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.
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