Leasing

Towers of Babble

Property Owners Can Profit From Telecommunications Leases.

Commercial real estate owners have discovered gold mines right in their own backyards — cellular phone antenna leases. With more than 115 million people across the United States talking on cell phones, telecommunications companies continually are expanding the number of communication towers to provide better and more complete coverage and capacity.

Whether mounted on rooftops in urban areas or on vacant land in less-populated communities, cellular antennas are close to being perfect tenants. Telecommunications companies have solid credit, few property management issues, high renewal rates, and a willingness to take otherwise wasted space. 

While these companies have selective site criteria and some communities create zoning opposition, for the most part, property owners who meet the site selection needs encounter few problems. Telecommunications companies pay to survey the land, obtain building permits, and build access roads. They provide construction drawings and pay for installation and operating costs.

Equipment Types Rooftop-mounted antennas usually are used in areas populated by high- or mid-rise structures, especially if zoning restrictions for freestanding towers are present.

Typically, companies mount from two to nine antennas, either directly on the roof, on heating, ventilation, and air conditioning screens, or affixed to the side of a building. The two-feet- to six-feet-tall antennas can be painted to match the mounting surface. Cables connect antennas to the telecommunications equipment located on the rooftop or penthouse.

The type of equipment varies with each company, but typically an equipment shelter of approximately 10 feet by 20 feet is required to host the communications equipment. If space is available, the company also can install its equipment in the building's mechanical room. If additional cooling is required in the mechanical room, the telecommunications company will provide it, at its cost.

Telecommunications companies also provide owners with construction drawings for review and approval. Sometimes the antennas and equipment are superimposed on a photograph of the building to provide a complete visual image.

Ground-based towers are the best choice for suburban or rural areas without multistory structures. Suburban tower heights typically range from 100 feet to 200 feet, with much taller towers, up to 400 feet, located in rural areas.

Required land size for towers ranges from a parking space to several acres. Due to co-location zoning regulations that require multiple carriers to use the same towers, ideal ground space is 100 feet by 100 feet, but smaller compounds — 50 feet by 50 feet or less — are used if other options are not available.

Several different types of towers exist. A lattice or self-supporting tower requires a larger area for its foundation, since there are four supporting anchors. Typically 150 feet to 250 feet tall, lattice towers are less expensive to construct than other types.

A guyed tower is a very tall structure, usually 250 feet to 500 feet, utilized primarily in more rural sections of the country to maximize coverage. Supported by guy wires on three sides, this structure typically requires a lease of several acres of land from the owner. Often the owner can retain grazing or farming rights under the guy wires, with certain restrictions.

A monopole is a single pole constructed from galvanized metal sections stacked on top of each other to obtain the required height. Typically 50 feet to 175 feet, a monopole does not have guy wires and has a sleeker look than a lattice or guyed tower. All cabling is concealed inside the monopole.

The height of the antennas affects service distance. Every 100 feet in tower height equates to 1 mile to 1.5 miles of reliable coverage, depending on terrain. Thus, a 200-foot tower (or rooftop) reliably serves a 2-mile to 3-mile radius, depending on terrain. The signal will travel farther but will begin to reach only hilltops. Telecommunications companies re-use frequencies, therefore tall towers placed too close together can interfere with each other. The length of the antennas can determine the amplification of the signal, the number of calls it can handle, and the direction of the signal.

If a tower's height is a concern, a property owner should request the proposed tower height and indicate this in the lease to safeguard against a misunderstanding later. But telecommunications companies cannot negotiate much on tower height, since a certain height is necessary for proper signal coverage.

Suitable Cellular Sites Telecommunications companies are highly selective, choosing sites based on a property's proximity to an identified service problem area. Owners of the tallest building or highest hill may think that companies will beat a path to their doors, but this is not the case. Often radio frequency engineers avoid sites with too much elevation, fearing that a tower's signal will interfere with the company's neighboring sites. Towers in populated areas are about five miles away from each other; however, underserved pockets, or dead zones, can be in-filled with a mini-tower or smaller antennas located on shorter structures, such as light poles. These micro cells provide coverage in about a half mile to a mile radius and are ideal for traffic corridors with dead zones in between full-size towers.

In most cases, company representatives research the service problem area, called a search ring, and identify potential sites that match the required criteria, such as zoning and elevation. Representatives then contact property owners to determine their willingness to lease. Cooperative owners with available and favorably zoned properties located within the search ring are prime lease candidates, since telecommunications companies operate under tight time schedules.

