Crown Castle Purchases T-Mobile Towers
On September 28, 2012, Crown Castle and T-Mobile announced that Crown would purchase 7,200 towers from T-Mobile. This came as no surprise. Many industry analysts expected Crown to be the lead bidder when T-Mobile first publicly announced the sale of its towers.
Crown Castle bought the towers for $2.4 billion, or $334,000 per tower. Crown also congratulated itself for buying the towers for less than the going market rate. However, the portfolio is substandard when compared to other transactions.
Before Steel in the Air was formed, Ken Schmidt, SITA's president worked as a site acquisition agent for T-Mobile (previously Voicestream). At the time, T-Mobile had granted the right to American Tower Corporation to build any of the towers that American Tower deemed valuable, under what is known in the industry as a build-to-suit deal. Subsequent to that time, T-Mobile also entered into a similar build-to-suit deal with Mobilitie. For a decade, both American Tower and Mobilitie could, and did, "cherry pick" from T-Mobile's tower development opportunities. If a tower site that T-Mobile identified as desirable had clear upside (future collocation potential), American Tower or Mobilitie could choose to build the tower themselves.
Why the 7,200 tower portfolio isn't as valuable as it might appear
This meant that the towers that were built and owned by T-Mobile were ones that, in many cases, American Tower or Mobilitie had passed over as undesirable. This isn't to say that the sites were actually undesirable, just that they appeared to be at the time. For instance, close to half of the 7,200 towers that Crown purchased from T-Mobile were designed as single tenant towers: towers that were designed to accommodate T-Mobile's equipment only. The tower portfolio had an average of 1.6 tenants per tower, significantly lower than Crown's average of ~3, which means that in order to collocate additional tenants, structural modifications would have to be performed on the towers.
Lest you think that we are being overly negative, the purchased towers are well positioned in primarily urban and suburban areas, which are likely to see greater lease-up from new wireless tenants in the future. The portfolio also gives Crown Castle a stronger presence on the west coast, specifically in California and Washington, which are states where Crown's portfolio is not as strong.
How does this affect property owners who are engaged in T-Mobile ground leases?
For landowners with T-Mobile tower ground leases, this deal put them in a better situation. Crown will certainly be more aggressive about purchasing or extending the underlying ground lease than T-Mobile. Any of the 7,200 ground lessors who have not already sold their T-Mobile ground leases are in a better bargaining position now. It will take time for Crown Castle to start making lease buyout or extension offers; but when they do, landowners might be enticed.
If you are a leaseholder currently engaged in a lease with T-Mobile or Crown Castle and want additional assistance in determining what your lease is worth to Crown, either for an extension or for a lease buyout, please feel free to contact us.
Estoppel Requests from Crown Castle
Additionally, if you receive an "estoppel" request from Crown Castle, we implore you to have it reviewed by a competent attorney. An estoppel is supposed to be a disclosure by you to Crown Castle that verifies that the lease is in place and that the current rent amount is correct. The estoppel also says that you believe that you have no claims against T-Mobile. However, in the past, other companies have used an estoppel as a means to get the landowner to "amend" their lease by adding clauses or language that the landowner never agreed to before. These estoppels can have a significant impact on your future rights as the ground lessor. Thus, we strongly recommend having an attorney review the document and compare it to the lease agreement. If the estoppel purports to amend your lease, in most cases, it is not necessary to sign it. In some cases in the past, the tower companies have offered compensation for landowners to sign the estoppel. That doesn't mean you should sign it; you might be giving away more than you get. If you would like to have your estoppel reviewed, please contact Cell Tower Attorney.
Tower companies often prefer to purchase leases outright in order to further diversify their portfolio of assets; however, they are not the only companies out there who are interested in buying cellular leases. Buyout companies do it for profit alone. The motivation of the buyer may or may not be of interest to you, but it will likely affect their final offer.
When renegotiating leases, you should first check the expiration date (which is not the same as the renewal date). If you have more than five years remaining on your lease, it’s probably best to leave well enough alone. Why? Because leases are typically valued higher the closer they are to expiration.