Author’s Note: The following article is written tongue in cheek- I was just feeling a little rambunctious today about the myriad of “strategies” that we come across every day that lease buyout companies, tower companies, lease optimization firms, and wireless carriers use to try to convince landowners to do something that is not in their best interest. Hopefully, this will help at least one landowner realize that they aren’t alone and that they don’t have to make hurried and rash decisions.  Please realize that no company does all of these things and not all salespeople at these companies do them. 

If I were a company trying to get a landowner to sell a lease, extend a lease without additional compensation, reduce their financial compensation for a lease, or otherwise give consent to adding equipment without compensation, here are the strategies I would use. These are time tested and definitely work. Please note that some of these strategies might not be ethically sound, so please consult with your religious advisor, your attorney, and your company ethics advisor before pursuing them.

First, all of my salespeople would have official sounding titles. I wouldn’t call them salespeople because that suggests that they are trying to sell you something. I would call them a Director even though we have 200 “Directors”. Or I would call them something like Lease Optimization Specialist because that makes it sound like they are trying to help you.  Or if I wanted to be straightforward, I would just call them “Money Taker”.  I might consider outsourcing all my salespeople as subcontractors so that I have “plausible deniability” when they do something unethical.

Second, I would find out where the landowner lives and works. I would ask them for their phone numbers using official sounding letters that state that the information is required when actually the only reason they want it is to pester you through any means possible. I would get the landowner’s email address, phone numbers, home and business mailing addresses so that even if they found a way to avoid me on one line, I could reach them on another. I would learn their kid’s names and attempt to uncover any skeletons in their closet.   I would share my religious beliefs if you are a church landowner and suggest that because I am religious I would never deceive you.  (Actually happened)

Third, I would set up a schedule to contact them over and over. Advertising professionals suggest that you need to contact someone eleven times with advertising to get them to notice you- so I would do double that. The first would be a postcard that suggests that we are a wireless company looking to install new antennas in the area. I would make it intentionally vague but promising such as “I am here to give you money, would you like some?”  I would then follow up with phone calls until I had the opportunity to speak to the landowner/building owner directly. I would use an auto-dialer because there is no violation of the do not call list if there is a pre-existing business relationship. If a person’s secretary prevents me from talking to them, I would threaten to sue her directly. (This actually happened) If I couldn’t reach them on the phone, I would start mailing them regularly. This would include postcards and emails on a bi-monthly basis first extolling the virtues of my company and then if those failed to work, I would start sending ones that get progressively more aggressive. These postcards would eventually say that if they failed to respond, we would move the tower even if it wasn’t ours and we had no right to move it.

Fourth, I would constantly suggest that there was a drop dead date, even though there never are real drop dead dates. I would make up ridiculous reasons why the next drop dead date was real such as pending mergers or limited amounts of money that I could deploy to purchase leases. Then when they missed the drop dead date, I would call again and say that through my hard efforts, I was able to convince the company to bend “just this one time”. “I might lose my job for this,” I might say trying to pull at your heartstrings.   (Yes- this actually happened)

Fifth, when that didn’t work, I would start sending newspaper articles with doomsday titles although I would do so without any explanation on why I was sending the article. “LightRadio Cube will Make All Towers Obsolete Overnight” is what I want the landowner to read into an article that really only says that “LightRadio Cube might reduce the need for future towers”. Or I would gleam onto completely ridiculous articles that have no factual basis such as “Blimps to replace towers”.  I would point out every article that suggests that various merger combinations are “guaranteed” to occur. (The Sprint/T-Mobile merger was heavily rumored in 2010.)  I would send you doom and gloom articles about how the wireless carriers have to spend billions of dollars to improve their networks, but conveniently choose not to point out that the wireless companies have in the past generated 40-50% profit.

Sixth, I would make aspersions knowing that the average landowner was not capable of confirming or denying them. For instance, one “consultant” suggested that Sprint/Nextel is going to terminate 50,000 of their sites. (Even though they only have 66,000). Or I would tell a landowner that there was a good chance that Nextel was a possible tenant on his tower even though Sprint was on the tower as well. Or I would suggest that AT&T and Cingular still have a lot of terminations to complete from their merger in 2005.  I might suggest that I already have a tenant waiting to go should they sign with me even though I really didn’t.  Alternatively, I would suggest that we can market a tower company’s tower better than they can even though the tower company has 30 professional salespeople who do nothing other than market towers and we don’t have a single person dedicated to marketing the site.  I would do a deal with a national restaurant chain and tell landowners I can readily move their site to the nearest fast food restaurant.

