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Cell Tower Lease faqs

FREQUENTLY ASKED QUESTIONS

Ken Schmidt
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At Steel in the Air, we receive some rather common inquiries that we find ourselves giving answers to on a regular basis. Here are some of the frequently asked questions.
If you have other questions that have not been answered here, please feel free to contact us.

WHO DOES STEEL IN THE AIR WORK FOR?

Our clients are 95% public and private landowners, building owners and public entities, including local governments and schools. The remaining 5% consists of financial institutions like banks and investment banks, consulting groups, attorneys, small tower owners, and appraisers who need consulting or valuation services. You can see examples of our clients on our Who We Serve page. With the exception of two expert witness situations on eminent domain of towers, we have not worked with large tower companies or wireless carriers. Our focus is solely on the landowner (the “Lessor”). Unlike other consultants, in cellular lease negotiations, we never accept any compensation from anyone other than the property owner.

I HAVE A PROPOSAL FROM A CARRIER FOR A LEASE. WHEN DO I NEED TO INVOLVE SITA IN THE NEGOTIATING PROCESS?

We recommend that you involve us after the carrier has contacted you for the second time. The first time they contact you, let them know that you are interested, but you can’t say yes until you know exactly what they are proposing. Here are some questions you should ask: Where is the tower going? What type of tower is it? How much ground space do they need? How much rent are they proposing? What are the lease terms? Is your property the primary site they are looking at? If they have visited the site, and have started the lease exhibit and/or the property survey, the time is right to contact us. They may ask you to agree to the financial terms or even sign a term sheet. We recommend strongly that you don’t agree or sign anything until after consulting with us.

WHAT IS THE U.S. AVERAGE CELLULAR LEASE REVENUE?

The average cell site lease rent varies depending upon the type of lease that it is (and the type of tower that it’s tied to). By this, we mean that a ground lease typically pays less than a rooftop lease which typically pays less than a tower collocation lease. We recently did a blog post about the average lease rate for all leases in given locations within the US.

WHAT IS THE APPROPRIATE LEASE RATE FOR OUR PROPERTY/BUILDING?

The answer is that it depends upon the uniqueness of the subject site. By that we mean whether the carrier could just as easily find other properties nearby to lease. Lease rates for cell towers can run from as low as $100 a month to $15,000 a month for very unique properties. The average lease rate (considering all cellular leases in the U.S.) in our database is around $900/mo. The type of lease, and the location of the cell site, highly impact the valuation. We have dealt with leases on both ends of this spectrum and all between. For more information on how we help you determine the fair market value of a cell tower lease using our proprietary cell tower lease rate database.

I HAVE A FRIEND WITH A TOWER IN ANOTHER STATE AND HE IS GETTING 3 TIMES MORE MONTHLY REVENUE THAT I AM GETTING FOR MY LEASE. WHY IS THAT?

Lease rates are dependent upon many factors. Some carriers or tower companies pay more than others do from the get go. Zoning regulations affect lease rates (and vary from one municipality to another). The current economic climate is also a factor, as is the longevity of the lease (eg. a 50 year lease is more valuable than a 20 year lease). The number of carriers using the cell site will also contribute to the net rental payment. But the most important factor of all is the “uniqueness” factor. This is calculated by evaluating whether or not there is comparable land (competition) nearby which could accommodate the carrier/ tower company just as easily. The uniqueness factor also considers the proximity of your land to other cell sites. When carriers first search for land on which to build cell sites, they utilize a “search ring” – an area within which boundaries cellular signals can effectively be handed off to the next tower. Better positioned lands affect the final value of the lease, and contrary, to what most people think, the best land isn’t necessarily the highest. In addition to all the factors above, the type and terms of the lease are also considered when calculating its total value.

HOW MUCH SHOULD THE LEASE ESCALATE AND HOW OFTEN?

