Negotiations: Why do they happen?
If you are approached about a cell tower lease or are looking to make changes to an existing lease, you are in for some lengthy negotiations. Both you (the landlord) and the cell carrier can benefit from taking the time to thoroughly review the contract and negotiate the best terms for both parties. At the end of the negotiation, it is important that you receive the best rate and fair terms for your property.
Having wireless technology engineering and leasing knowledge will help you immensely in your lease negotiations. Cell companies know this when approaching property owners. They understand that landowners are unlikely to pass up the opportunity to make money, and that they will be eager to sign a lease to secure this new source of income. They are counting on that excitement to blind you in the negotiations and enable them to take advantage.
Frequent Landlord Mistakes
We frequently see that innocent mistakes in negotiating cell tower leases have cost landowners hundreds of thousands of dollars over the life of each lease. Agreeing to the wrong terms could invite negative outcomes like progressively increasing vehicular traffic to your property for the next thirty years, large antenna expansions, and a lack of compensation for extra wear-and-tear on your property or incessant intrusion into your daily life. Without knowing it, you could also sign away certain property rights that make it hard to sell or transfer your property later. This is why it is critical that you invest in solid representation when negotiating a cell tower lease.
This is where CellWaves comes in. Beautiful towers and rooftop installations take planning and experience, and we demand nothing less than the best for our wireless landowner clients. One of our primary goals is to preserve our clients’ property values, so we never allow ugly structures to be built on your properties. These details can easily get lost or hidden if you negotiate your own leases, which is why we recommend hiring someone to help you.
Over the years, wireless carriers and tower companies have discovered ways to make clauses like those we outlined above look innocent during negotiations. Unfortunately, the implications to landowners can be extremely detrimental. Some other examples of traps that landowners have fallen into when negotiating leases on their own include ugly towers or rooftops that hurt property values, unclear easements and access issues that causes legal disputes in later years, right of first refusals that give carriers and tower companies control of your property transfer rights, and most-favored-tenant clauses that look innocent but legally obligate you to have your books audited by carriers and tower companies
Attorneys Know Law, Not Wireless Technology and Valuation
Landowners can and should bring in their attorneys to assist with lease documents, but it is very unlikely that a property owner’s attorney has the necessary technical knowledge of the wireless industry, radio-frequency (RF) engineering, and the technology evolution that will affect the value of a wireless lease. Consultants here at CellWaves, however, can help fill in your attorneys’ knowledge gaps and give you the upper hand in lease negotiations.
Our years of working inside the industry with wireless carriers has afforded us the experience and expertise to anticipate what the carriers want, to negotiate fairly, and to advocate for you to receive a fair market value for the property. We accomplish this without creating undue burdens on your property rights or agreeing to legal terms that can harm your enjoyment of the property after the cell tower has been constructed.
75 Years of Combined Experience
Wireless carriers hire leasing experts who are commissioned to pay landowners as little as possible for their land and rooftops. They will be friendly. They will be helpful. They will be nice. But, never forget for a moment that their job is to represent the wireless carriers – not you Our senior team has over 75 years of combined experience in doing exactly this – experience forged by identifying, negotiating, and crafting language that advanced our carrier’s interests when we worked on the other side of the industry. All this expertise can now be applied to advance your interests and assist you with negotiations.
Who Negotiates a Tower Lease Agreement?
When you have been approached about a cell tower agreement or are looking to make changes to an existing contract, you can easily feel overwhelmed with all the details. Hiring a consultant to help with negotiations can help ease the stress and burden of a lengthy and complex process. We will analyze and audit any existing contracts and provide our own professional insight.
If you want the best contract possible, never commit to thirty years of wireless property obligations without CellWaves’ guidance. With over 75 years of combined experience working as employees for wireless carriers and as consultants for wireless landlords, we have seen a variety of different leases and will negotiate the best one for you. No two leases are ever the same. Even within the same company, wireless carriers will have different leases among different markets and regions.
We will bring our own expert knowledge to each individual negotiation. If this is a first cell tower lease, we will be there to help guide you every step of the way. This is because when you work with CellWaves, you are never alone. Hiring CellWaves for representation during negotiations would be one of the smartest business decisions you will ever make.
What Can Go Wrong During Negotiations?
Negotiating a cell tower lease can involve a great deal of back and forth between you and the carrier. It can be a long process with many different terms and minute details that need to be negotiated. Here’s an idea of what these negotiations will look like if you have no guidance.
Imagine if a person has to appear in court for a trial. The defendant enters the courtroom and they are all alone. This one person is up against some of the best lawyers in the country, and those lawyers have tried thousands of cases. How would the defendant feel about being alone in this situation? Overwhelmed? Stressed? Confused? More than likely all three at various points in time.
Just like the fictional prosecution team, arriers have seasoned consultants working to get them the lowest rates possible for your property. It is very easy to feel overwhelmed, stressed, and confused when working opposite of such an experienced team. This is why we want to help.