Seventh, I would start calling more and more frequently until I got an answer out of you because I know that you are weaker than I am.  If you are smart enough to figure out what number or even the area code you were calling from, I would start using Skype or another VOIP line to disguise my location.   Friendly hint: watch out for calls from (949).   I would call you at times where you weren’t expecting.

Lastly, when it was clear that I wasn’t able to sell you on what I wanted, I would send an ominous note perhaps copying my SITE RELOCATION OFFICER or my YOU DID IT NOW OFFICER saying that we had discussed the lucrative options that I had provided and that you foolishly have chosen to ignore them. I would ask you to sign this document even though I really never cared if you signed it and you have no duty to sign it. I might get angry at you for wasting all my time until I decided to call you back in six months to start the process all over again.

Even though this post was written tongue in cheek, it does illuminate the sizable advantageous that lease optimization firms, lease buyout firms, tower companies, and wireless carriers have against the average landowner. They do this daily – have people dedicated to perfecting their process.  The lease buyout and lease optimization firms can track what pitches work and which don’t. They have the ability to compare notes and do research which is intended to make you the landowner question your own resolve. That is where we come in. We can sort through their suggestions and strategies because we have seen them over and over. We can tell you when to ignore their pleas. There are times when you should sell a lease and times when you should renegotiate your lease downwards.  Fortunately, those times aren’t very frequent.   We will help you ascertain your best option.  We will tell you when it is safe to stop picking up their calls and when you can ignore their letters.   We will provide direct and honest guidance because we only work for you.  

A gentleman contacted me this past week, a bit upset in that his church board had decided to sell a cell site lease to Wireless Capital Partners.   The Board had heard the pitch from the lease buyout company and was persuaded by Wireless Capital’s pitch that they would market the site to other carriers and get additional tenants to use the property.   The gentleman had pleaded with his church board to use our services or at least consider the alternatives, but they directed him to “let it rest”.   In this case, this was a bad decision by the church board on many fronts, and they will end up paying for their ignorance many times over.  

So why was this decision so bad?

The main reason the church believed this deal was a good one was because Wireless Capital had suggested they would market the location and get additional revenue.   In exchange, Wireless Capital Partners would receive 50% of any revenue for additional users.   The church’s rationale was that if WCP was successful at getting 2 new tenants on the site, they would be in the same position as if they got one on their own.   Suppose that each lease was paying $1000/mo.   That means that Wireless Capital would get $1000/mo for two leases and the church would get $1000/mo for two leases.   Over 20 years, the church would give up $322,444 in lease income that they would have received 100% of had they not entered the deal with WCP. 

The Church assumed incorrectly that there hadn’t been greater interest in their location from other carriers because of a lack of marketing.   In fairness, this is a common assertion that we hear from landowners who feel that they aren’t marketing their property effectively.   However, this ignores the fact that the carriers choose where they want to place their equipment, and then they send site acquisition agents to the area directly to find the most suitable property.   We know this because we provided site acquisition services to carriers like T-Mobile and Nextel for years.   Not once did we ever look at a list from Wireless Capital Partners or similar firms to see what sites they were marketing.   There was no reason to because we always approached the landowner directly first.   ALWAYS.

Even assuming that a lease buyout firm could get to the carriers directly and could convince them to look at their marketing list, the carriers don’t decide which site to use based upon price unless all other factors are equal.   Meaning that if your steeple is taller than other rooftops, site acquisition agents will approach you regardless of whether your site is on a list.  And if your rooftop is the same as other rooftops in the area, the site acquisition agents might even avoid your site so as not to have to negotiate with landowner representative.   When I did work for T-Mobile, we were advised to avoid working with one specific site management company because the process was always longer and the cost always higher than going to a competitive building without a site manager.   (See Marketing your Cell Site for more information)

To further compound matters, I question whether Wireless Capital Partners even has the resources to market the property.   In 2008, Wireless Capital Partners shut their doors to purchasing new leases.  This is the first purchase offer from Wireless Capital that we have seen in 2 years.  Many landowners who were in negotiations with Wireless Capital Partners in 2008 thought they had a deal only to have Wireless Capital Partners try to re-trade the deal and then back out altogether.   In 2008, Wireless Capital Partners went from 200 staff members to a skeleton crew.   I suggested to the gentleman who called me that the church board ask WCP how many people they have on staff whose sole job was to market sites to the carriers.  The board rebuffed this request.  

