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How We Determine Cell Tower Rent Values – Explained

How We Determine Cell Tower Rent Values - Explained
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.
Kazella:
All right. My name is Steve Kazella. I’m one of the managing partners here at Tower Genius, LLC. We are the USA’s premier cell site lease coaching consulting firm, working exclusively from landlords for the past 14 plus years. My business partner, Kevin Donohue, and I have over 50 years combined experience working in the cell tower leasing industry. So I would like to talk today, this video is going to be maybe a little bit longer than I usually do, but I know many of you probably wanted me to put on the green cape, but I don’t have it available to me today.

So let’s talk about one of the biggest questions that we get besides people trying to get a cell tower on their property, which again, if you’re trying to do that, it’s a very risky proposition. There’s a pretty low probability, maybe a one in 1,000 chance that you can actually get one. If you are interested in doing that, please don’t call me, go to www.getacelltower.com and you opt in. And there’s some instructions there and we charge a fee for it because we get about two, 3000 people call us every year trying to get a cell tower. So we have a sales funnel page for that, getacelltower.com.

And if you look at the odds, it’s probably about one, a thousand chance that you’ll actually be successful. They’re about 330,000 cell sites, the United States, and there are about 330 million people. So do the math on that, so many landlords are. But let’s talk about why you came to this video, which is how are cell tower and cell site lease rates determine or calculated. People always want to know, how do you figure out what the going rate of the cell tower lease agreement is?

Well, I know some guy that’s getting 5,000 or 10,000 a month. These guys only over me 500. Well, how’s it calculated? Are there comps? Well, the carriers in tower companies will tell you, “Oh yeah, there’s comps. Here are 10 property owners in your county that we signed the lease for $1,000 a month worth or 500.” There are no comps in this industry. Okay. That’s the first bit of information. They’re going to cherry pick five or 10 property owners and say here, “Here are the five suckers that took 500 bucks a month.” And that’s unfortunately what happens all the time. I’ve seen it already several times here in 2022. Okay.

Are they calculated by a lease calculator? Yeah, I’m sure there’s a few people that are clever enough to do the software comp with a calculator spreadsheet. If it works for them, that’s great. But we’ve been doing this for a long time and we’ve never used a calculator for any of it. So take your calculator and check it out the window as far as cell tower lease calculators are concerned. That’s not how it works.

How about by square footage or by the number of antennas? The answer is no to that. However, with the exception, you might find certain municipalities, government agencies where you have government employees and that’s how they do it with their master lease agreements. It’s not the way that the average Joe or Jane is going to have them be determined on their property. So yeah, there are a few exceptions. There are some electrical utility companies, water districts, county, state governments that will calculate square footage or a number of antennas.

The problem with the number of antennas in the square footage. What if they take out the equipment cabinet? So what if they reduce the size of the antennas? Okay. So you started out with 12 antennas, but hey, Mr. Landlord, we only need six now because of the technology advantages. So give us a 50% rent reduction. Ain’t going to work.

So how are cell tower lease rates calculated? Okay. Are, are the cell tower values calculated by a site by site basis? Absolutely, yes. And we’ve been doing this, we’ve seen thousands and thousands of these and each and every one of the cell sites that we’ve consulted on for our clients have been determined. The values have been determined on a site by site basis because there is no cookie cutter solution. It’s all what’s at that particular location. So let’s talk a little bit more about this. I know I’m blocking the whiteboard here, but cell towers and cell sites.

So a cell tower, obviously a towers it’s either a guide wire tower with anchors at the ground, a lattice tower with three feet or a monopole it’s typically the types of cell towers that we see. It’s either a cell tower or it’s a cell site antennas on a rooftop or other structure. Okay. And when we are looking at determining the values we need to ask, is it a new cell tower or is it an existing cell tower or is it a single carrier cell tower or is it a multi-carrier cell tower? All these factors play into what the values are here.

