Cell Tower Lease Rates: How They Are Determined
When a wireless carrier or tower company first approaches a landowner, they use a site acquisition agent to contact the landowner. The agent typically already has a starting lease rate in mind when they knock on the door to start negotiations. The cell tower lease rate they will propose is based upon a number of factors. The primary factor is what their experience tells them is the lease rate at which most landowners will agree. Most site acquisition agents have a significant amount of experience in the area where they are acquiring new cell tower sites. These lease specialists will know the average lease for a given area. They know what the carrier or tower company is willing to pay. The wireless carrier or tower company also provides suggestions on the appropriate starting offer lease rate. The site acquisition agent, if they are good at what they do, will have already reviewed the area and chosen the sites that best fit the objectives provided by the wireless carrier or tower company. They know whether your site will work under local zoning regulations, federal regulations, and whether the site is easy to construct or not. They will have done a competitive analysis of the area to determine whether multiple properties could work and meet the carrier's objectives. Unfortunately, they won't tell you what they found in their research.
CELL TOWER LEASE RATES ARE TIED TO THE AVAILABILITY OF OPTIONS
Contrary to popular belief, lease rates aren't tied to population density. While they trend higher in urban areas, some urban areas command completely different lease rates even though they are similar in population. For instance, New York City has cell tower lease rates that are double what Houston landowners receive for similar sites. The explanation is that Houston's zoning laws are notoriously simple and as a result, it is far easier to find multiple sites that meet the carrier's need. As such, the carriers don't need to pay as much for a cell tower lease in Houston as they do in New York City, despite the fact that New York and Houston are both top 3 cities in terms of population. Cell tower lease rates, therefore, are really tied to the difficulty of finding suitable alternatives. If a wireless carrier can't find a spot that meets their needs, they will pay a higher lease rate for one that does. In general, there are established average rates for leases in cities all across the US. Steel in the Air has the great fortune in that as a company we have helped over 2200 landowners over the last seven years and have gathered their cell tower lease rate data and received data from thousands of inquiries to our website. (See cell site lease rate comparable data for more details on our data) While we believe any landowner can network and find a few friends/neighbors with a cell tower lease and ask them what they are getting paid, that doesn't mean that the small sample you have is representative of the fair market value of your site. Nor does it mean that you deserve to get the average cell tower lease rate for your site. Your site may be preferable to the wireless carriers, and they may be willing to pay more for it.
FACTORS THAT INFLUENCE CELL TOWER LEASE RATES
In the event that there are numerous alternatives available to the carriers, there may not be much opportunity to negotiate up their initial offer. However, if your site is preferred as compared to the other sites or is the only option the carrier has, then let the negotiations begin. The site acquisition agents who are contacting you have the benefit of knowing all of their options. They have reviewed the following factors in selecting your property along with others in the area as potential candidates.
- Topography - Ground elevation is important, but that doesn't mean that if you have the highest hill in the county that you will get a better lease rate. The tower company can always build a taller tower on a lower property. But the taller the tower, the more expensive the tower, so an advantage in ground elevation may help your negotiating position.
- Difficulty of Zoning - Before a cell company can get a building permit to erect the tower, they typically must get a conditional use permit or special use permit to build the tower. Most municipalities have zoning codes that determine where a tower is allowed. Oftentimes, this means that one piece of property will work for the tower company while others in the area won't. In some cases, there is only one piece of property that will work for the carrier's coverage goals - and in that case, the owner deserves the best lease rate for their cell tower.
- Constructability - The site must be easy to access and have room for construction of the tower. The best situation is flat land with no tree cover whereas hilly land with tree cover makes tower development more expensive. A carrier will sometimes pay more for a site that is easy to construct and may offer lower lease rates if the cost of construction is greater.
- Access to Power and Telephone Company Service - Virtually all towers need power and telephone service. The farther the distance to telephone and power, the higher the price tag to the tower developer.
- Proximity to other Cell Sites - Each wireless carrier develops their tower in conjunction with the other towers in the area. The towers are set up to "handoff" from one tower to the next as you talk on your cell phone and drive by them. The carriers have a specific "search ring" that they need to locate each tower within in order to overlap their towers for effective "handoff". While there may be a suitable property for a cell tower near your site, it might be in a direction they can't move without reducing the effectiveness of the proposed tower.
IS MY SITE THE SAME OR PREFERRED AS COMPARED TO MY NEIGHBOR'S PROPERTY, OR IS IT UNIQUE?
Unless you understand clearly what options they have, you aren't on equal footing and you will either ask for too little and leave money on the table or negotiate yourself out of a lease by asking for too much. Until you know why they are selecting your property and whether they prefer it as compared to your neighboring property, you can't effectively negotiate the appropriate lease rate. That is where Steel in the Air, Inc. comes in as your trusted advisor. We can review the factors listed above and assess whether your site would cost more or less for the carrier to construct. From this, we can tell you what tower lease rates other landowners in similar situations received. We don't just tell you what other people in your area receive as a lease rate, we tell you why your site is better or worse and whether you should get the average lease rate or higher or lower. We can't guarantee that you will get a better lease as a result of using our services, but we can guarantee that you will know exactly why you accepted a particular lease rate so that you don't have to wonder for 25 years whether you left money on the table.
LEASE RATE ISN'T THE ONLY FINANCIAL CONSIDERATION
We also address the appropriate other financial terms in the lease agreement. What should you receive for escalation and how often? What is an appropriate option payment (even if they don't offer one)? Should you ask for revenue sharing if other users come on the tower? (The typical answer is no- but there are situations when you should). Should you be reimbursed for having an attorney review the lease? (The typical answer is yes- we can tell you how much to ask for).
Please don't hesitate to contact us. We will examine your location and tell you whether we think we can be of assistance or not. We don't sign up clients when we know that we can't help them.