As we step into 2024, major tower companies have seen their stock prices dip slightly after a strong rebound towards the end of 2023. What do these fluctuations signify in the market? Tower operators are seeking ways to compensate for reduced carrier spending, one strategy being negotiating rent reductions with property owners. Anticipate receiving letters from vendors of major tower companies requesting rent cuts. These negotiations significantly impact tower operators by boosting margins at profitable sites. While it’s frustrating, operators are determined to meet AFFO objectives.
If you’re a property owner and receive such a letter, take a moment to assess the situation. Consider your tower’s location, tenants, and lease expiration date. Typically, operators don’t request reductions for sites with leases expiring within 10 years, but exceptions occur in tough times. Understanding these factors helps determine your bargaining power. Some landlords may flat out refuse reductions, while others prefer to lose a portion of rent rather than concede entirely. Typically, the older generation is most susceptible to these rent reductions.
Seek guidance from a trustworthy consultant. Many property owners lacking support end up accepting unfavorable deals. Tower company vendors are skilled negotiators, often resorting to scare tactics. Notably, towers in carrier-built portfolios of more recent acquisitions are usually subleased, meaning the operator lacks ownership and shouldn’t threaten removal without consequences.
Rent reductions profoundly affect site value. Even a $200 monthly reduction, compounded over the lease term with escalations, results in substantial financial impact and alters the site’s perceived value to potential buyers. Encourage anyone facing these challenges to reach out for guidance, as carriers generally prefer to avoid relocation. If you’ve adhered to your contract, expect the same from the tower operator, though they may exploit contract terms if beneficial. Remember, negotiation works both ways!
