Whether you are a private landowner or a local government, you may be reading this because you think your lease has either been breached or is unfair.  Kreines & Kreines, Inc. believes there are three points in time when you might renegotiate a wireless lease:

·            At the end of the lease (anywhere from 10 to 30 years after it was signed).

·            At the option to renew – usually a five-year period when the carrier or tower company holds most (but not all) of the options.

·            Anytime, in the event of a material breach.

Kreines & Kreines, Inc. is not a law firm.  But we believe that if you have a tenant with a lease that states government approvals will be obtained by the tenant, and those approvals have not been obtained, you may be able to renegotiate your lease.  We also believe that, if you have land or buildings on which there is a sub-lessee (someone paying your tenant, but not you, to be there), you should have the right to consent to such an arrangement.

When you send Kreines & Kreines, Inc. your lease, we will analyze it for better language on your behalf.  If you want to go further, we can investigate where bootlegging or unshared revenues due to you are a problem.  We may even be able to determine whether or not your tenant (or your non-paying sub-tenant) may or may not be paying property taxes.

You may find that you do not want to break your unwanted lease.  But when it's time to renew, you may be able to name your terms.  Remember: the tenant has a portion of his network dependent on your location.  He may also have sub-tenants who are not paying you who have no idea – or desire – to move at the end of the tenant's lease with you.  Don't you think you at lease deserve a little more income each month?

A Lease is a One-Way Street

The first thing a carrier or tower builder will do is hand a prospective landlord a "standard form" lease (sometimes called an "agreement" or a "license").  Know this about "standard" leases or "Master" agreements: They are all different depending upon negotiation and they were all designed from the wireless industry's perspective.

If a carrier or tower builder says "take it or leave it," a prospective landlord may want to give it back and say "Maybe you can find another property owner who will face potentially angry neighbors for this paltry lease rate, but I need a better lease than this."  When that happens, a prospective landlord may want to call Kreines & Kreines, Inc. to help with guidance about changes to a "Standard" lease or a "Master" agreement.  These types of agreements are probably just starting points in a negotiation process.

Towers Can Be Lucrative 

Ah, co-location … the answer to everyone's prayers, right? Well, if you're a tower company maybe. But the alleged advantages of putting all carriers on one site is neither logical nor sustainable. Sooner (rather than later) another tower company will come along with another site which that company claims a carrier needs. And there is no end to tower companies wanting additional towers.

Actually, the only "win/win" in co-location is for the tower company itself. Please understand that the tower company is not in the business of providing wireless services and is probably not a personal wireless service provider licensed by the Federal Communications Commission. The tower company is in the business of vertical real estate. When the tower company first approaches a local government, that jurisdiction may approve a "tower," rather than a personal wireless service facility located on that "tower." But the tower is only a support structure made of steel. So, rarely is the actual personal wireless service facility approved by the local government and a permit is only sometimes issued for a $30,000 steel structure rather than a $300,000 (or more) personal wireless service facility. Even if the assessor is aware of this approval, the actual replacement cost of the permitted facility is usually drastically understated.

No taxes and maybe no permits. The only site costs are maintenance and the ground lease.

And when the next co-locatee comes along, it's likely a permit is not obtained from the local government. This is because the local government's ordinance probably only calls for a permit for a "tower." So, rarely is a permit (either zoning permit or building permit) applied for when the second colocatee comes along. That means that no notice is given to the assessor and, often, no sub-lease payment is passed on the underlying landowner. In that case, the rent paid to the tower owner on each new colocatee is strictly positive cash flow. This cash flow would ordinarily be net profit, but it is plowed back for the construction and/or acquisition of more "towers."

The $30,000 tower becomes a platform for millions of dollars worth of equipment. Does the assessor know about this property for tax purposes? In many cases the assessor does not know because permits were not obtained; therefore, the assessor has no way of knowing. Does the underlying landowner know? In many cases, no.

So what does the tower company do with all that money? Why, the company employs people to appear before local governments to say "co-location is the answer, and our company's experts have determined that you need another tower." Never mind that you've got more towers in your community than your community will ever need.

And there is no end in sight, except that tower builders are in trouble for overbuilding (see "Towers are Dinosaurs").

