Lease Buyouts and Extensions vs. Owning a Cell Tower (It Can Be Done!)
More than ever, self-storage owners are contacted to extend or sell their current cell-tower leases, yet they’re not getting true value for the use of their land in return. This is another reason why it's vital to understand a company’s method in determining cell-tower value.
When it comes to a lease extension, some operators may find be in a position to decline the extension and take over ownership of the existing tower. Once a cell-tower location becomes an established foundation point for the wireless networks it serves, wireless carriers located on the tower do not want to leave. This is when a self-storage owner can use wireless carriers’ dependency to their advantage.
If an operator converts ownership of the existing tower through tenant forfeiture or conveyance at the end of a lease term, or builds a replacement tower, he’s providing wireless carriers an easy transition—far easier than a migration to a location even right down street. The best part is you, the self-storage owner, will pocket all rent received from these carriers instead of the mere fraction from your current tenant as ground rent.
A cell tower with two or more tenants can garner upward from $200,000 a year in site rental revenue. In contrast, an operator leasing land to a tower company receives somewhere between $10,000 to $20,000 per year. Even if a self-storage owner receives a share of a tower company’s subtenant rents, it would fall far short of the revenue generated from operating a cell tower on his property. Seeking guidance from experts in the telecom industry who have your best interest in mind will help you determine if taking ownership of a tower is monetarily beneficial for you.
Are You Being Paid Correctly?
Be aware that a cell-tower lease is completely different from the commercial real estate leases you're used to. Never assume you’re paid correctly for the use of your land for telecom purposes. Cell-tower companies capitalize on self-storage owners’ lack of familiarity with their lease terms and their satisfaction in simply receiving a monthly rent check. This is how these companies keep their rent payments low and sub-standard.
Operators should always pay mind to the utilization of cell sites on their properties. For instance, a cell-tower company often uses areas outside the parameters set in a lease. In addition, they’ll allow third parties to use your land without getting your approval and without paying you accordingly.
Cell-tower companies get away with such breaches simply because operators don’t have the time to monitor activity on their cell sites. Experts working for cell-tower companies know exactly how far they can push these limits without you realizing it. The result: You aren’t given revenue you're rightfully owed, and you indirectly subsidize the cell companies' profit.
Finally, immediate options to increase the value of your existing cell-tower leases exist, no matter if you have one cell-tower lease or dozens. Increases of only a few hundred dollars a month will equate to hundreds of thousands of dollars over the life of your lease and will increase the overall value of your property.
Hugh D. Odom is president of Vertical Consultants, a telecommunications-consulting firm currently working with approximately 1,2 00 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 .