In new cellular lease negotiations, landowners rightfully question whether or not the wireless carrier’s proposal is in their best interest or “fair.” Escalation rates range from 1% to 8% per year, although most people don’t see anywhere near the up side of that range. If you examine the last 10 years, you will see that that the consumer price index (a measure of inflation) has averaged 2.3% per year. This means that to maintain the same value of your lease you would need to receive annual escalation of at least 2.3%. From 1990 to 1999, the average CPI was 3.1% per year. Over the last 100 years, it has averaged 3.2%. Recently, the wireless carriers have been pushing hard to reduce the escalation rates of their leases, offering 7.5% over five years or 2% per year. Your decision to push for a higher escalation should depend upon how unique your property is (or is not) and what you are asking for in terms of lease rate and other financial terms. In other words, escalation, lease rate, signing bonus, revenue share payments, option payments, and other lease terms should not be considered in isolation, since they are all factors in determining the overall fair market value of your lease. If you need help figuring out what to ask for, contact us. we are experts in evaluating ALL components of a proposed lease.

HOW LONG SHOULD THE LEASE BE FOR?

Our clients regularly ask us whether they have to agree to the typical 25 years being proposed by the wireless carrier or the 50-75 years being proposed by the tower company. Because of the capital investment required to build a cell site, and because other cell sites are built based upon their proximity to existing cell sites, the carriers need the assurance of a long term lease. Surprisingly, many of our clients think that a longer lease is more valuable. However because most leases contain termination rights only for the tenant/wireless carrier, it is less valuable than they might think as the longer term is a one way commitment. Twenty five years is typical and should be fine in most cases.

WHY DO THEY HAVE A RIGHT TO TERMINATE THE LEASE IF I DON’T?

Many landowners believe that they should have the right to terminate the lease, since the wireless carrier does. Unfortunately, most wireless carriers will not grant the landowner the right to terminate under any circumstances – and they won’t engage in cellular leases with landowners who insist upon it.

SHOULD I AGREE TO THE RIGHT OF FIRST REFUSAL CLAUSE?

Today, most proposed cell tower leases contain right of first refusal clauses that limit the Lessor’s (e.g., the landowner’s) right to sell the property or the lease without giving the Lessee (e.g., the tower owner/wireless carrier) the right to match the offer. The wireless carriers have a legitimate concern about third parties buying out their leases via a cell tower lease buyout. (Link to cell tower lease buyouts page) However, in most leases, the language in the Right of First Refusal is overly broad and could end up being very restrictive in the event of a regular sale of the property. This language should be narrowly drafted so as only to include the sale of the lease itself and only to companies that own or operate towers or that buy leases.

CAN YOU GIVE ME A LIST OF TOWERS IN MY AREA AND HOW MUCH THEY PAY MONTHLY TO THE LANDOWNER?

We provide this service as part of being retained on a consulting basis. We do have a sizeable tower location database, but we don’t by any means know the terms of each and every cell tower lease.

THE WIRELESS CARRIER IS OFFERING A FEW HUNDRED DOLLARS FOR THE OPTION TO LEASE MY PROPERTY. WHAT SHOULD I AGREE TO?

Many landowners and building owners don’t recognize that the carriers aren’t actually offering a lease, but instead want to purchase an option to lease. The difference is that a lease necessitates that the carrier pay rent, while the option only requires that they put down an option payment so that they have the right to lease the property if they so choose. Under the option, the carrier could always choose not to commence the lease and thus, you would not receive payments. Please note that when you sign the option, you are agreeing to the terms of the lease, so make sure that you have an attorney review the language before you sign, not after. We recommend asking for option payments, which can vary widely, from as little as $100 and as high as $10,000. Some landowners or their attorneys try to force the carrier or tower company to start paying rent immediately. If you do that, you will lose the lease 99 times out of 100.

HOW QUICKLY DO I HAVE TO RESPOND ONCE THEY CONTACT ME?

The site acquisition agent who contacts you, more often than not, gets paid on a milestone basis, meaning that they get paid when they perform certain tasks, such as the identification of three candidate sites, and also when leases are signed. Thus, they are motivated to move quickly because they don’t get paid until they do. If you take too long, they will likely move to the next candidate. Our suggestion is that you contact them immediately, and try to proceed quickly, whether that means negotiating the lease yourself, going to an attorney (like www.celltowerattorney.com), or retaining a consultant, like Steel in the Air, Inc. Delaying, in most cases, will mean that someone else will end up receiving the rental income. Feel free to contact us at any point in the process. We will happily advise you on what your next steps should be, whether they are to retain us immediately or to wait until the carrier has presented a formal offer.

