Maximizing the Value of a Cell-Tower Lease: How Self-Storage Owners Can Get More From What They’ve Got
Copyright 2014 by Virgo Publishing.
By:
Posted on: 12/25/2012



 

By Hugh D. Odom

Self-storage operators often seek ways to generate ancillary revenue from their properties. One of the most sought-after avenues is leasing land for cell-tower placement. While it's common for facility owners to focus on getting a cell tower on their site, many don’t capitalize on the opportunity to lease their land once it’s presented. In addition, many who have existing cell-tower leases often leave the terms in their agreements as provided without maximizing them to benefit their business.

The primary reason is they're unfamiliar with the telecom industry. Cell-tower and telecom companies rely on this inexperience as well as a self-storage operator’s satisfaction in simply receiving a monthly check. To level the playing field, facility owners need to understand how to value cell-tower leases. Agreements should be structured to track value of the telecom company’s use of the self-storage property throughout the entire 20- to 25-year term of a typical cell-tower lease.

The Rental Rate

Many self-storage owners have become accustomed to relying on “market rent” to determine the rate for leasing their property to a telecom company. But this can cost an owner hundreds of thousands of dollars over the life of an agreement. A cell-tower lease is not a real estate asset for the purposes of valuation. Wireless carriers and tower companies value these leases as telecom assets, and so should self-storage operators.

In addition, self-storage owners who rely on figures within their neighbor’s cell-tower lease rates may be cheating themselves out of revenue. A cell-tower company will gladly tell you what it’s paying other property owners in your area if it’s beneficial for it to do so, which is often the case. These companies are making billions of dollars in revenue each year simply from paying undervalued rents to landowners in areas like yours.

Cell-Tower Value

Every cell-tower site has a different value. For example, you can have two cell towers from the same company within two miles of each other. They can have the same rent and basic lease terms, but the leases can have significantly different values. This is because the value of the land is not part of the equation. Value is based on:

  • The revenue being derived from the equipment on the tower
  • Revenue generated through sublets at the site
  • The importance of the tower site to the overall wireless network
  • Options the tenant has in the immediate area to relocate the site
  • The costs associated with moving the site

The proof that self-storage owners are leaving money on the table with regard to new and existing cell-tower leases is reflected in the revenue being derived from the cell-tower companies themselves. In 2011, the largest cell-tower companies generated an average of more than $2 billion in yearly revenue, each from subletting properties like yours.

Self-storage owners have a choice: Be undercompensated for their land or arm themselves with information that allows them to obtain fair value for its use. Whether you’re a self-storage operator with a couple of facilities or dozens, the value of the cell tower on your property is not the steel pole protruding from the ground. It’s the location of that steel pole.

Self-storage owners have options to optimize the rents received under a new lease or increase the value of an existing one. An increase of a few hundred dollars per month in your cell-tower rent can mean not only hundreds of thousands of dollars of additional revenue over the life of your lease but a significant increase in the overall value of your property.

Hugh D. Odom is president of Vertical Consultants, a telecommunications-consulting firm currently working with approximately 1,200 self-storage facilities across North America to place telecommunications equipment and optimize existing leases. For more information, call 877.456.7552; visit www.vertical-consultants.com .