Top 10 Pieces of Advice for Landowners
1. Do know that their first offer is almost never their final offer.
2. Don't ever assume that your neighbors/friends/family knew what they were doing when they negotiated their own leases.
3. Don't ever sign a lease that doesn't include the full construction drawings as an exhibit.
4. Don't assume that every lease must have sublease revenue sharing.
5. Don't believe everything you read on the web. The average for cell site leases is NOT $1500/mo.
6. Do have your attorney review your tower lease.
7. Don't trust a verbal promise by the wirelss carriers or the tower companies.
8. Do be prompt in negotiating and responding to inquiries for a cell tower lease.
9. Do consider that the tower may alienate neighbors and nearby residents before agreeing to a lease.
10. Do your own homework on whether towers are safe or not.
Labels: cell phone tower lease
Impact of CPI Based Escalation
One of the recent questions we have been getting quite frequently is whether it makes sense to modify an existing lease to a Consumer Price Index (CPI) based escalation rate. This is because a few of the tower companies, including Crown Castle are actively looking to change their existing leases to a CPI based escalation due to changes in how they are required to report expenses over time related to a lease.
To help make sense of this issue, it is important to start with what CPI has done over the last 10 years. Please see the chart below. This is based upon the Urban Wage Earners and Clerical Workers (yes- there are multiple versions of CPI that can impact your actual escalation from year to year positively or negatively).
You will see that over the last 10 or so years, CPI escalation has ranged from a high of 4.08% to a low of 0.09% with an average of 2.38%. It is not difficult to see then that if you have a fixed based escalation in your lease that is greater than 2.38%, it might be detrimental to agree to a CPI based escalation. Clearly, CPI fluctuates and could go higher or lower. But based upon the last 12 years, many landowners will not be better off going to a CPI based esclation rate as compared to a fixed escalation rate.
To further complicate matters, the tower companies are placing ceilings on the escalation rates so that even if CPI is greater than a certain percentage rate, that you will only receive that rate. This is ridiculous. If you are willing to risk your escalation on what happens with CPI- you should receive the reward as well if the CPI is higher than average.
In short, we see little reason why a landowner would agree to amend their lease to reflect a CPI based escalation unless they are confident that CPI will be higher over time than their current lease escalation. Even then, the landowner should understand what they are giving up in the amended lease before agreeing. This could include the right to share in revenue from the tower, the right to an increased base lease rate, and/or the right to landowner friendly terms.
If you are contacted to modify your lease, please don't hesitate to contact Steel in the Air, Inc. for more help.
Labels: cell phone tower lease, CPI, crown castle, escalation
How will cell tower leases be impacted by the current market conditions?
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.
Labels: cell phone tower lease, cell tower ground lease, crown castle, lease buyouts, wireless capital partners
Irresponsible School Boards and Churches
At Steel in the Air, Inc, we have assisted a number of municipalities with cell phone tower lease proposals at schools. We have also provided guidance to a number of schools, both public and private across the United States.
To our surprise, in some circumstances there has been little to no public opposition to the proposal to place a tower at a school or a church. The surprise comes from the fact that rarely are tower proposals at schools and churches unopposed by local residents. These residents rally to the cry that "towers will cause unknown health problems in our children" regardless of whether they have studied the issue or not. This post is not to suggest that these parents are rationally protective or hysterically uninformed, but to suggest that schools and churches should know in advance that parents will in all likelihood object to the proposed cell phone tower at the church or school. And that such opponents can become very vociferous and actionable.
In a recent newspaper article, "
Cell tower plan on tap for Middletown zoners" in the
Ashbury Park Press, a local School Board requested that it's attorney send a letter to Verizon AFTER they had already signed a lease to allow a cell tower on school board property. "This letter is written at the unanimous direction of the Board of Education, to advise you that due to overwhelming pressure and expressed concerns from the citizens of
Middletown, the Board is hereby requesting the cancellation of parties' Agreement prior to the completion of Verizon's application process and the Commencement Date of the Agreement." There are numerous other situations that we are aware of where the same thing
occurred. Some of Steel in the Air's own clients have contacted us after they signed a lease to inquire whether they can terminate it because of significant public opposition. We now tell all of our school/church clients that they need to assess whether they can accept opposition from neighbors before they sign.
My issue with the position of the school is not that they would object to the placement of a tower on school property. It is clearly their right and obligation to protect the children at the school. While I believe that towers are fundamentally safe with rare exception, I don't question the board's right to make a decision that the income may not be worth it.
