Municipal Lease Negotiations- When Cities Undervalue Their Assets
January 27th, 2010 by admin Posted in cell sites, city, municipality, water tower | No Comments »
There are times when I come across a news story and am saddened when I read about a municipal landowner who has negotiated an undervalued lease. This particular story is about a Village in the Chicago, IL area who negotiated their own agreements with Verizon, US Cellular, Clearwire, and T-Mobile for use of a water tower on school district property. The lease rate negotiated was less than the average of what the typical tower company charges for a collocation lease.
This particular site water tower is located in an urban area. Without knowing anything else about the area, it is easily clear that just by the fact that there were four users interested in going on the site, that this is a unique site and should have commanded significantly higher rents.
I assume that the decision maker’s had the best of intentions. I assume they contacted other municipalities nearby to find out what other villages were being paid. However, they were incorrect in assuming that their location was average and that the comparable lease rates should apply. As a result, they did their constituents a disservice. As a result, this particular Village will lose out on a minimum of $500,000 in future value over the course of the leases. All because they failed to understand the unique value of their property and relied upon average lease rates.
Vandals Collapse Tower with Excavator
September 6th, 2009 by admin Posted in tower collapse | No Comments »Some vandals claiming to be from an eco-terrorism group caused the collapse of two towers using construction equipment.
The pictures are pretty fascinating.
A story about the FBI getting involved can be found here.
Wireless Costs Around the Globe
August 31st, 2009 by admin Posted in ARPU, wireless costs | No Comments »Billshrink did a study of their data and found that US subscribers pay more on average for monthly wireless use than subscribers in the other countries they evaluated. The average revenue per user in the US is $53/mo per Billshrink’s data. Compare this to Sweden and Finland where the ARPU is $11/mo. The next costliest country for wireless service was Spain at $42/mo. Not ironically, most of the cheaper countries have better services and more advanced handsets. They also tend to be smaller in land mass which may contribute to cost efficiency. One benefit may be that the carriers can afford to pay more for cell site leases.
July 25th, 2009 by admin Posted in Uncategorized | No Comments »
Which Stealth Cell Tower is more Stealthy?
June 22nd, 2009 by admin Posted in camouflaged towers, stealth cell towers | No Comments »Reading an article in the Press Democrat for Santa Rosa, CA where they show two separate stealth cell towers. The article is not particularly innovative- just commentary on the battle between aesthetics and wireless expansion. However, the reason that I found it interesting is that they contrast two stealth towers. (Photos from Press Democrat)
The first is a water tower at a farm:
The second is a stealth pine tree in the middle of an orchard:
Clearly, one of these accomplishes the objective of being fairly stealthy- in that it is not readily apparent without a second look where the cell tower is. The water tower is well done- fits the environment. The pine tree on the other hand is ridiculous.
The question that remains is whether the second tower is really that much better than a typical monopole in terms of visibility? This is similar to a 100′ pine tree tower near downtown Tampa that rises out of a commercial area. It is completely out of place. Seems to me that stealth towers should actually be stealthy in the area that they are located. This burden falls on the local land use planners to actually understand what they are approving.
Crossroads Wireless- Bankruptcy!
June 15th, 2009 by admin Posted in Crossroads Wireless | No Comments »Many people contacted Steel in the Air, Inc about the possibility of getting assistance with negotiating land leases with Crossroads Wireless. After one or two consultations, we chose not to take on any of these clients because our experience in dealing with Crossroads agents proved that they would not make changes to their lease. At the $300/mo to $400/mo that Crossroads was offering, we suggested to potential clients that they should really consider the liability that they were incurring by working with Crossroads. Furthermore, we suggested people did not need to retain us unless their property was special or unique because they were not likely to get anything more on their lease.
None of our clients chose to go forwards with Crossroads. In hindsight, that may have been a wise decision. In February of 2009, a group of Crossroads creditors chose to file for involuntary bankruptcy for Crossroads. The Bankruptcy Court granted an order to convert the bankruptcy to a Chapter 11 reorganisation.
As it pertains to land leases, Crossroads was successful in signing up 2000 or so landowners. They now want to get out 197 of those leases. Whether these leases are ones where they actually started construction is unknown. Perhaps the leases that they want to retain are ones where they haven’t started construction or they have finished construction.
For more on this situation, please read an excellent article on the subject at Wireless Estimator.
T-Mobile Cell Tower Construction On Hold.
June 1st, 2009 by admin Posted in T-Mobile, tower construction | 2 Comments »This afternoon, one of our clients who had negotiated an agreement with T-Mobile for lease of their land received the following response from T-Mobile as to why their lease was not signed:
“As I mentioned during our conversation, due to the Economic Situation, T-Mobile is not moving forward at this time, with any leases, since no towers are going to be built. We would like to keep this site as a possibility for future reference, since it is a future interest for T-Mobile.”