Lease Rate Survey  

Kreines & Kreines, Inc. is a wireless planning consultant that collects cell site leases for and from its clients.  Kreines & Kreines, Inc. surveys its clients and other lessors and lessees for information similar to that represented by actual leases in the Kreines & Kreines, Inc. files.  The primary pieces of data most parties are interested in are the lease rate, expressed as dollars per month, that a lessee pays a lessor at the first year of the lease.

Knowledge is Power; Therefore Information is Valuable, but Surveys Have Limitations…  Wireless carriers don't want to share their leases with third parties.  (Leases are variously called "site agreements" and "licenses" as well as "leases."  The two parties to a lease are the lessor, also called the "landlord" and the lessee, also know as the "tenant.")  Most carriers don't want their lease rates to become generally known. 

Presumably, information about another lease rate for a higher amount might give a lessee one of two things:

·            If the lessee is informed about higher lease rates during negotiations and before a lease is signed, the lessee has bargaining power.

·            If the lessee has knowledge of higher lease rates after a lease is negotiated and signed, a felling of ill will might be created.  The lessee may find bargaining power to increase the lease rate at the next option to renew.

The Kreines & Kreines, Inc. Lease Rate Survey may impart power to its users while bargaining for a better lease rate, but our survey's purpose is to represent the data that Kreines & Kreines, Inc. has collected.

This Survey is Anecdotal, Not "Scientific"…  As political polling becomes more prevalent and important, surveys and polls are branded as "scientific."  This means that the accuracy of the survey can be measured by two factors:

·            Reliability – if the survey were undertaken by someone else under the same conditions, would the same results occur?

·            Validity – does the survey represent what it purports to represent?

Kreines & Kreines, Inc. only purports to represent Kreines & Kreines, Inc.'s own data; therefore, the survey is valid.  No other parties that we know of are willing to share their lease rate survey results, so reliability has yet to be tested.

What Types of Leases Does Kreines & Kreines, Inc. Include?  Kreines & Kreines, Inc. does not distinguish between types of leases or lessors, e.g.:

·            A ground lease is treated the same as a "spot" lease on a tower or a rooftop.

·            A landlord could be a property owner or a tower owner.

·            A "spot" lease on a water tank is considered equivalent to a "spot" lease in a church steeple.

The Leases Kreines & Kreines, Inc. Has Collected are Diverse, With Few Patterns or Trends…  Kreines & Kreines, Inc. has selected a large sample of leases from their inventory of leases.  Many leases are simply not comparable to these 40 because they may offer special consideration, e.g.:

·            Many municipalities receive use of the carrier's equipment in lieu of partial rent payments.

·            Some leases require an easement or other instrument in addition to the lease.  This tends to discount the lease rate and Kreines & Kreines, Inc. does not consider such leases in the Lease Rate Survey.

Of the many leases selected, only two conclusions can be suggested.

·            Older leases tend to have lower lease rates than more recent leases.

·            Urban coastal areas of the U.S. tend to have higher lease rates than the rest of the country.

Scatter Diagram of Leases…  Kreines & Kreines, Inc. makes available to its clients a graph that  shows each of the several leases arrayed by lease rate and initial date.   (Kreines & Kreines, Inc. patterns its graph after the quarter-rectangle display, such as used by USA Today to diagram Stock Market Trends.)  In a rectangular array, there are four quadrants, each equal in size. 

Kreines & Kreines, Inc. makes the scatter diagram and lease rates available to its clients.  One use of the scatter diagram would be to place a proposed lease amongst the total universe of leases to see within which group it most closely belongs.

Conclusion…  If a proposed lease doesn't fall in the same quadrant of those it most closely resembles, it may be undervalued.  This is not an ironclad rule, but the data suggest that the landlord may be in a good bargaining position for a better lease rate.

If you have a proposed lease, retain Kreines & Kreines, Inc. to analyze and improve it and we will share the data from this survey with you.

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Kreines & Kreines, Inc.
58 Paseo Mirasol, Tiburon, CA 94920
Phone: (415) 435-9214
Fax: (415) 435-1522
e-mail: mail@planwireless.com