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How to Negotiate a Cell Tower Lease – Part 3

How to Negotiate a Cell Tower Lease  - Part 3
Speaker 1:
The Wireless Wise Guys Podcast, Everything you wanted to know about cell tower leases but were afraid to ask. Powered by Tower Genius. The USA’s premier cell tower lease experts.
Steve Kazella:
Okay. So this is part three in this mini-series of how to negotiate a cell tower lease. And I know that a lot of people have questions. So when you’re negotiating a cell tower lease or a rooftop cell site lease, it’s either going to be for a brand new cell site, brand new cell tower or it’s going to be to extend a lease or renegotiate an existing cell tower lease. Maybe it’s on… Maybe you’ve got three or four or five years remaining and the tower company wants to extend that lease agreement.

One word of caution with, if you’re looking to negotiate an existing cell tower lease with a company like Crown Castle, American Tower SBA, Vertical Bridge, you do not want that lease agreement to go below two years. They’re going to be contacting you know, 15 years out, 10 years out. When you’re 15 years out, you’re probably not going to get as good a deal because carriers will still sublet tower space with 15 years left. The rationale is why would we spend a half billion dollars to install an AT&T cell site on the existing Crown Castle site when there’s only six years left and they haven’t extended yet. So they’re not going to, they’re not going to make a huge capital investment there.

So that’s why these tower companies are reaching out 10, 15 years prior to final lease expiration to see if they can extend this lease agreement with you. But once you’re below, so we have 15 years left. You have about three terms remaining. Once you’re below that 10 year mark with less than two terms remaining, you’re probably going to be able to get a better deal on existing tower, especially if it’s a multi-carrier site. But once you go below, let’s say two years remaining, carriers like Verizon, AT&T they’re going to be out there contacting their real estate departments and issuing new search rings because they need to have backup option agreements lined up in case you don’t extend that lease and you let the lease expire and the site has to be decommissioned.

So these tower companies have a responsibility to their clients, their tenants, the carriers. So don’t… you’re not doing yourself any favors by letting this lease dwindle down to two years or less. You want to get this thing done somewhere between 10, 15 years out. Once you’re below 10 years, again, that’s a great time to look to extend the lease agreements. You’ll have a lot more flexibility and negotiating leverage if you have a multi-tenant site versus a single carrier site, especially if it’s a Sprint/T-Mobile site, then you know, you really have a challenge because not all those sites will remain two carrier sites. Most of them are looked at as single carrier sites. Sprint will either be decommissioned from there or possibly they might assign that over to Dish as part of the merger.

But anyway, if you’re negotiating a brand new cell tower, so someone knocks on your door for the first time, and you’re not going to have as much leverage because the tower is not built yet as opposed to the leverage that you’ll have when you’re negotiating a lease extension. So that’s really, it’s a lot of times these lease extensions and amendments require a lot more work because people sign horrible [inaudible 00:04:00] and a lot of things need to be adjusted in them. On these news sites sometimes it’s like the Rolling Stones song, You Can’t Always Get What You Want, but you get what you need. Sometimes you’re going to end up agreeing to a cell tower lease. Maybe it’s not a grand slam or a triple or a double, you get on base with a single. And what I mean by that is sometimes you have to, if there are other competing properties in the area that the [inaudible 00:04:34] tower company could utilize, just as much you might end up compromising getting the lease.

And maybe you’re not going to have revenue share on, in the first 20 years of that lease. Or you compromise and you get you get some sort of agreement where you could kind of step up with revenue share. Give them something where it makes it amicable for both parties. If you’re looking at this is a long term arrangement, maybe it’s on a property that you’re going to leave for your heirs. Well, get on base with a single or double as we call it and structure the deal so that you can get up to the negotiating plate sooner. What does that mean? There’s no reason to sign a 50 year deal or a 90 year deal or a 60 year deal as some of these tower developers are promoting. So in these rural markets where there are multiple properties available, a lot of these real estate site acquisition consultants are going out there and just offering 2, 3, 4, 500 bucks and walking away.

I did see, I saw a major carrier walk away from a property in Mississippi last year because the owner didn’t accept $300. So it does happen. It’s rare. A lot of these rural sites you’re going to see 5, 6, $700 offers. But if you keep that lease agreement to an initial five year term with no more than four additional renewal periods, you will be able to get up to the plate eventually in about 10 years to renegotiate this and extend the lease. And at that point, once that tower’s up, you have leverage to go back for the revenue share or in other terms that may have been… You could just avoid taking that term in the deal.

One of those is right of first refusal. I always recommend, never do a right of first refusal. If you wanted to an option on Wall Street to buy the right for an option, you pay for that. These carriers just assume that people will, will accept that blindly. Typically in a lease agreement, when we’re looking at a Verizon lease, rooftop or ground lease or any other carrier or tower developer lease, typically when our firm is brought in to help provide a technical review because we’re not attorneys, we can’t call it a legal review because it’s not a legal review.

When we are recommending telecommunication language changes to these documents, we’re typically recommending about two dozen modifications. Some of the crappier lease agreements are going to need three dozen modifications, some big, some small. So remember that these deals are structured with the carrier or the tower company in mind. They’re grossly one-sided. And as we coined the phrase in 2008, we’re here to help level the playing field for cell tower landlords and property owners. I know that phrase has been copied by at least three of our competitors, but that is what our task is to help level that playing field and provide you with the expertise and you leverage our knowledge and experience to get that deal where it’s balanced and fair. And then you decide if it’s something that you want to encumber your property with long term or not.

And, and folks, sometimes the best deal is the deal that you walk away from. And, and occasionally when you’re negotiating on these cell tower leases, you do have to walk away once or twice a negotiation. It happens. And a lot of the times, if you have a superior location, they’ll be back. So that’s where it helps to have an industry insight or an expert on your side to help guide you, give you recommendations and help you to come to a decision. Whether that is doing the deal or not doing the deal, but at least you know what those provisions are in the lease that you need to pay attention to. And I’d say over the past decade and a half that we’ve been doing this for property owners, about 25% of our clients are referred by their attorneys where this is not something that’s just in their wheelhouse.

So if you have any questions or if your attorney has any questions, please give us a call here at Tower Genius and book a discovery call. You’ll either be speaking with myself, Steve Kazella or my business partner, Kevin Donahue. Our number is 888-313-9750. Book a 30 minute discovery call anytime with one of our appointment setters. And we look forward to discussing your cell tower lease proposal and help you to navigate that negotiation and maximize the deal. Speaker 1:
You’ve been listening to the Wireless Wise Guys podcast.
Steve Kazella

I was recruited out of Enterprise Rent a Car in 2000 by Kevin Donohue, who is my business partner today, to be a real estate site acquisition manager in the NYC Metropolitan Area for his company that was contracting for Verizon Wireless, T-Mobile and Sprint. In 2008 I founded a consulting firm know today as Tower Genius, LLC where Kevin and I have helped many thousands of people and existing cell tower landlords get the help and information they need to succeed at the cell tower negotiating table.

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