The Hidden Pitfalls Behind Promises to Manage Rooftops or In-Building DAS
We see a current trend where large property owners (storage facilities, industrial parks, malls and housing complexes, among others) are being contacted with offers to “manage” their rooftops and in-building distributed antenna systems (“DAS”). Recognizable cell tower companies are not the only ones making the offer – now there are “rooftop management start-ups” as well – each of them hunting for agreeable property owners to turn over the rights to their in-building distributed antenna systems in exchange for promises to increase revenue and drive marketing campaigns.
If you’re a property owner, you should be cautious – and informed – before deciding to sign away the rights to your rooftop or agreeing to have a DAS installed. Some companies, like Crown Castle International and American Tower Corporation, are reputable players with established relationships with wireless carriers (They maintain long-term master license agreements with the major carriers.). However, smaller and newer start-up companies also exist who are attempting to replicate the tower company model. Their promises of large upfront one-time payments and recurring revenue share are likely to be, as the old adage goes, too good to be true.
The first question to ask is, why are these companies offering an upfront payment of money? The answer is simple – due to the expansion of 4G technology and the subsequent Wi-Fi backhaul, wireless carriers must expand upon their existing networks in order to sufficiently carry the increasingly burdensome loads of data traffic demanded by Smartphone users. These wireless carriers are going to be paying someone (if they are your tenants, they will be paying you). However, if a company (rooftop management, tower or DAS) is able to gain exclusive rights to “manage” your rooftop or in-building systems, the “upfront” payment pledge that they offer to you will probably not be paid by them at all (it will be paid by the wireless carriers who are, in fact, your tenants), effectively making the management companies actual out-of-pocket costs zero. So while they are paying nothing (or next to nothing), the benefits to these companies are substantial, and come in the form of securing for themselves a long-term, consistent stream of rental payments with very little (if any) real management – all they are really managing is the money flow. It’s not a bad model – for the rooftop management, tower and DAS companies, that is.
In addition, there are many other important things to consider before deciding whether or not to enter into a rooftop management or in-building DAS agreement – not the least of which is how much control and access you (as the property owner or “manager”) will maintain (or lose) once the agreement is ratified. For example, if the roof might require repair or replacement sometime within the terms of the lease, it would be wise to retain the right to temporarily relocate equipment – at the rooftop tenant’s expense. Also consider what would happen if one of your other tenants needed to access and use the roof in order to install, for example, a special HVAC unit or communications system for their own network needs. Then there’s the scenario where other tenants might be disturbed during “management” companies access of the rooftop and maintenance of equipment. We recommend caution when considering turning over management of your rooftop – be aware that it could impede your ability to meet your other tenants needs (or your own).
In the final analysis, ultimately it is the location of the property that is critical in meeting the wireless carrier’s needs – not the rooftop management company’s efforts. If the wireless carriers need a site at your location, eventually you will hear from one of their site leasing/acquisition agents. While the larger companies, such as Crown Castle and American Tower, have a direct relationship with the wireless carriers, their agreements often leave property owner carrying some legal liabilities that we do not believe are commensurate with the amount of compensation offered. With respect to the smaller companies in this sector, it is wise to investigate their ability to effectively market your rooftop and, at a minimum, we recommend requiring supporting documentation of their marketing efforts along with milestones detailing delivery of actual wireless carrier/ tenants rental payments.
There are many different ways to structure rooftop management, cell tower and DAS agreements, some of which, no doubt, monetarily benefit property owners, like yourself, while allowing you to retain a fair degree of control over your property. The more educated you are about who the players really are and what their end games are, the more leverage you will have. We recommend that you retain legal counsel – or an experienced cell tower brokerage, valuation and leasing consultant – to assist you in evaluating these issues and others, including liability and adequate insurance. We have worked on thousands of agreements like these, and are available to help you navigate through the issues.