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I think the church got about $230,000 for the perpetual easement. The property is on a ridge within the city limits, so it might have made it more valuable.

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Nope, that's not what drove the value. It may have been part of the calculation on the rent paid to the church but not in the calculations on the easement.

When a perpetual easement is purchased the price is driven largely by the rental stream the landlord (in this case the church). Be that base rent or other money paid to the church under the ground lease.

You'll hear what we call "vultures" talk about deals in terms of "multiple" which means they're going to value an easement deal in terms of a multiple of either monthly or annual rent. This is sort of an unsophisticated way of looking at the deal and I'll get to that in a moment.

Typically, market on multiples is around 14-16 times the annual rent or 180-190 times the monthly rent. Vultures discuss deals on these terms because they are not in deals for long-term hold. They're not tower operators. They're simply financial middle-men who want to buy as many towers as they can at about 13-15 times the annual rent on average, put them into a portfolio and sell them to one of the big companies at 16-18 times the annual rent and make their money on the spread. This allows them to smooth out the averages so they might pay 19 times the annual rent on one tower but they may only pay 11 times the annual rent on another.

Anyway, their basic goal is to pay wholesale to the landlord and sell to a tower operator at retail.

For our purposes as an operator we simply do a NPV calculation on the cash flow of the revenue to the landlord and determine whether our outlay meets our hurdle IRR. The idea is that at some level we actually save money over the life of the tower by paying a lump sum (or even installment payout over as much as 20 years) vs. paying rent every month. We'll do this as a sort of debt arbitrage on our own sites as well as purchasing the revenue stream on towers owned by other companies.

Essentially, we're purchasing the revenue stream. So say a landlord is getting $1000 per month currently and the rent escalates at 3% annually (fairly representative terms in most markets) and the lease expires in 2050.

We'll do a deal for about $175,000 in a lump sum on a site like that whereby we execute a grant-of-easement & assignment of lease. The landlord gives us an easement on the tower & access premises and assigns us their interest in the lease as lessor. So, we'll either become our own landlord or we'll become landlord for the owner of the tower.

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Maybe I mis-read but wouldn't a rural guyed tower require more than 10,000 sqft? It a all dependent on height but I would think a 400'+ tower would be much greater land area - but maybe you treat that separately I never did the actual site acq side

[edit] just saw the 10k reference was for compound

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Correct.

Sometimes you'll see huge lease areas for guyed towers- I've got one where the leased area is over 9 acres. But just as frequently you'll see the leased premises for a guyed tower limited to some # of SF at the base of the tower, the area for the anchors, and say 20 feet on either side of the wires.

Thanks Finn

I worked TURF for a couple of years before I moved over to indoor/MetroCell #bigbust

Might move back to DAS...

I get the principle of time value of money and no I didn't run it on your example. However on my 5 second analysis that deal sure seems like a bad deal for the owner to take 1/3 the potential earnings for cash in hand.

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I get the principle of time value of money and no I didn't run it on your example. However on my 5 second analysis that deal sure seems like a bad deal for the owner to take 1/3 the potential earnings for cash in hand.

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It's the proverbial bird in the hand vs. two in the bush. I'm taking the guarantee over the potential every time.

Easements are capital gains vs. ordinary income

How old is owner? Estate planning, etc? The number of times I've had owners say "I want to leave something for the grandkids." My response is typically "Sir, you told me you have 10 grandkids. Why leave them $100 per month when you can do this deal and put $17,500 in a trust fund for each one that will grow at better than 3% annually."

People often want to pay off debt, etc. Invest it better, etc. If you're looking at a time horizon beyond 10 years you're doing it wrong. Take the lump sum and invest it elsewhere.

Also consider that tower contracts almost universally have a 6-12 month termination provision where the tower operator can terminate the lease with 6-12 months notice for any reason whatsoever and no penalty.

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Also consider that tower contracts almost universally have a 6-12 month termination provision where the tower operator can terminate the lease with 6-12 months notice for any reason whatsoever and no penalty.

