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Identifying Tenant Needs for Compound Expansions 

When a tower company requests a compound expansion, the first step is to identify which tenant requires the additional space. Carefully review the drawings to allocate only the necessary space for their installation. Avoid providing extra space, as it could be utilized by another tenant, effectively allowing a free collocation within the expansion. This approach ensures that each tenant gets only what they need and prevents unintentional benefits to others. 

Ensuring Compliance During the Contract Phase 

During the contract phase, it is crucial to ensure that no renewal terms or legal provisions are added beyond what is specified in the underlying lease. Tower companies often attempt to include additional terms at no extra cost to secure their interests and avoid future negotiations. By closely monitoring and adhering to the original lease terms, you can prevent any unwarranted advantages being granted to the tower companies. 

Maximizing Revenue Opportunities with Additional Ground Space 

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Tower companies may seek additional ground space for small one-time payments to accommodate future tenants, especially at sites with tight compounds. When a compound reaches its capacity, opportunities for future revenue growth become limited. Securing extra space allows tower companies to market the site without the need for further negotiations with property owners if a new tenant arrives. Although this strategy carries some risk, a single colocation can easily offset the cost multiple times. In these situations, contact JP Tower Consulting to assist with the negotiations and ensure a favorable outcome. 

Compound Expansion FAQs

  • What is my cell tower lease worth?
    The value of your lease depends on several factors. If it has over 15 years left and escalates at 3% annually, its market value is roughly 19 times the annual rent. However, lower escalations or a Right of First Refusal (ROFR) can decrease its value. For leases within 15 years of expiration, tenant composition and lease duration are critical. Closer expiration dates increase value, especially with multiple carriers. Sites with less than 5 years left are valued based on a multiple of what the perceived negotiated rent would be at final lease expiration. While a site under 2 years from expiration is based more on a multiple of tower cash flow.
  • How long will the process take to sell my tower lease?
    The timeline for closing depends on any title defects and how quickly attorney redlines are resolved. It's crucial to clear any lines, judgments, or back taxes before starting the process to sell your lease to avoid complications. If there's a mortgage, discuss an SNDA with the lender as it's often required for closing, especially if the loan amount matches or exceeds the purchase price. Properties without a ROFR are simpler to transact. Typically, closing takes 3-6 months, but unforeseen issues might extend it beyond a year, especially with ongoing negotiations between attorneys.
  • When is the best time to sell my tower lease?
    Consider selling your lease if it has less than 10 years remaining, as it's often valued differently by tower and third-party buyout companies. Another opportune moment is just before or after an escalation hit if your lease is long-term. Ensure you have a plan for the proceeds before selling.
  • Should I have an attorney review this lease buyout?
    Absolutely, I recommend getting legal advice. If you sell the property without proper consideration for the tower lease, it could complicate the sale or burden the buyer with unexpected costs like property taxes. That’s why you’d want to account for a reimbursement for property taxes so a future buyer wouldn’t be on the hook for taxes on a tower they receive no benefit from. Contract terms will always favor the tower company and hiring a telecom attorney for that piece of mind is crucial.
  • How long is the buyout for?
    Lease buyouts are often structured as perpetual or 99-year easements. If you prefer shorter terms, third-party buyout companies offer options with 50- or 60-year easements.
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