Many cell tower companies are now aggressively seeking out extensions to their current cell tower leases. So why are these tower companies contacting the landowner if there is still time left on the lease? The answer: Time and money.
1. Time-A cell tower company needs to secure additional time to both better market the tower location for future subtenants/co-co-locators it may be seeking out as source of additional revenue at the site and more importantly to satisfy existing sublet commitments it may have already made as it relates to the site, its current revenue source at the site; and
2. Money- A cell tower company benefits financially in that securing a site long term calms the nerves of investors as it acts as a form of guaranty that a site's revenue stream will not be interrupted; this especially holds true for those companies who are publically traded (Crown Castle & American Tower). A property owner needs to interpret the claims that a cell tower company presents, which includes the following:
1. Claim #1: "Due to the value of the long term relationship we have with you, the landlord, we are willing to extend the current lease for the cell tower with you". What they aren't telling you: That in reality, they need the extension of time more than you do.
2. Claim #2: "We are willing to pay you a 'signing bonus' if you agree to extend the lease". What they aren't telling you: While a signing bonus is great, it is usually only a small fraction of what should be offered for the landowner's consent to an extension of the lease.
3. Claim #3: "We are willing to allow the lease to continue to escalate as provided for under the current terms of the lease agreement". What they aren't telling you: This is basically giving you something that you already have a right to and in some cases the tower companies are actually seeking to effectively reduce a landowner's annual rent escalations by having them agree to certain things like a Consumer Price Index ("CPI") rent escalation. What the tower company is not telling you, is that while your current annual rent escalations could be 3% or greater, agreeing to a CPI escalation could lower your annual rent increase to less than 1%. This would cost you tens of thousands of dollars over the life of the lease.
So Why Do Most Landowners Agree To An Extension Of Their Lease? Why do landlords agree to an extension, the answer may be the illusion created by a cell tower company representative or agent. Once façade that is created is that a landlord is securing revenues for the lease by agreeing to an extension. What is the true story? A majority of all tower and rooftop leases have extremely liberal tenant termination clauses and as a result, any extension agreed to by the landowner basically provides the tower company with a long term commitment from the landowner with no reciprocal agreement from the tower company.
A landlord's decision to agree to an extension of its lease is an important negotiation and should not be taken lightly. The structure of this transaction may mean hundreds of thousands of dollars over the life of is lease. The cell tower companies are not on your side, they benefit the best deal they can make for their company, nor will they look out for your interest just because they have been paying you rent all these years. The cell tower company's top priority is to make the best deal for their bottom line, shouldn't yours be as well?
Hugh has over fifteen (15) years of legal/telecom experience, including representing AT&T as an attorney for over ten (10) years in that company's acquisition and disposition of telecommunication sites across North America and abroad. Hugh is the founder and president of Vertical Consultants a telecommunications consulting firm. Vertical Consultants specializes in assisting property owners in optimizing the value of any proposed or existing cell tower or rooftop lease. Vertical Consultants invites you to learn more at http://www.vertical-consultants.com/. Hugh can be contacted at 877-456-7552.
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