(EDITOR’S NOTE:  A week after I posted this, I received a friendly note from the President of WCP.  He forwarded a press release from Nov 10, 2010 that they have acquired $327 million in capital.  I also heard from an associate that they have been reaching out in the industry looking to hire a sales staff.  It appears that WCP may be back in business.  I can’t tell at this time whether any members of their sales staff will be focused solely on marketing acquired properties to wireless carriers.)

I understand that some landowners may still find value in marketing of their property despite our recommendations otherwise.   Even then, there are other lease buyout firms that will purchase your lease at competitive rates to Wireless Capital and market the property for 20% of the future revenue – not 50%.   We strongly suggest to any landowner considering a lease buyout to get multiple offers.  You wouldn’t consider selling your house to the first person that walks in the door, accepting their terms and conditions.  You would list the home, get multiple offers, and compare them to determine which was best for your situation.   Why did this particular church accept this offer?   I am sure they thought they were doing what they felt was best, but unfortunately, they didn’t know that there were better offers out there. 

If you are in this same situation and have been contacted by Wireless Capital Partners or another lease buyout company to purchase your lease, please see our Cell Tower Lease Buyouts page.   We can either be retained on a consulting basis to help you figure out whether it makes sense to sell your lease, and if so, to whom.   Alternatively, if you are simply interested in seeing what other lease buyout firms will offer for your property, both in terms of lump sum and marketing percentages, we are happy to solicit additional offers for you at no cost to you.

We recently received a Request For Proposals from the City of Allentown, PA. This RFP was intended to procure a “consultant” to assist the City with the sale of its cell tower lease income. The City of Allentown wants the consultant to review the city’s cell tower leases and advise the City on whether it makes sense to sell them. Then the “consultant” is supposed to solicit offers to buy the leases. But instead of paying the consultant, the City of Allentown expects that the consultant will work out side deals with the prospective buyers and get paid by the buyers. In short, the City wants an independent and unbiased “consultant”. But in reality, the “consultant” will end up being neither because they are paid by the buyers of the leases instead of by the City.

The “consultant” has little incentive to bring offers to the City that won’t pay the consultant as much regardless of whether those offers would be better for the City. Because the “consultant” gets paid by the buyer, if a particular buyer doesn’t pay as good a commission, the “consultant” will ignore that company and the City will not get all the offers that it should. Furthermore, the “consultant” won’t bring offers to the City that may have more favorable terms and conditions if those same offers don’t pay as much in commission. We wonder whether the “consultant” will advise the City of the fact that it might have increasing recurring tower maintenance and operational expenses in the future after selling its leases. Perhaps not because it might otherwise reduce the “consultant’s” finder’s fee.

In this case, it seems that the City received a proposal to purchase its leases and a proposal from a “consultant” to review the proposal perhaps from the same entity at the same time. I assume that the City could not authorize a commission based contract without putting it out to RFP and thought that they would be thrifty by putting the cost burden on the “consultant” to collect his fee from the same people that are interested in buying the leases.

In the end, it is very unlikely that the City will end up with the best deal for its citizens. The City will save money by not having to pay for an unbiased consultant- small savings considering the money it will almost certainly leave on the table. If you review our blog, you will see that this is the first time we have called out a municipality by name. We are hoping that exposure to this ill-conceived endeavor will encourage the City to reconsider and think long term instead of short term.

The last month has been a tumultuous time in the cell tower lease industry, primarily on the side of lease buyouts. With the plummet of the stock market, rising concerns about the availability of credit, and consumer confidence very low, the industry is starting to see the impact. Through our consultations, we have already started to see tangible evidence of a declining market especially in the lease buyout side.

From our vantage, there is a distinct shrinking of the lease buyout market. Of the numerous players who purchase long term easements under cell towers and rooftop sites in exchange for a lump sum, there has definitely been a slide in the purchase prices and an increase in the due diligence requirements for purchases. Companies that buy the leases are looking to pay less and to be more selective in their choice of leases – preferring to purchase only “investment grade” leases. (i.e. those that are from AT&T, T-Mobile, Verizon). While they still purchase non-investment grade leases, the multiples paid for all leases has definitely gone down.

One primary reason for this is that Wireless Capital Partners shut its doors about a month ago. With one major competitor out of the way, the remaining firms recognized the advantage they now have and have started to lower their prices and increase their due diligence requirements. Prices are lower than they were just two months ago. There are rumors that a new entity may be formed to fill WCP’s shoes, but SITA has not seen any evidence of such yet.

