These are cell tower sites in which the cell tower operator is losing money on an annual basis. They are usually cold steel towers in which the anchor tenant has terminated leaving the tower “cold steel.” There are some towers that may have a tenant or two on the tower yet still may be underwater due to the property owner receiving more than what the cell tower operator receives.
Towers that were built with an anchor tenant may have become cold steel due to market consolidation or from a tower developer building a tower nearby to poach the carrier. From a market consolidation standpoint, Sprint and Nextel had built many towers over the course of time here in the United States. Nextel sold to Sprint which in turn sold to T-Mobile. Many of these single tenant Nextel or Sprint sites may not have needed coverage wise by T-Mobile. In those instances, T-Mobile has terminated those leases to avoid paying additional expenses where they may already have coverage. You’ll see these sites in OH, SC, PA, TN and other states. Since these sites are in rural areas, the rent being paid to a property owner is still small enough to justify keeping the tower upright with the hopes of acquiring a future tenant. Tower developers have been out in full force over the last decade helping the carriers get better financial terms at the towers they exist on. It’s also a negotiating ploy against the cell tower companies when they get closer to negotiating a Master Lease Agreement (MLA). The carriers are starting to negotiate much better deals with the cell tower companies. Recently, SBA has inked a Master Lease Agreement with AT&T. I’m sure AT&T had ramped up dealings with the tower developers to try to control their costs. High rent legacy sites in areas where zoning is easy will always be a concern to the cell tower companies. Even with these MLAs, I think tower developers are here to stay as they always provide leverage to the carriers against the cell tower companies regardless of an impending MLA renewal.
California has some of the highest property owner lease rates that you’ll see in the United States. It’s not uncommon to see towers with an anchor tenant to be underwater in a state like California. The municipalities can be extremely difficult to negotiate with, leaving the cell tower operator to think if they’d even want to operate a tower there. A cell tower operator will do everything in their power to ensure that a tower isn’t negative cash flow. They’ll live with a slight underwater tower but if a property owner is too greedy, it’s possible that tower could be headed for removal.
If you’re a property owner with a tower that’s cold steel and being paid a monthly rent, stay the course. You’ll probably be targeted by the cell tower operator to take a rent reduction. Usually, I’d suggest never taking a rent reduction but that depends on your monthly rent and what other towers may be nearby. If you are ever to receive one of these rent reduction letters, you should most definitely contact a cell tower expert.