You will likely be in this contract for thirty or more years, and a lot can change in that amount of time. By partnering with experienced members of the CellWaves team, you can start to feel at ease during negotiations. We will work to make sure you are taken care of during the entire process and will use our inside knowledge of the cell phone industry to negotiate the best terms for your property.
What Is the Best Way to Negotiate a Lease?
During negotiations, your CellWaves consultant will review every piece of the proposed cell tower lease contract and make suggestions based on their knowledge of the cell site industry. They can make sure that the lease will continue to work for you not just today, but for the duration of the contract.
Experience is a key element of negotiations. Our consultants have negotiated hundreds of cell site leases and can apply this knowledge to help you. We also know what terms should be avoided in leases and how to get them removed. After reviewing so many contracts, we are fully prepared to negotiate any unique situations that may arise in an agreement.
Why is a Lease Valuable?
According to AT&T’s 2016 earnings published to the SEC and the AT&T Investor Relations website, their profit that year yielded $16.9 billion of free cash flow (pure profit). That is $46 million daily profit using cell sites on properties. Add in Verizon’s $13.6 billion in profit (and we haven’t even included smaller carriers’ profits — T-Mobile and Sprint) and you can begin to see why a property is extremely valuable for wireless carriers: it allows them to maintain a wireless system that earns them billions of dollars in profit.
An Essential Gear in Daily Communications
Carriers receive tens of thousands of contracts every year from property owners interested in becoming wireless landlords, but most of those properties do not have the right characteristics for cell site placement. At the beginning of the design process, RF design engineers control the entire cell site placement process. Through computer modeling, information regarding trees, buildings, hills, roads, malls, population concentrations, topology, and many other important population and morphology databases is fed into the signal propagation programs (called Prediction Tools). Then, coverage predictions are generated. These are generally quite accurate, but they require two important assumptions at every location—precise location and height.
Proper location and height are extremely important, as each site must be able to “see” all neighboring sites to hand mobile phone calls from one cell site to another without dropping the call. Once a design is complete, engineers issue a design search ring, which defines locations by latitude and longitude to indicate where they must have the cell sites located for the model to work.
This information is sent to the real estate department, which then sends out zoning specialists to determine if the area is zone-able for a particular height requested. Through this process, many potential cell sites identified during the design phase are rejected because they cannot be zoned or are too difficult or time consuming beyond the needs of the business. If a site meets engineering location, height requirements, and passes the zonability criteria, site acquisition specialists are dispatched to negotiate with the landlords of those sites.
After months of working with various landlords, conducting field tests, and running FAA studies, construction costs are assessed based on known site conditions. In the end, only one site passes all engineering and zoning criteria within any search ring, and that site is selected as the “primary candidate.” That site gets full zoning support and is developed through construction. The odds of being selected are very low, but for those who are, it’s basically like winning the cell tower site lottery.
What Does this Mean for Property Owners?
Consider a group of sites that are perfectly spaced and performing well as a system. A cell site often has fifty “neighbors” built into its algorithm. It has the ability to hand over calls and receive calls to and from any one of these neighbors depending on many different call pattern conditions. If one site is moved, the other fifty sites now have to be reengineered. To save a few hundred dollars a month, no carrier would subject their optimized system to this much fluctuation.
Conclusion: Carriers will not move a cell site purely on rent cost alone.
Carriers’ Real Estate Development
A carrier’s real estate department never wants to move a site. They already have many time-sensitive projects, including building new cell sites, managing existing ones, and upgrading existing sites to newer equipment. The last thing they want to do is create more work that nets them nothing new.
About 15% of landlords are considered difficult because they are informed and make high demands. They have professionals and insiders working for them. They are the savvy ones who hire us to help with negotiations. In practically all cases, carriers just pay and move on. They make this up by negotiating really hard with landlords who do not understand their own position and will cave in to lower rents and lease terms. About 50% of landlords are in this category and 35% are in the middle. They are not demanding and can’t be pushed around easily, so they are able to negotiate average terms.
Reliable Constant Revenue Stream
As investors look for better returns on their investments, real estate is an asset class that many turn to for portfolio diversification, low risk, good returns, and predictable payments. In return for a lease, investors will offer an upfront payment of 180 times the current monthly rent. In return, they ask for thirty to fifty years or even longer in future revenue. After that, the monthly rent reverts back to the original landlord if they are still alive, their heirs if they are not, or the new property owner if the property was sold.
A number of variables affect the offer price, such as how long you are willing to offer the rent for, the annual escalation rate on the rent, the prevailing interest rate, the underlying wireless carrier (T-Mobile, Verizon, AT&T, and Sprint [to some extent] command the highest offers), and any prevailing rumors or announcements regarding mergers and acquisitions in the marketplace. Rumors of Sprint acquiring Clearwire made Clearwire leases immediately worthless, as investors do not want to own assets that do not have a perceived permanence in their future.
Cellwaves can help with negotiations of a buyout as described above. We can assist with making a site sale attractive to the carriers, finding the right investor, marketing the property, and then getting you the best rate possible through negotiations. This process may take a bit longer but will yield a much high rate and better terms in the long run.