To meet the demands of their wireless-telecommunications customers, companies like AT&T, Sprint, T-Mobile and Verizon continue to build new cell-tower sites across the country—some on self-storage properties. When negotiated correctly, this lease can be a great source of ancillary income for the storage business.
Here are some pros and cons to ponder when approached by a cell-tower company or wireless carrier who wants to use your property.
Additional income. When a cell-site agreement is properly structured, you can see immediate revenue, with initial monthly rent ranging from $1,000 to more than $3,000, depending on several factors. You can also realize additional revenue based on the utility and value being derived by the company’s use of your property. This can be achieved if additional subtenants are added to the tower or upgrades are made to the existing telecom equipment. However, the average self-storage owner leaves about $852,000 in revenue on the table due to an improperly structured lease.
Improved cell service. A new cell site won’t only serve the needs of wireless customers in the area, it can serve as an upgrade for services offered to your tenants. If you’re forward-thinking, you can even negotiate conditions that’ll allow for use of certain cell-tower infrastructure that can be used for future development projects.
Lump sum cash/capital. If you’re looking for capital to infuse into your self-storage facility, an option is to sell your cell-tower lease for a one-time lump-sum payment. The funds received can also be eligible for a 1031-exchange transaction. There are many third-party companies that’ll pay, however, make sure you understand the true value of your lease as well as the conditions and impact of selling it.
Community opposition. Many people have concerns about the health risks of living near a cell towner or rooftop cell-site equipment. Even though the American Cancer Society reports that it has found no direct link between cell towers and cancer, many still object to towers in their communities.
If you attempt to put a cell tower on your property, your neighbors could oppose. However, you can negotiate terms in the lease that will provide evidence that you have set certain inspection and compliance requirements in place. This will help ease community concerns and could eliminate any negative impact on the value of your property.
Operational impact. When a cell-tower company approaches you, it’ll sell the concept a certain way. For example, it’ll say the tower will be on a part of the property that’s “out of the way.” In truth, you aren’t just giving the company rights to a certain area; you’re accepting restrictions for your entire facility.
While a cell-tower company wants you to focus on the rent, you need to know exactly what you’re agreeing to and how it may impact future development, disposition or even financing of your property. Don’t take money in one hand only to give it away from the other!
Lease management. While you may have a wealth of experience in renting storage space, a cell-tower lease is a completely different animal. The reason most owners are being underpaid is they structured their lease incorrectly from day one. They started undervalued and it only got worse from there. A lease can provide significant ancillary revenue; unfortunately, most owners don’t understand how to optimize it. Moreover, they fail to navigate and manage it correctly throughout its term, thereby losing revenue that’s there for the taking.
Every transaction has its ups and downs, and a cell-tower lease is no different. You must understand that a typical agreement commits you for more than 30 years, with no way to terminate. While knowing how much rent you should receive is important, it’s just as critical to understand exactly what you’re agreeing to today and into the future.
Hugh D. Odom is president of Vertical Consultants, a telecommunications-consulting firm currently working with approximately 5,000 self-storage facilities across North America. Its clients include Extra Space Storage Inc. Life Storage Inc., and Simply Self Storage. Mr. Odom has more than 22 years of legal and telecom experience, including being an attorney inside AT&T for more than 10 years. For more information, call 877.456.7552; or visit www.vertical-consultants.com.