Municipal Lease Negotiations- When Cities Undervalue Their Assets

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 town in the Chicago, IL area that negotiated its own agreements with Verizon, US Cellular, Clearwire, and T-Mobile for the 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 towns 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 town 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.

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