There are 2 ways a tower operator will pay revenue share. Tenant count revenue share is typically a fixed amount that is typically paid out monthly. Revenue shares paid as a percentage are exactly what you think, a percentage of the revenue the tower operator receives from the customer.
Tenant count revenue share is the preferred way a tower operator pays revenue share for any new tenant added to the tower. When this legal provision is first presented to the landlord, if a yearly increase isn’t discussed, the tower operator won’t apply an escalator to this revenue share provision. It’s imperative when negotiating this legal provision that you obtain an escalation between 2%-3%.
Percentage revenue shares may be the most attractive for the landlord. The landlord participates in any sort of amendment that increases the rent the carrier pays to the tower operator. A landlord doesn’t have that upside from a tenant count revenue share. A percentage revenue share is a percent of the gross amount the tower operator receives from a given carrier. For example, if AT&T is paying $2,000 per month and the landlord has a 10% revenue share, that landlord receives $200 per month. What’s great about these revenue shares is you have the built-in escalator from tower operators lease with the carrier. The landlord will never have to worry about not getting an increase. In some cases, the tower operator may have an escalation that’s greater than 3% per year. The standard industry escalation is 3% per year. However, the carriers are starting to get 2% and 2.5% escalations in their negotiations with the tower operators.
When negotiating a new lease or an amendment to that original lease, it’s imperative to have the tower operator pay a revenue share for any new tenant that joins the tower. Simply negotiating this provision in your lease could always surprisingly provide you with upside that you otherwise wouldn’t have. Too many of these tower leases that were finalized 15-25 years ago don’t include any additional upside for the landlord from a revenue share perspective. At JP Tower Consulting, we understand the average landlord isn’t an expert in the tower industry. Don’t ever hesitate to reach out directly to us to balance out the power in a negotiation with a tower operator.