However, I object specifically to the ignorance of this school board in not considering the issue prior to voting to accept the lease. They clearly like the dollar signs but failed to consider the possible adverse reaction. All they would have had to do is read the paper or search the Internet for hundreds of stories whereby there was opposition to a cell tower on the basis of health. And in failing to do so, the board was irresponsible.
Since the Telecommunications Act of 1996 and subsequent case law prevents local zoning officers and boards from denying a tower proposal on the basis of health- the residents turned their anger to the school district. The School Board caved to the pressure of the residents and chose to not honor their word/contract with Verizon. In essence, their negligence may cost Verizon a minimum of $30,000 in site acquisition costs, architectural and engineering services, environmental review, tower manufacturer fees, and the like. In the end, this all could have been avoided had the School Board acted responsibly rather than on public pressure. A contract is a contract. I assume that Verizon could bring an action for breach of lease and for damages- but suit against a school district may not be an publicly acceptable course of action.
In the future, perhaps other school boards or churches might actually consider the potential ramifications from approving a cell tower on school district property before they simply negotiate fiscal terms and sign a lease. It would save both the wireless carrier and the school board a significant amount of aggravation.
Labels: cell phone tower lease, church cell tower, school cell tower, verizon
Are Crown Castle and WCP Working Together?
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.
Labels: cell phone tower lease, crown castle, lease buyouts, lease purchase, wireless capital partners
Sprint's Attempt to Sublease their Sites
Sprint has been contacting landowners recently with existing Sprint sites and asking to modify the current antenna installation. They propose adding 2 parabolic antennas to the site. When asked, they suggest that the additional equipment is used in "support of" their 4th generation WiMAX technology. Yet a careful review of the proposed lease amendment shows that they want to modify the current lease agreements so that Sprint "OR ANY OF ITS AFFILIATED ENTITIES, SUBLESSEES, ASSIGNS OR CUSTOMERS" can use the Site for installing equipment, antennas and microwave dishes, air conditioned shelters, ect.
Basically, Sprint wants unsuspecting landlords to sign these agreements not realizing that they have now authorized Sprint to sublease to virtually anyone. (I am a Sprint customer- perhaps I can get a sublease on one of their sites).
Personally, I find this type of negotiation misleading. Why represent that Sprint wants to add equipment if in fact, they simply intend to sublease to a third party? The answer is relatively easy- otherwise landowners would ask for more money.
Before you agree to an amendment like this or a proposal to add more antennas to your cell site, make sure you consult an attorney who understands wireless leases to counsel you on what rights you are giving up. If you need help evaluating the value of a Sprint lease amendment for additional antennas, contact Steel in the Air.
Labels: cell phone tower lease, Sprint PCS, Sprint/Nextel, WIMAX
BlackDot Wireless and AT&T Still Trying To Get Reductions
Cell site lease groundowners who thought they had heard the last from AT&T and Blackdot after refusing to lower their ground lease rates are being contacted again by Blackdot Wireless with the same pitch- just a different angle. These landowners or building owners with AT&T cell sites weren't persuaded by the earlier pitch that AT&T and Cingular were merging and that there was possible duplication in the AT&T network that might lead to lease terminations.
Blackdot clearly believes in the old addage: If at first you don't succeed... because they have a new pitch to try to get some of the higher lease rate landowners to reduce their leases. Blackdot's people must have time on their hands, because the new attempt is a glossy document called a Site Appraisal Form that they have generated that attempts to show all of the other options available to AT&T in the nearby vicinity. There is a shiny map and a list of all possible alternative sites within 1 mile which also lists the lease rate that Blackdot "purports" that AT&T could get from either the tower owner or landowner.
Blackdot represents that AT&T has signed master lease agreements with Walmart and McDonalds to place towers on their properties at $1500/mo. They also represent that either Walmart or McDonalds will pay the relocation costs to move AT&T to their facility. The pitch is that if the landowner does not agree to the proposed reduction, that AT&T will move it's cell site to either a Walmart or a McDonalds because of the lower lease rate.
The Site Appraisal Form includes all types of official looking comparisons and graphs- like a Performance Index that shows the rent of the various options in graph form. There is a Current Lease Consensus- that looks like the threat level bar at the airport- which undoubtedly will show yellow or orange or red for every site they send it to. (Because that constitutes danger to the lease longevity)
The funny thing is that I doubt that the wireless carriers have ever even seen this form- and definately don't use graphs or threat bars to determine whether a landowner's lease is over market average. However, Blackdot does not show other lease rates that other landowners are receiving in the area- because that might show that in fact that the subject landowner's lease is not really that expensive.