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How often does that happen?

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Also consider that tower contracts almost universally have a 6-12 month termination provision where the tower operator can terminate the lease with 6-12 months notice for any reason whatsoever and no penalty.

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This is just one example as to why some people won't consider entering into these types of deals while others willingly under cut their neighbor for the cash.

Those contracts are complete screw jobs to the land owner in exchange for money today. That doesn't mean he gets screwed, it just means there are a hundred ways for him to get screwed contractually if need be by the operator or they go talk to his neighbor.

I have one question for you guys on the broker / operator side. How many towers have you taken down? I talked to a guy on your side that was boasting about building 10,000+ towers and never taking one down.

Gets me right back to the bird in the hand point above. You better be putting that money in a trust for your grandkids because I see no inclination of the builders/ operators ever planning to remove your new flag pole when it is no longer needed.

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Also consider that tower contracts almost universally have a 6-12 month termination provision where the tower operator can terminate the lease with 6-12 months notice for any reason whatsoever and no penalty.

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How often does that happen?

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Depends on the carriers on the tower.

I've got one right now where we're decommissioning the tower. I had an offer to buy out the lease on the table to the LL 18 months ago for $290K.

Since then the only tenant on that tower, Cricket, was bought by AT&T. And AT&T has 2 other towers within 3/4 of a mile so they've terminated the Cricket lease on our tower and as soon as they remove the Cricket equipment we're terminating the lease and taking down our tower.

So the LL saw maybe $30K in rent over those 18 months and is now losing $260K because they got greedy 18 months ago.

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Also consider that tower contracts almost universally have a 6-12 month termination provision where the tower operator can terminate the lease with 6-12 months notice for any reason whatsoever and no penalty.

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This is just one example as to why some people won't consider entering into these types of deals while others willingly under cut their neighbor for the cash.

Those contracts are complete screw jobs to the land owner in exchange for money today. That doesn't mean he gets screwed, it just means there are a hundred ways for him to get screwed contractually if need be by the operator or they go talk to his neighbor.

I have one question for you guys on the broker / operator side. How many towers have you taken down? I talked to a guy on your side that was boasting about building 10,000+ towers and never taking one down.

Gets me right back to the bird in the hand point above. You better be putting that money in a trust for your grandkids because I see no inclination of the builders/ operators ever planning to remove your new flag pole when it is no longer needed.

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How are they a screw job? Someone is leasing their land and being paid for the use of the land by the lessee.

Do you know of a lot of abandoned cell towers that haven't been removed? As mentioned above it certainly is a risk in a bankruptcy situation but unless the lessee is in bankruptcy they have a contractual duty to remove the tower at the end of the lease.

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Sounds like the NIMBYs who whine about a lack of cell service but lose their minds at the mere mention of a tower in their area.

I should probably edit to seem less combative as I've already suggested to our land owner to look into it for our property south of Rock Springs.

I'm pretty far from being a liberal thinker as I work in deep water oil and gas. This just seems to have the potential in 30 years for thousands of towers to be sitting abandoned in litigation because no one claims to be responsible for them after the leases and access are sold as assets over and over.

Reminds me of off shore wells and platforms the government just required to be removed. (Although I wish they would have left them up for fish structure and habitat)

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How are they a screw job? Someone is leasing their land and being paid for the use of the land by the lessee.

Do you know of a lot of abandoned cell towers that haven't been removed? As mentioned above it certainly is a risk in a bankruptcy situation but unless the lessee is in bankruptcy they have a contractual duty to remove the tower at the end of the lease.

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I don't know at all, that's why I asked based upon the blow hard I met that bragged about building thousands without ever having to remove one.

I didn't say they were being screwed. I said there was a lot of potential of being screwed as the contracts were very one sided.

I personally would never agree to a cancelation clause penalty similar to a lump penalty decreasing proportionally by the length of lease terms.

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I should probably edit to seem less combative as I've already suggested to our land owner to look into it for our property south of Rock Springs.