WHO SHOULD PAY FOR TAXES?

The tenant should always pay for any personal property taxes or real property taxes that are owed due to their improvements on the property or the erection of a cell tower. We would strongly recommend not entering into a lease agreement wherein you are responsible for the taxes due to the tower.

WILL MY PROPERTY SUFFER DEPRECIATION BECAUSE OF A TOWER PLACED ON THE PROPERTY?

In some rare cases, it is possible, especially if the placement of the tower would detract or limit future development on the property. However, most of the time, the value of the added income will easily exceed that of any depreciation on the property.

WILL STEEL IN THE AIR HANDLE THE ACTUAL NEGOTIATIONS WITH THE WIRELESS CARRIER / TOWER COMPANY, OR WILL YOU JUST ACT AS MY ADVISOR?

Most of our clients retain us on a consulting basis. In some situations, we can directly handle negotiations. Please contact us to find out more.

THE CARRIER (OR TOWER COMPANY) HAS RECENTLY PERFORMED EQUIPMENT UPGRADES ON THE CELL TOWER. SHOULD THEY BE PAYING ME MORE FOR THESE CHANGES?

It depends. If they are asking for an expansion of their cell tower ground lease area, then probably. If they own the tower and the upgrades are done within the original, agreed-upon footprint, the typical lease does not require that they pay you additional compensation for upgrading their equipment. On rooftop cell site lease modifications, the issue is more complex, and depends upon the specific modifications and the specific lease language. We have assisted many property owners in figuring out whether they can ask for additional compensation and, if due, have helped them get it.
Please send us your lease and we will be happy to take a look, and tell you (at no cost) whether it is worth your time to pursue the matter. If you have forwarded your lease to other consultants and received the high-pressure sales pitch from them after doing so, don’t worry. That is not our style. We will tell you what we can do, what it will cost, and then follow up to make sure you don’t have any questions.

MY LEASE DOESN’T EXPIRE FOR YEARS, SO DO I HAVE TO AGREE TO AN EXTENSION AT THIS POINT TIME?

Absolutely not. If you are party to a lease with Crown Castle or American Tower Corporation, you should be aware of some tactics. They might attempt to convince you that failure to renew your lease now will have results, such as:
  • The cell site your lease is tied to will be forwarded to their Alternative Site Relocation Department (and removed from your property).
  • Other wireless carriers will not elect to collocate on the cell site (because the lease term is not long enough to make it worth their while), therefore the tower and your lease will depreciate in value.
So when should you renew your lease? The short answer is: do it when it’s worth your while. Are they giving you an increase in rent? Are they giving you a hefty signing bonus? Are they giving you a revenue share on current or future tenants? We have assisted a few hundred clients with American Tower lease extensions and another few hundred with Crown Castle lease extensions. We have consulted hundreds of property owners involved with lease negotiations with wireless carriers, as well. Call us or email us, let us know what they are proposing and in most cases, we will tell you not to accept it. If we think your situation can be improved by working with us, we will let you know how we pride our services.

MY LEASE DOESN’T EXPIRE FOR YEARS, SO DO I HAVE TO AGREE TO AN EXTENSION AT THIS POINT TIME?

Absolutely not. If you are party to a lease with Crown Castle or American Tower Corporation, you should be aware of some tactics. They might attempt to convince you that failure to renew your lease now will have results, such as:
  • The cell site your lease is tied to will be forwarded to their Alternative Site Relocation Department (and removed from your property).
  • Other wireless carriers will not elect to collocate on the cell site (because the lease term is not long enough to make it worth their while), therefore the tower and your lease will depreciate in value.
So when should you renew your lease? The short answer is: do it when it’s worth your while. Are they giving you an increase in rent? Are they giving you a hefty signing bonus? Are they giving you a revenue share on current or future tenants? We have assisted a few hundred clients with American Tower lease extensions and another few hundred with Crown Castle lease extensions. We have consulted hundreds of property owners involved with lease negotiations with wireless carriers, as well. Call us or email us, let us know what they are proposing and in most cases, we will tell you not to accept it. If we think your situation can be improved by working with us, we will let you know how we pride our services.

