Since 2010, wireless carriers AT&T, Verizon, and T-Mobile (Carriers) have slowly divested out of managing and or owning cell towers by way of Master Lease Agreements (MLA’s). MLAs provide a means for Carriers to offset the costs of upgrading and improving their networks (such as upgrading equipment from 4G to 5G) by having tower companies (TowerCo’s) pay lump sums upfront in exchange for the ability to manage and or own out right cell towers the Carriers now own.

On paper, this sounds like a great deal for the Carrier and TowerCo but as you’ll see it’s clearly a nightmare in the making for Landlords who want and deserve to receive market lease rates. 

So, let's break down the Verizon/Vertical Bridge deal to see what Landlords can expect to get.

What are the key points of this deal? 

The deal is a game-changing transaction between Verizon wireless and Vertical Bridge, the largest private owner of communications infrastructure in the US. Here's what you need to know:

• Vertical Bridge gains exclusive rights to lease, operate, and manage over 6,300 wireless towers across all 50 states.

• The deal is valued at approximately $3.3 billion, including certain commercial benefits for Verizon.

• Verizon will lease back capacity on the same towers, at a lower rate and escalator for 10 years, with options to extend up to 50 years.

• This move aims to help Verizon reduce tower-related costs and increase vendor diversity; so no one tower company or entity can own a majority of Verizon’s cell site locations.

• In exchange, Vertical Bridge gains the right to sublease all 6,300 towers and nearly all of the additional rent less revenue share owed to landlords that have revenue share.

• Vertical Bridge's portfolio now includes over 500,000 sites, with 17,000 owned and master-leased towers.

Why should Landlords care about this deal?

Verizon has basically handed the keys to Vertical Bridge. The deal allows Verizon to lease back on towers assigned to Vertical Bridge often at a lower rate than what landlords receive now which means Vertical Bridge will have to pay the difference to landlords. 

In exchange, Vertical Bridge will get 100% of any additional tenants added to the towers less what they have to pay landlords, so what this means Vertical Bridge now has an overwhelming incentive to do everything they can to increase profits by reducing and/or eliminating the rent and rights landlords have now. 

So how will Vertical Bridge turn a profit on this deal?

Of course, Vertical Bridge will be looking to add new tenants to towers wherever possible but they may also contact affected Verizon landlords about reducing or eliminating their rent by way of rent reductions or lease buyouts. Additionally, Vertical Bridge could be looking to add clauses into existing cell site leases that ultimately hurt landlords. 

Telemarketing companies such as Blackdot and MD7 are often hired by tower companies to bully landlords into adding rights of refusal, non-compete and or confidentiality clauses into their leases. In other cases, landlords are offered one time signing fees to extend and amend their cell tower lease.  

What can happen if a landlord falls prey to common MLA tactics?

Unknowing landlords could be convinced to sign away their rights for pennies on the dollar without fully understanding the true value of their cell site lease. Oftentimes, a landlord will be assured by a trusted advisor like their attorney who often knows little if anything about cell site leasing to take a deal that will not be in the best interest of the landlord in the long run.

For example, a recent client contacted CSA after signing a lease extension that included a right of refusal (ROFR) that required the Landlord to contact the TowerCo before they agreed to sell their entire property to any 3rd party.

Soon after, the Landlord received an offer from a buyer to purchase his entire property at a premium, so without hesitation, the client accepted the offer and went immediately into escrow.

The Landlord thought the ROFR only applied to offers to buy the cell tower lease but later found out the hard way, the ROFR covered his entire property, so even a property offer would have to be first reviewed by the TowerCo then matched or refused by the TowerCo before the Landlord could sell to a 3rd party. 

During the due diligence process, the buyer contacted the Landlord about the ROFR and the Landlord had to admit he did not contact the TowerCo for consent before accepting the buyer's offer.

As a result, the Landlord not only lost the sale of his property but the TowerCo threatened to sue the Landlord if he did not pay restitution and give the TowerCo a significant rent reduction. If this sounds like extortion, it is about as close as you can get and you want to avoid this happening to you at all cost.  

So, what can I do to protect my income and my property when MLAs occur?

Here are five things CSA recommends you do if you are affected by a MLA:

1. Review Your Lease - Make sure you understand your current landlord rights as they relate to assignability, permitting, construction, indemnification and property taxes.

2. Follow Assignment Requirements - Make sure your tenant follows the lease assignment requirements. If lease assignment requires your written consent, DO NOT GIVE ANY WRITTEN CONSENT UNTIL YOU KNOW YOUR SITES TRUE VALUE AND YOU RECEIVE THAT VALUE AS A CONDITION FOR YOUR CONSENT.

