Building and Owning a Cell Tower
On a weekly basis, Steel in the Air sees newspaper articles about municipalities negotiating their own cell tower leases. Clearly, we do not believe this yields the best lease rates. If you would like to see more on why we believe this, please click here to be taken to an article we wrote for Privateline.com.
This webpage is about a different approach. If the stated goals of the municipality are to increase revenue, then the municipality should consider building and managing the tower itself. While there are numerous reasons why this should be considered as an option, the main reason is that the revenue from such a structure could add to the coffers of that municipality.
To illustrate this point better, let's discuss the financial basics of building a tower. A tower might cost $150,000 to construct. However, a fully loaded tower can bring in $100,000 in revenue annually. After a few years, that means that the tower is paid off and the municipality is receiving $100,000 a year in income.
Contrast that with the municipality leasing space to a wireless carrier to build a tower. If the municipality were to lease the ground space, it would receive somewhere between $12,000- $24,000 per year depending upon the location. That would be the same regardless of the number of tenants. While it would cost nothing to lease the land, the municipality is giving up a significant amount of annual revenue. Even assuming that the municipality received a share of additional co-locator's rent, that is still far short of the revenue received from building a tower by the municipality. And the municipality does not have an asset on its books. Instead, it has a restriction on the use of its land.
What makes this process even more attractive is that often times the municipality is in a much better position to regulate the development of competing towers. With well written ordinances, the municipality can decrease the proliferation of cell towers while increasing its coffers. All in all, it’s not a bad deal.
Steel in the Air can assist the municipality in reviewing whether or not it makes sense to develop the tower. Steel in the Air can also create a pro forma for the municipality to evaluate the potential of the tower by doing a competitive analysis of likely tenants. Furthermore, as experienced tower developers, we can walk you through the process from beginning to end.
If your municipality is contemplating leasing land to a wireless provider or has been approached by a tower company to build a tower on municipal property, please contact us for additional information.