I'm pretty far from being a liberal thinker as I work in deep water oil and gas. This just seems to have the potential in 30 years for thousands of towers to be sitting abandoned in litigation because no one claims to be responsible for them after the leases and access are sold as assets over and over.

Reminds me of off shore wells and platforms the government just required to be removed. (Although I wish they would have left them up for fish structure and habitat)

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Except that's 180 degrees removed from industry reality.

You're seeing the small players squeezed out and consolidation of towers by the major players so you're seeing companies with market caps in the tens of billions of dollars being responsible for these things. And if you saw the processes involved in the integration of these sites you'd be amazed.

The thing is that towers rarely come down. It does happen but you rarely see them completely decommissioned and devoid of carriers because of what we describe in the industry as "densification."

Following up on my previous post re: the inverse relationship between coverage radius and amount of voice/data transmitted the facts are that the amount of data being transmitted wirelessly (i.e.- over cell networks) is increasing exponentially every year. The growth is quite literally a vertical line.

The point being that where 10 years ago two towers 5 miles apart could handle everything and still have excess capacity now you need 2 more towers in between those original 2 to keep up with demand for coverage.

Cisco does great work researching this stuff: http://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/white_paper_c11-520862.html

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Executive Summary
The Mobile Network in 2014
Global mobile data traffic grew 69 percent in 2014. Global mobile data traffic reached 2.5 exabytes per month at the end of 2014, up from 1.5 exabytes per month at the end of 2013.
Last year's mobile data traffic was nearly 30 times the size of the entire global Internet in 2000. One exabyte of traffic traversed the global Internet in 2000, and in 2014 mobile networks carried nearly 30 exabytes of traffic.
Mobile video traffic exceeded 50 percent of total mobile data traffic for the first time in 2012. Mobile video traffic exceeded 50 percent of total mobile data traffic by the end of 2012 and grew to 55 percent by the end of 2014.
Almost half a billion (497 million) mobile devices and connections were added in 2014. Global mobile devices and connections in 2014 grew to 7.4 billion, up from 6.9 billion in 2013. Smartphones accounted for 88 percent of that growth, with 439 million net additions in 2014.
Globally, smart devices represented 26 percent of the total mobile devices and connections in 2014; they accounted for 88 percent of the mobile data traffic. (For the purposes of this study, smart devices refers to mobile connections that have advanced multi-media/computing capabilities with a minimum of 3G connectivity.) In 2014, on an average, a smart device generated 22 times more traffic than a non-smart device.
Mobile network (cellular) connection speeds grew 20 percent in 2014. Globally, the average mobile network downstream speed in 2014 was 1,683 kilobits per second (kbps), up from 1,387 kbps in 2013.
In 2014, a fourth-generation (4G) connection generated 10 times more traffic on average than a non4G connection. Although 4G connections represent only 6 percent of mobile connections today, they already account for 40 percent of mobile data traffic.
The top 1 percent of mobile data subscribers generated 18 percent of mobile data traffic, down from 52 percent at the beginning of 2010. According to a mobile data usage study conducted by Cisco, the top 20 percent of mobile users generated 85 percent of mobile data traffic, and the top 1 percent generated 18 percent.
Average smartphone usage grew 45 percent in 2014. The average amount of traffic per smartphone in 2014 was 819 MB per month, up from 563 MB per month in 2013.
Smartphones represented only 29 percent of total global handsets in use in 2014, but represented 69 percent of total global handset traffic. In 2014, the typical smartphone generated 37 times more mobile data traffic (819 MB per month) than the typical basic-feature cell phone (which generated only 22 MB per month of mobile data traffic).
Globally, there were nearly 109 million wearable devices (a sub-segment of the machine-to-machine [M2M] category) in 2014 generating 15 petabytes of monthly traffic.
Globally, 46 percent of total mobile data traffic was offloaded onto the fixed network through Wi-Fi or femtocell in 2014. In 2014, 2.2 exabytes of mobile data traffic were offloaded onto the fixed network each month. Without offload, mobile data traffic would have grown 84 percent rather than 69 percent in 2014.
Per-user iOS mobile devices (smartphones and tablets) data usage marginally surpassed that of Android mobile devices data usage. By the end of 2014, average iOS consumption exceeded average Android consumption in North America and Western Europe.
In 2014, 27 percent of mobile devices were potentially IPv6-capable. This estimate is based on network connection speed and OS capability.
In 2014, the number of mobile-connected tablets increased 1.6-fold to 74 million, and each tablet generated 2.5 times more traffic than the average smartphone. In 2014, mobile data traffic per tablet was 2,076 MB per month, compared to 819 MB per month per smartphone.
There were 189 million laptops on the mobile network in 2014, and each laptop generated 3.2 times more traffic than the average smartphone. Mobile data traffic per laptop was 2.6 GB per month in 2014.
Average nonsmartphone usage doubled to 22 MB per month in 2014, compared to 11 MB per month in 2013. Basic handsets still make up the vast majority of handsets on the network (68 percent).
The Mobile Network Through 2019
Mobile data traffic will reach the following milestones within the next 5 years:
Monthly global mobile data traffic will surpass 24.3 exabytes by 2019.
The number of mobile-connected devices exceeded the world's population in 2014.
The average global mobile connection speed will surpass 2 Mbps by 2016.
Because of increased usage on smartphones, smartphones will reach three-quarters of mobile data traffic by 2019.
Monthly mobile tablet traffic will surpass 2.0 exabytes per month by 2018.
Tablets will exceed 10 percent of global mobile data traffic by 2016.
4G traffic will be more than half of the total mobile traffic by 2017.
More traffic will be offloaded from cellular networks (on to Wi-Fi) than remains on cellular networks by 2016.