Even the tower companies have started to pull back from previous offers. Crown Castle’s agents have been representing to landowners that today (Oct 16, 2008) is the last day that they will be honoring most if not all of the lump sum buyouts they previously made. Unlike virtually every other time that lease buyout firms give “hard deadlines”, SITA believes that this one is for real. Crown’s stock price has plummeted from a 52 week high of $43 to their current price of $19. One specific reason for this is that Crown may have to pay back a $160MM credit facility. SITA does not believe that Crown or their landowners are in any jeaopardy- but this does put Crown in a situation where they need to retain their capital for more immediate needs than purchasing long term easements under their leases. Crown’s representatives have stated that they will still continue to push the extensions of the leases but won’t be making lease buyout offers until they can resolve their credit facility issues. This could take quite a while.

WHERE DOES THIS LEAVE ME AS A LANDOWNER?

Recognize that the value of your tower or rooftop lease is still the same. Nothing has changed that would reduce the value to the owner of the tower. What has changed is availability of capital to those companies that purchase tower and rooftop leases. Unfortunately for many landowners, the recent turmoil comes during a time when many landowners are going to need capital to keep their houses or run their businesses. So as the average landowner’s need for the capital increases, the number of competing companies that want to buy the lease decreases and the rates that the remaining companies are willing to pay decreases as well. We are getting an increased number of inquiries from landowners who need to sell their tower lease(s).

Our advice: if you don’t need to sell at this time- DON’T. We started in this industry in 1997, weathered the downturn in 2001-2002 and have seen the cycles. As with previous downturns, this too shall pass. The vacumn filled by WCP and by the reduction of offers from towers companies will either be filled again by the tower companies or opportunistic companies that see value in the lease buyout market.

If you do need to sell, recognize that you don’t have the same negotiating position that you had just one month ago. However, don’t believe that you have to accept the offer that you are given. Even now, we rarely see situations where the first offer is the best. At SITA, we can assist you in making sure that you get the best offer available. We know the players and we have assembled substantial comparable data to assist us in recognizing trends in pricing- both short term and long term. Please see our cell tower lease buyout page for more information.

If you don’t know whether you should sell, please contact us. We can help you determine whether there is any probility that your lease might be terminated. We can also help guide you on what the pros/cons of selling now are and discuss what the future holds for this industry and lease buyout firms.

In recent months, we have received numerous inquiries from cell site lease holders who have entered into letters of intent with Wireless Capital Partners to sell their leases. These owners have contacted us because they have had difficulty getting Wireless Capital Partners to close on the purchases in a timely manner. To be fair to WCP, in some cases, the landowners were given a non-refundable fee to “hold” the closing for up to 3 more months. However in other cases, these owners could not reach their agent at Wireless Capital Partners. These owners wanted to see whether there was anyone else that would close quicker.

On September 4, we were informed by a Wireless Capital Partners agent that the vast majority of the agents were let go. They were informed on conference calls that they would no longer be needed. Allegedly, there are some upper managers still left. Other associates in the industry have confirmed that they have received a number of calls from prior WCP agents looking for new employment last evening. This is after Wireless Capital Partner released a large percentage of their sales force just a few months ago. At that point the suggestion was that the minority of their sales force was getting the majority of their deals done- so they let go the majority that weren’t getting deals done.

This doesn’t bode well for Wireless Capital Partners. They confirmed previously that they were having some funding issues to us, but that those issues would soon be resolved. In the last few months, they haven’t been. They still might be resolved, but prudent landowners should consider how long they can wait for closing on selling their lease. We suggest that landowners who are in negotiations with a Wireless Capital Partners representative for purchase of a lease discuss how and when your deal will be funded. Perhaps ask that the funds be placed in escrow. If you already have a deal that hasn’t been funded, please contact us regarding getting other offers from companies that have not had funding issues. Make sure to read your letter of intent with WCP, you may have legal restrictions from getting other offers during the term of the letter of intent. If so, you might contact WCP and ask them to either honor their agreement with you or release you from it.

So today, two seperate clients who are considering cell site lease buyouts from Wireless Capital Partners received emails from their WCP reps that has a cryptic message regarding Sprint/Nextel’s credit rating being downgraded to junk bond status.

The messages include an attachment of a news story about the downgrade. One goes on to say that there have been some amazing changes for WCP since they approached my clients first and that pricing leases is a “moving target”. The other doesn’t suggest or tell why the story was sent. Neither really states why they were sent at this time.