Ironically, Blackdot is not even sure enough of its own information - there is a conspicuous statement at the bottom that states that Blackdot does not guarantee or warranty the accuracy of this information that they are using to try to convince the landowner that they need to reduce their rent. If they can't guarantee this information- how can they expect you to rely upon it to make a decision?
If you have been approached by Blackdot to renegotiate your lease, please contact us and we can help sort through the fact and the fiction behind the possibilities that AT&T would actually move to another location. We can evaluate what the costs would be for the relocation and whether it makes sense based upon the expected savings. Lastly, we can make suggestions on how to respond.
If you have found this post in error while looking for information on Blackdot and wish to visit their website- please insert www blackdotwireless.com into your browser. If you are looking for AT&T, please goto
http://www.wireless.att.com/home/. If you are looking for McDonalds-
http://mcdonalds.com/ or Walmart at
http://www.walmart.com/. Please note that Steel in the Air, Inc. is not affiliated with Blackdot Wireless, AT&T, McDonalds or Walmart in any way. Blackdot Wireless, AT&T, McDonalds, and Walmart are registered trademarks of those companies.
Labels: AT and T, blackdot, cell phone tower lease, cell tower ground lease, cingular, mcdonalds, T, walmart
AT&T to Build Cell Sites in McDonald's Arches?
We have received recent inquiries from AT&T cell site owners who have been approached by Blackdot to renegotiate their leases. Of course, there is a new pitch, because the old pitch that the merger between AT&T and Cingular was going to cause terminations just doesn't ring true anymore.
The new pitch by Blackdot Wireless is that AT&T has now signed deals with McDonald's, Walgreens, and other miscellaneous large landowners at a fixed rate which allegedly is cheaper than the lease that AT&T has with the landowner. While the pitch is flawed, there is some reality behind it. AT&T has master lease agreements in place with large multi-site landowners and is looking to reduce their high dollar rents by looking at alternatives.
However, the savvy landowner should not take Blackdot's pitch at face value. There are radio frequency engineering criteria that must be met for each site. The criteria may not be met at the burger joint next door. Furthermore, it may be difficult if not impossible to get approval for a new tower in the area. Lastly, at some point, the costs of relocating the site outweigh the savings to be gained by the relocation on a monthly basis.
If you have been approached by Blackdot Wireless on behalf of AT&T to reduce your rent recently, we can assist you by evaluating the following:
1. Whether your cell site lease rent is significantly high
2. Whether AT&T could relocate the site and still meet their engineering goals
3. Whether the local municipality would even allow the relocation
4. Whether the relocation would cost more than would be justified by the savings in rent
Please contact us to discuss any offer from Blackdot Wireless related to your AT&T cell phone tower lease.
Labels: AT and T, blackdot, cell phone tower lease
Water Tower Cell Site Lease Buyouts
We recently provided a consultation for a municipality that was pondering the sale of its cell tower leases on its water towers and electric transmission poles to a lease buyout firm. Like many municipalities, this particular city was looking at the lease buyout as a means of increasing available funds without raising taxes.
The lease buyout firm had offered approximately 9 times the annual rental income for the rights to these leases for 30 years. We advised them on what the proper amount of the lease buyout should be were they to go forward with the lease buyout
firm's offer. We also advised them that if their goal was to maximize the lump sum, that they were better off considering the sale of the "wireless asset" entirely. Since a municipality would not have an interest in selling the water tower- we suggested that they could sell the current wireless leases and the potential for future leases.
By offering the sale of the "wireless asset" (like a cell tower), the municipality could capitalize on the robust tower market and open the bidding opportunity up to 10-15 more bidders. (There are only a few lease buyout firms). By doing so, the municipality would receive higher offers- possibly ranging to as much as 15 times their annual rent.
The transaction would be structured as the purchase of a fixed term easement- say for 30 years. The municipality would sell the current and future rights to lease the water tower to wireless carriers for that period of time. In return they would receive a higher lump sum today. The easement would mirror the current leases. The purchaser would have the opportunity to market and collect income from any wireless tenant using the water tower. Given that some of the lease buyout firms request 50% of the additional revenue as part of the purchase of the site, the municipality was in essence selling the additional 50% for almost a 60% increase in the purchase price.