Global mobile data traffic will increase nearly tenfold between 2014 and 2019. Mobile data traffic will grow at a compound annual growth rate (CAGR) of 57 percent from 2014 to 2019, reaching 24.3 exabytes per month by 2019.
By the end of 2014, the number of mobile-connected devices will exceed the number of people on earth, and by 2019 there will be nearly 1.5 mobile devices per capita. There will be 11.5 billion mobile-connected devices by 2019, including M2M modulesexceeding the world's projected population at that time (7.6 billion).
Mobile network connection speeds will increase more than twofold by 2019. The average mobile network connection speed (1.7 Mbps in 2014) will reach nearly 4.0 megabits per second (Mbps) by 2019. By 2016, average mobile network connection speed will surpass 2.0 Mbps.
By 2019, 4G will be 26 percent of connections, but 68 percent of total traffic. By 2019, a 4G connection will generate 10 times more traffic on average than a non-4G connection.
By 2019, more than half of all devices connected to the mobile network will be "smart" devices. Globally, 54 percent of mobile devices will be smart devices by 2019, up from 26 percent in 2014. The vast majority of mobile data traffic (97 percent) will originate from these smart devices by 2019, up from 88 percent in 2014.
By 2019, 54 percent of all global mobile devices could potentially be capable of connecting to an IPv6 mobile network. More than 6.2 billion devices will be IPv6-capable by 2019.
Nearly three-fourths of the world's mobile data traffic will be video by 2019. Mobile video will increase 13-fold between 2014 and 2019, accounting for 72 percent of total mobile data traffic by the end of the forecast period.
By 2019, mobile-connected tablets will generate nearly double the traffic generated by the entire global mobile network in 2014. The amount of mobile data traffic generated by tablets by 2019 (3.2 exabytes per month) will be 1.3 times higher than the total amount of global mobile data traffic in 2014 (2.5 exabytes per month).
The average smartphone will generate 4.0 GB of traffic per month by 2019, a fivefold increase over the 2014 average of 819 MB per month. By 2019, aggregate smartphone traffic will be 10.5 times greater than it is today, with a CAGR of 60 percent.
By 2016, more than half of all traffic from mobile-connected devices (almost 14 exabytes) will be offloaded to the fixed network by means of Wi-Fi devices and femtocells each month. Without Wi-Fi and femtocell offload, total mobile data traffic would grow at a CAGR of 62 percent between 2014 and 2019, instead of the projected CAGR of 57 percent.
The Middle East and Africa will have the strongest mobile data traffic growth of any region with a 72percent CAGR. This region will be followed by Central and Eastern Europe at 71 percent and Latin America at 59 percent.