Cellular networks continually are evaluated and optimized, so a site passed over earlier may be viewed differently at a later date. Owners who want to find out if their properties qualify should send their properties' location on a street map, site latitude and longitude coordinates, and contact information to telecommunications companies' real estate managers. Radio frequency engineers enter the site coordinates into a software program to evaluate the effectiveness of various tower locations. If the location happens to be in an area of current interest to the company, it is forwarded to the site acquisition team for further evaluation.

Companies use the following criteria to determine a property's viability for a ground tower.

Proximity to Search Ring. Properties must be in or near the area identified by radio frequency engineers.

Flood Plain. Properties listed in 100-year flood plains usually are excluded, even if the area never has flooded.

Zoning. Ground-based towers usually require heavy-commercial or industrial zoning. For sites in other areas, companies may pursue special-use permits, if city officials generally are supportive. Even with city opposition, companies sometimes will pursue a site if no other options exist.

Access. Telecommunications companies need access to sites with heavy construction equipment. They construct access roads, if it's not cost prohibitive, and require access at all times.

Testing. Telecommunications companies usually conduct a phase 1 environmental assessment to identify potential concerns. Many regions also require an analysis of historical structures in the area to determine a cellular tower's impact. This typically involves avoiding the placement of freestanding towers next to, or within direct view of, historic buildings, churches, or monuments.

To evaluate the viability of high- or mid-rise buildings, companies use the following criteria.

Proximity to Search Ring. Properties must be in the area identified by radio frequency engineers.

Elevation. Unlike ground-based towers in which elevation can be adjusted by changing the height of the tower, rooftop antennas are relatively fixed. A building must be of sufficient height to satisfy the particular service needs in the area.

Access. Building owners must provide access at all times. Equipment maintenance and service often are performed at night, when call volume is low.

Space. Buildings must have approximately 10 feet by 20 feet of space available for telecommunications equipment. It can be on the rooftop or inside a penthouse or boiler room.

Negotiating the Lease Telecommunications companies typically negotiate a lease term of 15 to 30 years, including options. Often leases are negotiated for initial five-year terms with automatic five-year extensions. Most companies insist on cancellation clauses, but in practice, they rarely use them due to the time and expense of relocating operations.

Companies will submeter and pay for all electrical charges associated with their operations, including any tax increases tied to the installation of their cellular tower/antennas.

Due to increased interest among cities to encourage co-location, in which one tower serves a number of companies, owners can request percentage rent from additional co-locations on the tower. A typical co-location fee would be 25 percent to 30 percent of the additional revenue received. If the telecommunications company plans to assign the tower to a third-party tower manager, the likelihood of co-location fees is lower. The tower manager relies on co-location money to stay in business, whereas it is ancillary to telecommunications companies.

Telecommunications companies need time to obtain all of the necessary approvals prior to commencement of a lease. Typically, the investigative stage requires an environmental audit, soil tests, Federal Communications Commission approval, zoning approvals, and building permits. The lease usually begins once ground is broken, but a time limit can be established. If the site requires a conditional-use permit, which requires a public hearing, an owner should plan on at least six months from lease signing to rent commencement. The construction schedule also is subject to the telecommunications companies' development plan — they may push a high priority site over a low priority site.

Rent varies greatly by location and is influenced by the number of site options available. Rental rates range between $5,000 per year and $30,000 per year, but the median rent paid in the Midwest is about $10,000 per year to $12,000 per year for a traditional ground site and often higher for rooftop locations in major metropolitan areas.

Problem Issues One of the biggest deterrents to cellular antennas and towers is community opposition based on visual clutter. To avoid a proliferation of towers, many communities require co-location, reducing the need for other structures. Co-location is normally less expensive and less time-consuming than constructing a new tower.

Also, property owners and communities have initiated a growing movement to improve the aesthetics of cellular structures. Cellular antennas now can be designed to fit inside church steeples, flagpoles, and mounted to light poles.

Flagpoles seem to be the most common disguised structures. The thin antennas disappear inside the pole, but these antenna installations are more expensive and can limit the effectiveness of the radio signal, so they usually are reserved for communities with very strict zoning controls. These installations still require equipment space on the ground.

Douglas K. Dolan, CCIM

Douglas K. Dolan, CCIM, is vice president of Dolan Commercial Industrial Realtors in St. Louis. He serves as a real estate consultant to Cingular Wireless, Verizon Wireless, and VoiceStream. Contact him at (314) 726-2610 or [email protected]

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