Our client was understandably angry because this particular lease reimbursed him for legal fees that he had already expended. So T-Mobile’s failure to sign the lease meant that he wasn’t going to be reimbursed even though he had done everything they had asked of him and had signed the lease.
It appears from this message that T-Mobile tower construction nationwide is on hold. We have heard a rumor that capital expenditures from T-Mobile in some markets have been dropped 90%. We suspect that they are still continuing with construction on some towers but that a budget hold has been placed in effect and a good number of towers are not being constructed at this time. In our experience, these setbacks are typically an indicator of one of the following:
1. Poor financial performance: T-Mobile has not been having a banner year.
2. Possible merger: Carriers typically stop construction prior to announcing a merger.
3. Need to reallocate budget for 3G.
I believe this is probably indicative of the 1st scenario. If you are in a similar situation, there isn’t much you can do other than wait. Whatever you do, there is no cause to get angry towards T-Mobile.
Top 10 Pieces of Advice for Landowners
June 1st, 2009 by admin Posted in cell phone tower lease | 3 Comments »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.
Impact of CPI Based Escalation
May 3rd, 2009 by admin Posted in cell phone tower lease, CPI, crown castle, escalation | No Comments »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.
School Cell Towers: Why RFP’s Don’t Work
April 10th, 2009 by admin Posted in cell towers, municipality, school cell tower | No Comments »
Steel in the Air, Inc. regularly assists schools with cell tower leases on school district property. We represent schools and universities who see the upside of income that doesn’t require a budget meeting or tax increases to procure. With the downturn in property tax valuations and increasing budgetary restraints, more schools are evaluating school cell towers as a source of income.
Recently, we went and spoke to a particular school board in south Florida as a member of the public in response to their consideration of the possibility of leasing school district property to cellular providers. Our particular objection to their proposed plan was that they intended to simply issue an Request for Proposals “RFP” in hopes that multiple parties would bid on the exclusive right to place towers on school district property. We objected to this option because we felt that it limits the value that the District procures from cell tower leases on school property. The District was looking to minimize the impact on its day to day operations by going with a single source vendor who would build, own, and operate the towers. They would evaluate District property and assist the District in marketing the property to wireless carriers. If they found interest, they would develop and pay for the cell tower on school land and manage it. In return, they split the revenue with the school district 50/50.
On the surface, this may seem like a good option. There are surely benefits to this type of plan.
- The District and the tower company’s goals are typically aligned in that the tower company needs tenants if it intends to be profitable.
- The District gets to offload the negotiation of lease agreements to a third party vendor thereby decreasing staff time on the projects. (As anyone who regular negotiates leases on school district property knows- these are time consuming leases).
- The District gets a sizable amount of income- especially in more urban areas or in areas where
However, there are some potential issues with this type of plan for school cell towers.
- 50% of the revenue can be substantially less than the District would have received had it just negotiated the lease directly with the wireless carrier.
- In some cases, it is unlikely that more than one wireless carrier will use a particular location. As the tower company only gets 50% that may not be enough to justify building the tower. As such, the District forgoes whatever revenue it could have negotiated directly for the lease.
- The District can give up some of its control over the placement of towers on its own property.
- Some districts have experienced significant public opposition to cell towers on school property on the basis of the sometimes irrational concerns about radio frequency radiation.
- Despite some common goals, the tower company and the District will inevitably have different goals because the tower company exists solely to make money off the operation of the towers.
The biggest issue we had with this particular District is that they assumed that an RFP would effectively bring in bidders. However, what they don’t know is that the way they intend to craft the RFP will limit the number of bidders. The large tower companies don’t do 50% revenue sharing. There are some tower companies that would be interested in building cell towers at schools, but they aren’t likely to see the RFP. The wireless carriers won’t bid because they would simply prefer to let a tower company deal with the burden and cost. The District is unlikely to know how to find small tower companies who aren’t likely to read or follow school district RFPs. So the District constituents get the short end of the stick because the RFP ends up being bid on by one or two companies. To make matters worse, these bidders almost always know that RFP’s for school sites will only be bid on by one or two companies and therefore aren’t forced to bid competitively.
Our suggestion is that school districts retain outside experts to assist them in determining the most profitable way of leasing space for school cell towers. We can review the District’s goals and help guide you on the method that will maximize your revenue while minimizing the headache to the district. It might be that one vendor is suitable or perhaps multiple vendors. Alternatively, perhaps the District could consider building and owning the towers themselves. Please contact us if you are school district looking to increase its revenue while minimizing the administrative burden from dealing with the wireless providers. We can provide non-biased advice on how best to accomplish BOTH of these goals. Please also see our webpage on municipalities building their own towers.