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I personally would never agree to a cancelation clause penalty similar to a lump penalty decreasing proportionally by the length of lease terms.

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And the tower operator would go elsewhere.

The reason being that our customers (read- AT&T, Verizon, Sprint, T-Mobile, etc) all have 30-day cancellation clauses in most cases. That's what they can do when they're as big and powerful as they are.

So how do we ensure things don't start looking like the old photos of oil plays with deriks packed as tight as possible for as far as the eye can see?

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So how do we ensure things don't start looking like the old photos of oil plays with deriks packed as tight as possible for as far as the eye can see?

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Depends on where you're located but generally zoning is a huge problem for us.

Google "distributed antenna system" as what we refer to as "small cell networks" are the next wave. Still won't replace towers but in certain environments, especially urban areas, they're a great solution.

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So how do we ensure things don't start looking like the old photos of oil plays with deriks packed as tight as possible for as far as the eye can see?

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More derricks meant more oil out of the ground, more towers packed together isn't useful.

The cell providers want as few towers possible to get the job done because towers are overhead.

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So how do we ensure things don't start looking like the old photos of oil plays with deriks packed as tight as possible for as far as the eye can see?

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More derricks meant more oil out of the ground, more towers packed together isn't useful.

The cell providers want as few towers possible to get the job done because towers are overhead.

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The above clashes with the below.

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The point being that where 10 years ago two towers 5 miles apart could handle everything and still have excess capacity now you need 2 more towers in between those original 2 to keep up with demand for coverage.

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So how do we ensure things don't start looking like the old photos of oil plays with deriks packed as tight as possible for as far as the eye can see?

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More derricks meant more oil out of the ground, more towers packed together isn't useful.

The cell providers want as few towers possible to get the job done because towers are overhead.

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The above clashes with the below.

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The point being that where 10 years ago two towers 5 miles apart could handle everything and still have excess capacity now you need 2 more towers in between those original 2 to keep up with demand for coverage.

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Not necessarily.

You're assuming cell towers look like this:



When they can quite often be made to look like this:

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So how do we ensure things don't start looking like the old photos of oil plays with deriks packed as tight as possible for as far as the eye can see?

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More derricks meant more oil out of the ground, more towers packed together isn't useful.

The cell providers want as few towers possible to get the job done because towers are overhead.

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The above clashes with the below.

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The point being that where 10 years ago two towers 5 miles apart could handle everything and still have excess capacity now you need 2 more towers in between those original 2 to keep up with demand for coverage.

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I guess I focused in on packed together.

As cell phone numbers increase, more towers are needed but its not like old oil fields where the goal was to put as many as possible in an area to increase profit. Cell carriers don't see increased profits just by throwing towers into an area.

Rural areas aren't going to see near the increase in towers as growing urban areas.

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Since then the only tenant on that tower, Cricket, was bought by AT&T. And AT&T has 2 other towers within 3/4 of a mile so they've terminated the Cricket lease on our tower and as soon as they remove the Cricket equipment we're terminating the lease and taking down our tower.

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Example of not running excess towers.

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They only put up special towers if required by local zoning ordinances correct? Say if I asked for a tree but my neighbor didn't you would just contract with my neighbor?

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Based on all the other questions I asked regarding contracts heavily favoring the operator, I'm guessing yes. And it will most likely be made to look like a hand giving you the middle finger.

Question to the group -- We have some family land (La Grange area) and have been in discussions for a few months with cell tower rep. We've agreed to most major items & they've sent over a contract. However prior to moving forward we'd like a lawyer to review our contract and provide their comments/red lines. Does anyone have experience/recommendation on a lawyer with cell phone tower experience?