MY LEASE DOESN’T EXPIRE FOR 8 YEARS. DO I HAVE TO AGREE TO THEIR REQUEST TO RENEGOTIATE THE LEASE NOW?

No you don’t. In fact, they are contacting you this far in advance because it gives them time to renegotiate. Their agents are good and aggressive negotiators, so the timeframe suits them well. We typically recommend that you wait until closer to the expiration unless they have put forth a compelling offer. At that point, we recommend that you forward us the offer. We will review it and let you know if it is worth considering or whether you should just refuse it. And we won’t charge you a dime. However, if we think that there is an opportunity to improve the terms of the lease, we will let you know the cost of our services. After that, we won’t push you or smother you with emails and advertisements, other than to follow up and make sure that you don’t have any further questions.

WHY DON’T I HAVE REVENUE SHARING ON MY LEASE (OR MY PROPOSED LEASE)?

When revenue sharing terms are added to a cellular lease, it means that the Lessee (the tower company or carrier) will share a percentage of the revenue it receives when additional tenants are added to the cell site. If you have been doing research on the web, you may have come across other websites that suggest that every lease should include revenue sharing, and you may be feeling foolish that yours does not. You may have heard stories from friends, neighbors or associates that have towers on their property about how much extra revenue they get from revenue sharing. It’s true – revenue sharing is definitely valuable. Some of our clients generate over $100,000 a year with leases that include revenue sharing, however the reality is that fewer than 20% of all leases have some type of revenue sharing. Of the 80% that do not have revenue sharing, a small portion of them could have added it, if only they had asked. The rest, however, would have forfeited the tower if they had insisted on adding a revenue sharing clause to the lease. Today, the ratio of leases with revenue sharing is even smaller, meaning that significantly less than 20% of new leases contain revenue sharing. Tower companies only offer revenue sharing as a last resort, and carriers will do their best to avoid including it, because they know that it devalues the tower.
Fortunately, this doesn’t mean that it’s impossible to add revenue sharing to your lease. If you have a lease and the tower company or carrier wants to extend it, you may be in the position to request that revenue sharing be added. We can help you gauge what percentage of the revenue you should ask for and, more importantly, whether you want it or not. Suppose that you could look into the future and determined that there would never be another wireless carrier leasing space on your tower; would you ask for a share of the revenue then? Conversely, if you knew that your site was likely to have another four carriers interested in it over the next 5 years, how hard would you push for revenue sharing? That is where we come in. Between our cell tower location database and our ability to review sites anywhere in the US, we can provide an educated guess on what the future tenant prospects are for your specific location. Then we can tell you, not only whether you should push for revenue share but, how hard you should push, and what the value of that revenue share would likely be over tim
Call us or email us today. We will be happy to review your situation at no cost and let you know if this is something that we can help you with.

THERE ARE MORE COMPANIES (E.G., WIRELESS CARRIERS) USING MY TOWER, WHY AM I NOT GETTING ANY ADDITIONAL RENT?

In most cases, tower owners or wireless carriers aren’t required to pass on revenue that they receive from collocating space on their towers, even though it may seem like this is unfair due to an increase of traffic on your land. It is possible, however, to get more rent if more ground space is required for additional equipment or the deployment of new base stations. It’s also possible to negotiate more rent if or when your lease is close to its expiration date (in some cases even within 5-10 years).

I HAVE OFFERS FROM COMPANIES WHO ARE INTERESTED IN BUYING MY LEASE. CAN YOU GET ME A BETTER PRICE?

In 95% of situations, the answer is yes. And better yet, you don’t have to pay us to find out. Just call us, share your offer and lease information, and we will let you know if we can help and what it will cost you for us to do so. If we can’t help, we will tell you that as well.

I HAVE RECEIVED NUMEROUS CALLS FROM MULTIPLE COMPANIES REGARDING PURCHASING MY LEASE. HOW DO I EVALUATE THESE OFFERS?

Please see our Cell Tower Lease Buyout Guide. It will answer this and many other detailed questions that landowners have about cell tower lease buyouts and how to evaluate buyout offers.

I AM CONSIDERING SELLING MY LEASE, AND THE BUYER HAS OFFERED REVENUE SHARING OF FUTURE TENANTS. HOW LIKELY IS IT THAT THEY WILL FIND OTHER TENANTS?

