review cell tower leases in rural parts of American with term escalators which is a huge mistake. Some are so bad that the rent goes up 3% or 5% every five years
According to Trading Economics the US inflation rate averaged 3.26% from 1914 to 2019, reaching an all time high of 23.70% in 1920. At a minimum a property owner should agree to a rate that keeps up with US inflation. The market has come to accept a rate escalator of 3% annual as a standard. Verizon has tried to push 2% annual on new leases, however, we would not recommend agreeing to a lower rent escalator. Again remember, term escalators (every five years) is a bad idea and over time the value of the dollar you receive will typically be less.
Secure Option Payments To Cover Your Cost.
When developing a new cell tower you will often see an “Option” and an “Option Payment” proposed in the lease. This is a one-time payment the cell tower company will pay you in exchange for you allowing them to perform their due diligence on the property. A reasonable option period is two (2) years max, although some companies such as Crown Castle may request four years which is not needed.
New T-Mobile cell tower lease agreements propose a ridiculous option fee of $100.00. Even on a lease in New York City, T-Mobile is proposing to pay the property owner $100.00 in exchange for 12 months of T-Mobile poking and prodding the building.
Secure a Option Payment large enough to cover any of your legal and professional expenses. Remember that an Option Payment may be the only money you ever receive from a cell tower lease. If they do not build the cell tower, they will not start paying rent. So start off the relationship in the green and require a substantial one-time fee to cover your professional costs in doing the deal with the cell tower company.
Engage A Cell Tower Lease Expert
Airwave Advisors are the nation’s leading cell tower lease experts rated A+ by the BBB. To make sure you are not making any mistakes and are capturing as much as you can capture in your cell tower lease, contact Airwave Advisors today. Give us a call at (888) 443-5101 or e-mail us at firstname.lastname@example.org.
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).