Cell Tower Lease

[Sheri Nelson]

I have been approached by a cell tower company to put a cell tower on some property. The property is in an urban area. They have offered $1500 per month for a 5 year term and then 3 additional 5 year optional terms with 10% increases. I have no knowledge of cell tower leases and have no idea if this is a good rate or not. Can anyone provide any insight into this and any companies that would give good advice for this type of lease?

[Joel Owens]

I have done a few. The cell tower leases are not worth very much on the open market. They generally put out clauses even in the primary term of the lease and the options can't be counted on.

The question I would be asking myself is if a cell tower is the highest and best use of my land? Once those go in it is hard to build around them and causes access issues. The income stream isn't stable so cell tower lease buyers offer 20 cents on the dollar for the value of the lease and generally do not want to buy the land it sits on unless an ultra cheap price.

You said an Urban area. How much land do you have? If size able this might not be the best use. If the land is back in the woods or off the beaten path some where other types of development would not find it as desirable then the cell tower might be the answer.

If you have a great piece of land in high demand then pushing the tower off to the back on a corner with a small access road might let you keep your other land to extract value out of.

Would really have to know the address, how large the land is, topography of your land, etc.     

[William Jenkins]

I have to respectfully disagree with Joel regarding his comment that a cellular lease is not worth very much on the open market.  These leases are actually very valuable.    

My business is almost exclusively focused on developing wireless sites for the major carriers (AT&T, Verizon, Sprint, T-Mobile).  I also own and broker/consult on wireless assets (tower portfolios and ground lease assets) around the country.  

Whether or not you are getting a good offer requires quite a bit of more research.  I have done hundreds of wireless ground leases over the years and there are a lot of variables that go into determining how much you can hold out for.  Couple of quick ones off the bat..... zoning, availability of alternate landlords,  FCC, FAA, neighborhood groups, surrounding property uses, etc.  The list goes on an on.  I have done leases all the way from $350 per month all the way up to $4000.  Just like everything in real estate, it depends on how badly they need it, and what the alternatives are.      

       Questions... Is the company looking to lease your property a carrier or tower company (AT&T, Verizon, Sprint, T-Mobile, American Tower, Crown Castle, or SBA), or is it another party?  Have you negotiated with them yet (terms and lease comments) or is this their initial offer?      

[Sheri Nelson]

The land is improved property and already has a building and tenant on it. They want to put the tower in a corner of the property which wouldn't affect the rest of the property. The proposed tenant is a tower company. They have made an initial offer and given me a copy of their lease contract. I have no idea how much they want the property. They did say they were working on a lease on a nearby property but they couldn't agree on the lease and so they are looking for other locations.

[Joel Owens]

I do not have the level of experience with cell tower contracts that William does. I have done a few of them but it has been a few years back.

A concern with towers is that they tower hop. A new tower gets built that is higher or in a better location or a carrier buys out another so now they hop off of a tower because they have too many in the area.

When I had listings for property owners with cell towers I would call the cell tower lease buyer companies.

Their offers started at 10% of total lease value and moved to a max of about 25%. Their reasoning was that the options may never be renewed so they are taking a risk on the total lease value over the years.

So you could have a 50 year lease but only an initial 10 year guaranteed with 40 years of 8 five year options. The lease companies like to give themselves flexibility. You as the owner want a stream locked in for longer as it is easier to sell later on versus options.

Again I am not an expert with these and my experience was from years ago. The sellers I dealt with generally would rather not sell than take a big discount on money coming in every month with cell tower lease. 

You would need to see what impact if any a cell tower would have on your existing building and tenants and how close it would be.

[William Jenkins]

Sheri.  

It sounds like you are in a good position in that you have a place for them to lease that will not affect the remainder of your property.  

You have some options but I would not delay.   The people working these deals typically don't resort to high pressure but they will move on if they sense they are working with a difficult or indecisive landlord.   Options are as follows:   

1.   Execute a lease and collect monthly income.   There are many things you need to look out for and add into the agreement.   

2.   Do the above and then monetize the lease for a lump sum payout.   Aside from negotiating items into and executing the lease above you would need to negotiate and execute a ground easement and lease assignment agreement with a buyer.   There are many things you need to look out for in this as well.   

3.   There is a remote possibility that you could cut out the tower company and work with a partner to develop and own the tower.   This is is real money maker but it has to be done very carefully and you have to have someone that knows exactly what they are doing.   There is a small chance of making this happen but thought I would mention it    

I would be happy to work with you in a consulting/brokerage capacity.  I can guarantee that my involvement would more than pay for itself, and I could probably get the tower company to pick up some of the costs.   PM me or call me at my number below if you would like to discuss it further.  

Thanks.