I surmise that WCP is using the article to scare landowners into selling with the implication that if it happens to the mighty Sprint/Nextel it can happen to the other carriers. Secondly, I assume that WCP will either reprice their cell tower lease purchase offers for Sprint/Nextel leases or discontinue offers altogether. (EDITOR’S NOTE- 6-1-08- Since writing this post, it has come to our attention that WCP has simply stopped purchasing Sprint/Nextel leases. Contrary to what was written above- WCP’s financing group simply felt that there was too much risk in owning more Sprint/Nextel leases in the WCP portfolio. WCP’s business model is based around spreading risk on their leases and the Sprint/Nextel leases increased that risk too much. WCP is working on acquiring alternative financing for Sprint Nextel leases.)

If you are a landowner that has an offer from WCP for a Sprint Nextel lease- don’t dispair. Contact Steel in the Air- because their are other companies that are still buying Sprint/Nextel leases. If you are concerned about your Sprint/Nextel lease as a result of this- remember that Sprint and Nextel has no value without its cell sites. So while there may be a risk of termination due to the merger and duplication of Sprint/Nextel cell sites- these sites still form the basis by which Sprint/Nextel service their subscribers. Without them, Sprint/Nextel will really be in trouble.

Steel in the Air, Inc. and the author are not affiliated with Wireless Capital Partners or Sprint/Nextel. If you reached this post while looking for Wireless Capital Partners- go to www. wireless capital. com (without spaces) or http://www.sprint.com/.

In a tale of “strange bedfellows”, we are starting to wonder whether Crown Castle and Wireless Capital Partners are working together. A letter that Crown Castle is sending out to its landowners warns of the pitfalls of dealing with various lease buyout companies. However, the letter has one noticeable buyout company not included in the list- Wireless Capital Partners. We assume that this is because Crown Castle and Wireless Capital Partners have come to an agreement whereby they have coordinated their efforts to negotiate lease buyouts.

We could see where this might make sense for Crown Castle. Because of the rigidity of their proposals for buying out their lease agreements, they typically must buy a perpetual easement. However, some landowners are rightfully scared of selling anything in perpetuity. That’s where we assume Wireless Capital Partners come in- they offer their “non-recourse loan” for a shorter term purchase. The offer is less than Crown’s offer, but the landowner doesn’t have a perpetual easement on their property either to Crown.

So why should the landowner care? Because Crown Castle would not be working with Wireless Capital Partners unless they had something to gain from Wireless Capital. This gain might come at the disadvantage of the landowner. We surmise (but don’t know) that Wireless Capital Partners has committed to Crown Castle that they won’t increase the lease rates at the expiration of the purchased Crown Castle lease agreement. How does this negatively impact the landowner? Because as part of the WCP agreement, the landowner gives WCP the right to negotiate an extension to lease even if the extension is for a period greater than the amount of time granted in the non recourse loan. So WCP could bind the landowner to an extension of the lease that benefits WCP and Crown Castle, but is significantly undervalued as compared to what the landowner could get if he/she were aware of the value of his/her property to Crown at the expiration of the WCP non-recourse loan.

In our opinion, this “partnership” is not improper provided that WCP discloses any such relationship with Crown Castle to the landowner prior to any purchase of a lease agreement. If Wireless Capital doesn’t disclose, than the landowner might end up selling to WCP without knowledge of what they are giving up.

If you have been approached by Wireless Capital Partners regarding purchasing a Crown Castle lease agreement, speak with your attorney to fully understand what rights you are giving up. Ask them what WCP’s intentions are at the expiration of the current lease agreement. If you need help understanding the actual value of the lease buyout or what the lease should be worth after the purchased term, contact Steel in the Air.

If you have found this post while searching for Crown Castle’s or Wireless Capital Partner’s websites- please note that Steel in the Air is not affiliated with either entity. You can find more information about Crown Castle at http://www.crowncastle.com/ or for Wireless Capital Partners at www .wirelesscapital.com.

It appears that the subprime issues will have an impact on the wireless/tower sector particularly regarding cell phone tower acquisitions and cell phone tower lease buyouts- especially for the mom and pop side of the industry. We suspect that 1/4 to 1/3 of the new tower being built this year come from Mom Pop tower companies or individuals.

One of our associates mentioned that they have definitely seen a greater number of restrictions on commercial loan terms. As interest rates rise and loan covenants become more restrictive, small borrowers will find it more difficult and more expensive to borrow to build a tower or finance other business or non-business related purchases.

Meanwhile, the large tower companies and lease buyout firms who have fixed cost of capital will be sitting in the proverbial cat-bird seat. As the disparity between their cost of capital and the small borrower’s cost of capital increases, the buyouts or the tower acquisition offers will start to look more attractive and in some cases absolutely necessary for those who have extended too far or assumed that they could get low cost funds to finish an existing project. This could have the affect of reducing cell tower valuations.