So when I look at a cell site, I ask myself, is it carrier owned? So is Verizon wireless or is T-Mobile or AT&T or US cellular of the entity on that lease agreement, who is proposing that that cell tower, is it a carrier site or is it developer site? Is it telecom out of Florida, the tower developer or is it like a vertical bridge or an American tower proposal? So if it’s a carrier owned site, then you don’t have a middle man. Then they’re dealing directly with you. You’re going to get a better price in most cases.

If it’s a developer own site or a tower managed site, well then, then there is a tower company between you and the carrier. Okay. So they’re in the middle of that sandwich and they need their piece. Why? Because the tower company is footing the bill to develop that sell site. They’re going to pay about 200 to $250,000 in hard and soft costs to get that tower developed. And then Verizon, AT&T, T-Mobile dish US… Well, not US cellular, but the carriers will pay the tower company roughly about $2,000 a month. Give or take depending on where you’re located, where the site is.

So your expectation of getting $2,500 a month on a carrier on site. Well, that’s a possibility depending on where it’s located on these other factors that influence it. But if it’s a tower company owned site, they’re not going to offer you 2,500 bucks a month, they might offer you 750 bucks a month. They might offer you 1,000 bucks a month. I saw one yesterday here in Florida, guy called me and it was a major, one of the top four tower companies. They offered him $2,000 a month to start off. So I said, “That doesn’t make sense.” So there has to be something else in play. There’s either a multi-tenant tower nearby within a football field or two that may have an issue. Maybe there’s an eminent domain situation or something going on.

And basically they offered the property owner 2000 a month because something was going on most likely at the nearby tower. That’s what I believe was in play here. Or they wouldn’t have offered 2000 a month because one carrier at 2000 a month for a tower company doesn’t make financial sense. So it’s got to be a multi-carrier play. So it’s either carrier owned, tower developer owned, municipal government or private owner. That’s really the difference. Municipalities, quasi government agencies, water districts, utility companies, they’re all going to charge a premium.

So a lot of those economics of the tower company, having a tenant that pays 2000 a month go out the window. If you’re a municipality, you basically charge whatever you want, but you do need expert guidance and we have help. Municipalities and water districts and utility companies figure out pricing with the tower companies and carriers. Is it a new site and is it being offered by a developer? Well, you’re probably never going to see more than a thousand bucks a month. Is it a new site and a carrier site? Well, depending on where you’re located you might get 1,000 bucks a month, you might get 5,000 a month. So it really needs to be determined on a site by site basis.

And again, what are these influencing factors? Zoning? Is it a commercial, industrial retail, agricultural district? What other properties are available? So if there is a demand for coverage, the carrier’s going to have a search ring if there is a high supply. So if there are multiple properties where they could locate, you’re not going to see as much money on the rent. If you’re the only game in town, if you’re in Oasis in the middle of a desert, then you’re going to see a premium rental price.

Location. Again, what’s the proximity to other sites. And what’s the elevation? Is it bordered by wetlands? There is a lot of different factors that come into influencing what the prices are. What’s the visual impact of the site. If they tuck it behind the trees, or if it’s sitting right in front. Chances are if it’s an [inaudible 00:09:36] it’s not going to get approved in zoning.

What other competing locations? Primarily rooftops. If you’re in a city, let’s say you’re in San Francisco on a well on a flat area. That’s not really going to happen. Let’s say you’re in a Los Angeles on a flat area and you have six or seven other competing rooftops, all being contacted by that same site acquisition rep. Chances are you’re not going to see 2000 a month. You might see 1500. They’re going to look for the lowest hanging fruit, if there’s no difference in the coverage that the site provides.

And also the weakest link. Do you have a neighbor? Who’s a cheap skate? Do you have a neighbor? That’s hard up for money? Do you have a neighbor that is desperate? Well, they’re going to low ball that person all day long and they’re going to play them against you. So when you look at the influencing factors, there is no cookie cutter solution. You do need to look at the values on a site by site basis. High demand plus low supply equals better terms. It’s basic economics. So the carriers have a demand for coverage. They have a need. If there’s a low supply of competing properties or locations, you have a better chance of getting a great deal.

