When do you know there’s an opportunity to renegotiate your tower ground lease? As a ground lease gets within 15 years of final lease expiration, cell tower operators try to extend these leases. One-time payments/signing bonuses are commonly offered for these renewals. Many landowners have succumbed to these upfront payments to continue the ground rent at the same terms. But is it really on the same terms? Financially maybe so, but contract language wise, that’s a harsh NO.
When these towers were built in the late 90’s and early 2000’s, there was lots of legal language missing from the contracts that you see today. The cell tower operators yearly review their templates to account for everything imaginable under the sun, so the language overwhelmingly favors them. For example, Right of First Refusals weren’t commonplace in these early agreements. Every amendment of an underlying lease will surely include a Right of First Refusal.
As I mentioned above, cell tower operators were extremely aggressive in extending these leases where landowners didn’t want to take a buyout. Most of their top-tier sites have been secured which is why you are seeing acquisition departments shrink from the biggest tower operators. Most of the towers that expire in the next 10 years are single tenant towers. However, as the carriers look to collocate on many more towers in the next few years, there may be opportunity for some of these towers to become 2 major or greater towers.
All in all, if you have a lease greater than 10 years from expiration, you want to wait on renegotiating the lease. In some instances, tower operators may not reach out to you but shortly you’ll be on their radar to extend or potentially take a lease buyout. The ultimate sweet spot is 5 years from expiration. Not many have made it to that timeframe but it’s the most fruitful for landlords if you are trying to maximize the value of your tower revenue.
When you get closer to final lease expiration the landlord has far more leverage in the negotiations especially if there are multiple tenants on the tower. Those tenants (AT&T, Verizon, T-Mobile, etc.) want to know that they have long term security so tower operators will pay more to give their customers that security. There are so many other terms you can negotiate as well since you’re in a position of strength. Since the legal language in these contracts changes yearly, it’s extremely important to hire an attorney to review the contract. It’s worth the money to catch what the new flavor of the year will be inserted into these agreements.
As you are probably aware, avoid coming to terms on a renewal if the cell tower operator is offering just a one-time payment. Most likely these signing bonuses will range from $5,000 to $50,000. Now that may seem like a lot of money but if you can wait it out and get a rental increase that will have a greater impact for you in the future especially if you end up selling the lease. That’s why it’s important to hire a cell tower consultant that has your best interests in these negotiations. Oh yea, a lawyer too! Feel free to reach out to me directly with any questions.
