Cell Site Lease Amendment ConcernsPosted February 19, 2014 by admin
Have you been asked to sign a Cell Site lease amendment on a current cell site?
Many of our consulting clients contact Cell Site Capital because they have been asked to sign an amendment to their current cell site lease. The tower company usually states they would like to extend their lease for a longer term. Sounds like a good idea, right? Here is what you should be know before signing an cell site lease amendment. They usually will ask for some additional language that will protect their interest.
*This is pulled directly from the proposal from the publicly traded tower company letter to a client.
Extension of current Cell Site Lease Terms
“That Lease section will be amended by adding four (4) Renewal Terms to the Lease Term, with the final such Renewal Term scheduled to expire on September 31st 2055 (“Lease Expiration Date”). The Lease will be automatically renewed for each Renewal Term, unless Lessee provides Lessor notice of intention not to renew…”
Translation: The tower company reserves the right to cancel the cell site lease but you as the cell site leaseholder, cannot.
Modified Rent Period/ Prepaid Rent
“Lessee (tower company) will pay to Lessor (cell site lease holder), as partial prepaid rent for the Modified Rent Period, a one-time lump sum payment of Five Thousand and 00/100 Dollars ($5,000) (“Prepaid Rent”). In consideration for the Prepaid Rent, base monthly rental for the Modified Rent Period shall be reduced to exactly One Thousand Dollars and 00/100 Dollars ($1,000) (“Monthly Rent”).
Translation: As consideration for extending the lease, we want to reduce your monthly rent by 38%. Here is $5,000 though.
Additional Lease Area
“As further consideration for Lessee entering into the Lease Amendment, during the term of the Lease, Lessee (tower company) shall have an irrevocable option (“Option”) to lease up to a maximum of 1,000 square feet of real property adjacent to the Leased Premises at a location to be mutually agreed upon by the parties…”
Translation: If we need more space outside of the current tower footprint, we can take it. Thank you very much.
Right of First Refusal
“If Lessor (cell site lease owner) receives an offer from any person or entity that owns towers or other wireless assets (or is in the business of acquiring Lessor’s interest in the Lease) to purchase fee title, an easement, a lease, a license, or any other interest in the Leased Premises, or Lessor’s in the Lease, or an option for any of the foregoing, Lessor shall provide written notice to Lessee of said offer, and Lessee shall have a right of first refusal. Lessee may elect to acquire an interest in only the Leased Premises, and the consideration shall be pro-rated on a per acre basis…”
Translation: “Rights of First Refusal” and not necessarily a real bad idea, the issue I have with this client’s proposal is the last sentence underlined above. Basically, if you have a 5-acre parcel that is selling for $100,000 ($20,000 an acre) and the cell tower location is taking up a total of ½ acre, the tower company could purchase the cell tower lease area and the cell site lease for as little as $10,000 with no further compensation. This means no more monthly rent or compensation owed to you.
We deal with tower companies everyday and usually they are professional and have the best interest of securing their tower or rooftop asset. You should make sure that you have all the information to maximize your cell tower lease and make the best decision for you. Our hope is the few minutes you have spent reading this will help you with that decision. If not feel free to give Cell Site Capital a call and let us help.
To be clear, the info contained within this post is not intended as legal advice but for informational purposes only.