Clearly, the municipality gives up some rights with the sale of the easement. However, these rights should mirror those given up in the existing leases. If the leases prohibit unauthorized access to the water tower or set established times when the sites can be accessed, those can be in the easement as well.
This is not the ideal solution for all municipalities- but if the goal is to maximize the lump sum from the sale of the existing leases on the water tower, than it may be appropriate. If you are a municipality and are considering the sale of your water tower leases, please contact us for a
free valuation of your water tower cell site leases.Labels: cell phone tower lease, lease buyouts, municipality, water tower
Global Signal Sprint sublease questioned in IL Court
In late 2005, Global Signal announced the lease of 6600 Sprint towers and the sublease back of the towers by Sprint. One of the questions that we pondered during that time was how this lease would be interpreted if the underlying ground lease between the ground owner and Sprint prohibited subleasing. In a number of cases, Global Signal's response was to simply craft a site management agreement and not sublease the tower.
Fortunately, it appears that we will soon find out.
Oak Forest, IL has sued Sprint PCS over the alleged improper sublease of the tower to Global Signal, claiming that the sublease violated their underlying lease agreement. One of the other questions we pondered was whether there was any damage to the landowner by allowing Global Signal to sublease the tower. In effect, all Global Signal was doing was taking the place of Sprint in managing the tower. If the underlying cell tower ground lease prohibited subleasing, Global Signal could not sublease space on the tower without Oak Forest's consent.
Oak Forest could argue that by subleasing to Global Signal, that now there were two companies that need access to the cell tower. But really is the burden any greater?
Either way, it really does not appear that this suit was motivated by the "damage" from the unauthorized sublease. Oak Forest is developing a mixed use development where the cell tower sits- and negotiations on the voluntary removal of the tower weren't moving fast enough. Rather than use eminent domain to "take" the cell tower and compensate Global Signal, the city simply sued for breach of the lease. Having assisted a number of municipal clients navigate through the issue of eminent domain and cell towers, Steel in the Air has found that many municipalities are poorly informed about the cost of relocation of a cell tower.
The legal question here is whether or not the City was actually damaged, and if so, if removal and forfeiture of the tower is an equitable solution to the issue. That will be for the court to decide, if this actually isn't settled prior to the court hearing arguments.
Labels: cell phone tower lease, cell tower ground lease, eminent domain, Global Signal, Oak Forest, Sprint PCS, sublease
Crown Castle offers landowners who sold to Wireless Capital Partners the "opportunity" to extend their cell tower ground lease.
A landowner sold their cell phone tower lease to Wireless Capital Partners. The
Wireless Capital Partners lease assignment and successor lease provided that they controlled the rights to the cell phone tower lease for 30 years. The lease actually has only 26 years remaining, so Wireless Capital Partners received 26 years under the assignment of lease and 4 years under a successor lease. A successor lease provides for the rights vested under the current cell phone tower lease after the expiration of the current lease.
Crown Castle notified the landowner that to "process" the efficient transfer of payment, they needed an "Acknowledgement" of the sale of the agreement.
Never mind that Crown Castle actually received a Signed Affidavit from Wireless Capital Partners and the landowner "acknowledging" the sale.
What we specifically dislike about the letter from Crown Castle is that it suggests that if the landowner does not sign the "acknowledgement" that payments to
WCP may be delayed. (As if
WCP would allow this to happen). To make matters worse, the proposed acknowledgement is not an acknowledgement at all- but a
questionnaire about completely irrelevant questions to the transfer of the lease to
WCP.
As part of the
Crown Castle Lease Cell Phone Tower Lease Extension Program, Crown offers a nominal one time payment of $4000, plus
reinstatement of the lease (AT THEIR OPTION) at the conclusion of the successor lease for 15% escalation of the current lease rate then in effect. The landowner ends up extending the lease at what may be below market terms for a cell phone tower lease. Crown gets the security of extending their lease without any real obligation.
We cannot suggest to anyone that they accept this offer. If you have sold your lease to Wireless Capital Partners or to Unison Site Management, simply keep the lease as is. We don't even suggest that you contact us for help- because this offer is so one-sided as to be ridiculous in most cases.
Steel in the Air, Inc. got into this business because we felt that the tower companies and wireless carriers were taking advantage of landowner's ignorance. It is this type of one-sided offer that makes us glad that we did.
Labels: cell phone tower lease, cell tower ground lease, crown castle, lease purchase, wireless capital partners