So if you have questions about how cell tower lease values are determined, it’s on a site by site basis. And if you have questions, give us a call at Tower Genius. So number is 888-313-9750. We’ve been doing this for a long time. We’re going to answer any questions that you have, either myself, Steve Kazella or my partner, Kevin Donohue will talk to you and we will figure out a strategy. Book a 30 minute discovery call. You won’t regret it.

Okay. So as a follow up to the video that I just shot here, Steve, again. So just want to run through a couple quick things here, which I don’t think I touched upon during the video. So we’re talking about cell sites. They are not determined by comps. They’re not determined by these calculators or by square footage or by number of antennas with a few exceptions of municipalities and utility companies, water companies, things like that, who some of them do calculate by square foot. Don’t ask me why, that’s how they do it. But that’s the exception to the rule.

All cell tower leases are calculated on a site by site basis. So you really need to have somebody take a look at it. And the bottom line, it comes down to cell tower versus a cell site on an amendment on an existing cell tower. Okay. That is owned by a tower company. Most of them will be. We have to ask, is it a single carrier site or is it a multi-carrier site? A multi-carrier tower company owned cell tower would generate more revenue because they’ve had, let’s say two or three tenants paying $2,000 plus per month for the last, I don’t know, 10, 15, 20 years.

And we look at that, we figure out what that tower may be generating. We’ve seen sites that generate very little money. We’ve seen sites that generate a lot of money and believe me folks, tower companies are not going to disclose that. That is their holy grail. They’re not going to tell you what they’re making. Unless you wind up in a lawsuit with them and there is some discovery. And we have seen that too. So we know what we’re talking about. And typically the Verizons of the world AT&T, T-Mobile sprint. They did pay $2,000 roughly month escalating at three to 4% a year on most of these towers.

So when you’re looking to extend a lease with American Tower corporation, Crown Castle, SBA, Vertical Bridge, one of these companies, is it a single carrier site or is it a multi-carrier site? Because a single carrier site, it’s not going to have as much wiggle room as a multi-carrier site will. And that’s really where we have to look at these factors again, zoning, location, visual impact ping sites and your neighbors. How much is it going to cost to relocate that tower? If you play hardball with them, do they have the budget to move the site? Is there any better location nearby? So these are all things, again that we take a look at, these influencing factors and the chances of relocation exists, but they’re low.

Here’s another big thing. Rooftop manager tower company owned, rooftop management contracts, in my opinion it’s one of the biggest conflicts of interest that exists in the industry today. How can you have a company that owns 30, 40,000 towers or thousands of sites and who is marketing to companies like Verizon, AT&T, T-Mobile to attract them as tenants on new sites or to get new build programs. Are they really going to be negotiating your best interest if they manage your rooftop? Like if you have a problem with Verizon and, or you want to get that rent increased. Why on earth would you put somebody between you and the carrier that is a tower company that is in bed with them? Just doesn’t make any sense.

So if you have a rooftop and I would just suggest, avoid these rooftop management contracts with the tower companies. It’s a conflict of interest. And there’s really no reason to do that. As far as with a single carrier, multi-carrier road site again. So you won’t see these multi-carrier sites likely with the carriers, they’ll be tower company owned. So if you had questions about these factors that influence the values, give us a call at Tower Genius. 888-313-9750 or go to towergenius.com and book of 30 minute discovery call with Kevin Donohue or myself, Steve Kazella. We are knowledgeable in this field. We’re not attorneys. Attorneys do hire us as subject matter experts in this field. So give us a call 888-313-9750 and we look forward to helping out and speaking to you soon. Thanks. Speaker 1:
You’ve been listening to the Wireless Wise Guys Podcast.

stevetowergenius

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.

Carriers & Tower Companies Have Their Hired Guns. Shouldn't You?

Negotiating a cell tower lease, trying to figure out what the correct cell tower rent value for your property needs to be, or evaluating the broad range of proposals and offers received by most cell site landlords in 2022 can be very confusing. Connect with Tower Genius or submit your info below, and we'll evaluate your situation, answer your questions and even make a few recommendations you may benefit from.

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