Many Thanks!!

AgLA06 said:

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They only put up special towers if required by local zoning ordinances correct? Say if I asked for a tree but my neighbor didn't you would just contract with my neighbor?

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Based on all the other questions I asked regarding contracts heavily favoring the operator, I'm guessing yes. And it will most likely be made to look like a hand giving you the middle finger.

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Question to the group -- We have some family land (La Grange area) and have been in discussions for a few months with cell tower rep. We've agreed to most major items & they've sent over a contract. However prior to moving forward we'd like a lawyer to review our contract and provide their comments/red lines. Does anyone have experience/recommendation on a lawyer with cell phone tower experience?

Many Thanks!!

eric76 said:

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One thing I'd want would be a stipulation that they remove everything when they abandon it unless you agree at that time to leave it. And maybe some kind of stipulation about how long it can sit there without them using it before it is declared abandoned.

The reason I say that is that there are a number of old telephone company microwave towers around that are now abandoned. They are too expensive to dismantle and so they just sit there.

In one that I know of out in the country, there was a building by the tower and the owner uses that now to store livetock feed. The tower itself is pretty useless now, though.

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Good advice, though I'd still require some sort of deposit to guarantee this. Companies are easy to form and themselves abandon and suing them later may be pointless even if they agree to such a contract provision. You need something to go after. If they don't agree to this, you know they had no intention of doing this.

Finn Maccumhail said:

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I get the principle of time value of money and no I didn't run it on your example. However on my 5 second analysis that deal sure seems like a bad deal for the owner to take 1/3 the potential earnings for cash in hand.

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It's the proverbial bird in the hand vs. two in the bush. I'm taking the guarantee over the potential every time.

Easements are capital gains vs. ordinary income

How old is owner? Estate planning, etc? The number of times I've had owners say "I want to leave something for the grandkids." My response is typically "Sir, you told me you have 10 grandkids. Why leave them $100 per month when you can do this deal and put $17,500 in a trust fund for each one that will grow at better than 3% annually."

People often want to pay off debt, etc. Invest it better, etc. If you're looking at a time horizon beyond 10 years you're doing it wrong. Take the lump sum and invest it elsewhere.

Also consider that tower contracts almost universally have a 6-12 month termination provision where the tower operator can terminate the lease with 6-12 months notice for any reason whatsoever and no penalty.

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At the risk of hijacking the thread...

How much does this apply to other times that land is leased? For example, mineral rights?

I own 6.5 aces and have 25% of the mineral rights of my property. About 5 years ago an oil company (Halcon) put in a well and started paying us monthly royalty checks. Over the course of the first few years, the amount of the checks dwindled down to virtually nothing ($70 once every 3 months). But then we started getting letters offering to buy out our mineral rights. At first, the offers were in the $2500 neighborhood - when it got up to $5k, our neighbors sold. Then back in June we suddenly got a royalty check for > $800. Then another one in July. Then we got on offer letter for "55 times the average of our last 3 months royalty checks". When August came in at about $600, This would have made the offer worth a little better than $40k.

We didn't take it - but we were VERY tempted. The main reason we didn't take it was because our mindset was "they know something we don't know".

If I KNEW the monthly checks were going to continue at the $700-$800 range, there is no way we would sell. But Sept's came in at $550... which indicates production is dropping again.


I guess my question is: at what point do we sell it?

AgLA06 said:

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So how do we ensure things don't start looking like the old photos of oil plays with deriks packed as tight as possible for as far as the eye can see?

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If it's like every other industry throughout history, some other technology will replace the towers.

Satelites maybe?

Web networking (where my cell phone is it's own transmitter when it's sitting idle)?

Something that hasn't been invented yet?

We represent large landowners and frequently negotiate leases, including cellular towers.

Feel free to message me.

A very wise old cowboy once told me, never sell your mineral rights. Never ever.

I don't have a premium account on here so I can't see your contact info. Could you provide your email?
Thanks!