Very unlikely. Lease buyout companies typically don’t have a single person on staff whose sole task is to market cell sites to wireless carriers. While they boast about how much revenue they have added to sites that they’ve purchased, 99% of this revenue would have been added whether the lease buyout company had bought the site or not. If you are selling because you want additional revenue from the carriers they promise to add to the site, DON’T. If you are selling because you want to sell your lease, go ahead and do so. However, please note that there are very few cases where it makes sense to actually give revenue sharing to the buyout company. You can get the same amount of money selling the leases without agreeing to revenue sharing as you would if you did agree to it.

CAN YOU RECOMMEND A COMPANY TO MARKET MY PROPERTY/TOWER FOR A TOWER OR TENANTS?

If you are already engaged in a wireless lease with a wireless carrier or cell tower company, then your property currently exists in more than one database. Wireless carriers already know where you are and you will likely be the first landowner approached when they are ready to expand or augment their existing networks, because you have already been through the zoning approval process.

Cell site leasing is a complicated business. The only possible way marketing could be effective is in the case where the company who wishes to market your lease represents a wide base of wireless carriers who desire to expand their networks into your particular area. In addition, only tower owners can market cell sites, so if you are not the tower owner, nothing can be done.

If you’ve received a solicitation from a third party company who suggests that they will market your property, they are probably interested in something else entirely – a lease buyout, and a percentage of future revenue that might come from carrier collocation.
In the world of cell tower leasing, patience is a virtue. There is no use spinning your wheels in an attempt to entice a carrier to use a property that doesn’t fit their network infrastructure needs. So rather than giving up 25% or 50% of your future revenue, we recommend that you just sit tight.

IS THE MONEY FROM THE SALE OF MY LEASE CLASSIFIED AS ORDINARY INCOME OR CAPITAL GAINS?

This is a question that you should pose to your CPA. In the past, our clients’ CPAs have come down on both sides of this issue. Unfortunately, we are not qualified to advise you on this issue. However, we do advise you not to listen to the lease buyout companies or the tower companies if they try to represent that they can advise you on this issue. The only person that should answer this question is your CPA, and the proper time to ask is before you sign a letter of intent to sell your lease, not after.

IF I SELL MY LEASE RIGHTS, WHO IS RESPONSIBLE FOR PAYING PROPERTY TAXES?

The answer depends upon your lease agreement and the purchase agreement you sign with the company that buys your lease. Please note that by default the companies that buy the lease will rarely offer to pay for property taxes without being asked.

HOW WILL THE EASEMENT AFFECT MY PROPERTY IF I DECIDE TO SELL THE PROPERTY?

It could have a fairly significant impact on the property or none at all. Any buyer of the property will be taking the property subject to the easement and, depending upon the location of the tower or cell site, may or may not care. If the tower is in a location that would impede future development (or redevelopment) of the property, the easement could have a severe impact on the willingness of a potential buyer to buy the property. Regardless of whether the tower is in a place where it won’t impact future development, it will definitely reduce the income on the property thereby reducing the price that the buyer will pay for the property. This typically doesn’t matter that much simply because the companies that buy these leases typically pay more for the lease than the buyer of the underlying property would pay for the additional income. For more information, please see our Cell Tower Lease Buyout Guide.

WILL THE INFORMATION I PROVIDE REMAIN CONFIDENTIAL?

All information you provide will be kept confidential, even if you choose not to retain our services.

WHAT ARE YOUR FEES TO HELP ME?

Please see our Pricing page for a comparison of how we price our services compared to other wireless lease consultants.

HOW CAN I REACH A CARRIER?

Wireless carriers have many departments (marketing, engineering, sales, customer service, etc.), so it would depend upon your question. If you’re interested in getting a cell tower on your property so that you can benefit from passive rental income, you should know that this is not as easy as it sounds. These articles might be of assistance:
  1. How Do Carriers Select Cell Site Locations?
  2. How Can I Get a Tower on My Property?
  3. Building Your Own Cell Tower

I’VE BOUGHT PROPERTY WITH A CELL TOWER ON IT, HOW DO I START COLLECTING RENT ON?

Please see our page on what to do when you buy property with a cell tower on it.

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