SBA Communications Lease Extensions-What Is Their True Motivation?

SBA Communications leases about 6,000 cell phone towers to major wireless service providers, including Verizon Communications, Sprint Nextel, T-Mobile, Alltel, and AT&T. The company trails leading rivals Crown Castle International and American Tower in terms of market share, with around 11% of total industry revenue in the United States. SBA Communications has fewer towers and generates less revenue per tower, as it does not enjoy the scale and efficiencies of its rivals.

SBA Communications like many similar cell tower companies is aggressively seeking out long term extensions to their current cell tower leases. Vertical Consultants has and continues to assist property owners throughout North America who have been contacted about negotiating extensions to their existing cell tower lease agreements.

So why is SBA Communications contacting the landowner if there is still time left on the lease especially in the case where there is 10 or more years remaining on the existing lease term. The answer:  Time and money.

  1. SBA Communications primary purpose for having a tower on your property is to generate revenue by the placement of subtenants on the tower that have constructed on your property and to do this the cell tower company needs to  satisfy existing sublet commitments it may have already made as it relates to the site to secure additional time to both better market their cell tower location for future subtenants it may be seeking out and more importantly to; and
  2. SBA Communications also benefits financially in that securing a cell tower site long term as it calms the nerves of investors. A cell tower company’s ability to garner an extension of the current lease term acts as a form of guaranty that a cell tower company’s tower site and more particularly the cell tower company’s revenue stream associated with that site will not be interrupted; this especially holds true for those companies who are publically traded. The cell tower companies will not make you aware of the extent of the financial benefit to that that company will garner if it gets an a extension but Vertical Developments will.

We can work with a landowner to interpret the many diverse claims that SBA Communications will present to a landowner when it is seeking an extension from such party. The follow are examples of what a cell tower company representative may claim in order to persuade a landowner to agree to extend their current lease:

  1. Claim #1:  ‘We usually do not agree to lease extension with time remaining on a lease but due to the trying to maintain a relationship with you we are willing to extend the current lease”.  What the cell tower company isn’t telling you:  That in reality, they need the extension of time more than you do and you have the bargaining power in this negotiation
  2. Claim #2:  “We are willing to allow the lease to continue to escalate as provided for under the current terms of the lease agreement”. What is SBA Communications not telling you:  This is basically giving you something that you already have a right to and in some cases the cell tower companies are actually seeking to effectively reduce a landowner’s annual rent escalations by having them agree to certain things like a Consumer Price Index (“CPI”) rent escalation. What SBA Communications is not telling you, is that while your current annual rent escalations could be 3% or greater, agreeing to a CPI escalation could lower your annual rent increase to less than 1%.  This would cost you tens of thousands of dollars over the life of the lease.
  3. Claim #3:  “We are willing to pay you a ‘signing bonus’ if you agree to extend the lease”. What SBA Communications isn’t telling you:  While a signing bonus is great, it is usually only a small fraction of what should be offered for the landowner’s consent to an extension of the lease. A signing bonus should be considered on a small portion of what should be part of a lease extension transaction. Generally, a signing bonus offered by a cell tower company represents only a small fraction of value that the cell tower company will benefit from such lease extension.
  4. Claim #4: “An extension of a lease term will serve as form of guaranty that we will not terminate the lease agreement and as a result shall serve as a means of securing that you will be receive rent during the rest of the lease term. What SBA Communications isn’t telling you: In reality, the majority of all cell tower leases have extremely liberal tenant termination clauses, with some having as little as 30 day notice period which will allow that company to terminate the lease and walk away without any penalty.  As a result, any extension agreed to by a property owner basically provides SBA Communications with a long term commitment from the property owner with no reciprocal agreement from the tower company to any long term commit on their side.

So How Can Vertical Consultants Be of Help With a Proposed Extension?

We work with landowners to make sure that if they are open to extending their current cell tower lease that they “get the most but give up the least”.

The decision a landowner makes today as it relates to an extension of its current lease may mean hundreds of thousands of dollars over the life of is lease as few hundred dollars more a month means a lot when paid over 10, 20 or more years.   This is an important transaction and should not be taken lightly as at the end of the day as noted above it could mean a lot if not correctly structured correctly.

The cell tower companies, as much as they would like you to believe are not on your side, nor will they look out for your best interest as their primary interest is to get the best deal for their company not for you.   Their first concern is their bottom line, shouldn’t yours be as well?

Contact us today so we can assist you in reviewing your proposed lease extension and work on your behalf to make sure you get fair value for allowing a tower company to extend their lease. Our initial review is free of charge.

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