3. Confirm Sublease Requirements - Remember if Verizon assigns your lease to Vertical Bridge then stays on the tower that makes Verizon a sublease and you could be due additional sublease rent. If so, demand additional rent for the additional sublease.

4. Update Insurance - If Vertical Bridge is now your tenant then make sure they provide a certificate of insurance naming you as additionally insured. 

5. DO NOT SIGN OR AGREE TO ANYTHING WITHOUT A CELL SITE PROFESSIONAL - Signing a simple authorization letter could cost you thousands of dollars or cause you to lose control of your site or property so beware have all documents reviewed BEFORE you sign.

Additionally, our CSA analysts, each with over 20 years of cell site leasing knowledge have  developed a Cell Site Optimization (CSO) plan designed to help Landlords defend themselves and their property against the perils related to Master Lease Agreements. 

Each CSO plan calls for CSA to help Landlords in Assess, Prioritize then Execute a plan that protects while increasing the value of cell site leases for Landlords like you.

So, if you are interested in reading and hearing more about how you can benefit from a customized Cell Site Optimization plan:

CALL NOW! 213-986-7620 and request our FREE Cell Site Optimization guide 

Final thought

Master Lease Agreements, rent reductions and ROFR’s are just a few of the things Landlords need to know about wireless leasing and for that reason we would like to remind you, at CSA,

Our Knowledge Is Your POWER!

Don’t Agree To Sign Anything Without A CSA Professional On Your Side

Best Regards,

Clarence McDowell

Managing Partner, Cell Site Appraiser

PS. We’re here to help! Call 24/7 213-986-7620 or email us at info@cellsiteappraiser.com

Property owners will tell you, getting a new 5G cell tower lease is like winning the lottery, but a windfall can quickly turn into a nightmare if landlords fail to include the right language covering key lease terms that will cause problems in the future if not addressed today.

So, before you start celebrating, take a deep breath and think about what's going on at your site and how it will affect other tenants (if any) who may be sharing your property. With so much competition out there, landlords may feel they have no choice but to offer up their properties at rates and terms they would never offer other tenants. So if you're not careful, you could end up getting yourself into a situation where you have the tail wagging the dog when comes to what you can or can not do on your property after signing a cell tower lease.

Here are some things you need to consider before signing off on any new tower lease:

• Right to Relocate - Most cell tower leases require the landlord to give wireless tenants 24/7 access to their equipment while tenants are rarely obligated to move their equipment to allow future development. Why is this a problem? Unlike traditional 2,5, or 10 year commercial leases, wireless leases offered by AT&T, Verizon, or T-Mobile can be as long as 30 years and have little if any way for landlords to cancel their wireless lease. So, if you don’t secure the right to relocate the cell tower, you could be limited or denied the ability to develop your property over the next 30 years. Moreover, this omission could impact your ability to sell your property to a buyer who intends to develop your property after purchase.

• Maintenance and Upgrades - Wireless tenants like American Tower or Crown Castle periodically need to repair, improve or upgrade their tower equipment. Depending on the project this may require heavy lifts, cranes, supplies or materials to be placed outside the tenants leased area for extend periods of time with construction work occurring on the tenants schedule with little or no concern for other tenants. Landlords who fail to require wireless tenants to have prior written approval for tenant improvements that require use of property outside the tenants leased area face the risk of having wireless tenant equipment blocking or occupying key areas of the property causing business disruptions for the landlord and or other tenants.

• Assignability - Landlords often miss terms that allow the wireless tenant to assign their lease to an unaffiliated third party without prior consent or landlord approval. This could be a costly mistake for landlords who want to increase revenue by adding new tenants because by allowing the tenant to transfer the tenant can sell their leasehold interest to another and profit from another party who may have leased from the landlord directly. In some cases, wireless tenants like Verizon have sold their interest via MLA’s (Master Lease Agreements) to tower companies like SBA or Crown Castle then they lease back on same tower at a lower rent without having to pay additional rent to the landlord and this is all due to poor or no lease language that prevents this from happening in the first place.

Key Takeaway - It’s easy to see how unknowing landlords can lose tremendous value if they don’t understand how a tower lease can impact their property both now and the future.

CSA recommends a site evaluation for any landlord who is interested in adding or is currently negotiating lease terms with a wireless tenant and no instance should a landlord negotiate without a cell tower professional on their side who knows how best to protect your properties value while maximizing your cell tower income. Contact CSA today if you would like to know more about how we can help.