Maximizing Tower Assets

April 1, 2010

As advertising revenues decrease, many broadcast owners are actively looking for other sources of income. Over the last 10 years there has been an increasing trend to lease available tower space on FM and AM towers (including rooftop assets). The growing cellular telephone industry has created the bulk of leasing opportunities, while paging and SMR services are now out of business. The bottom line is that there will always be opportunities to rent tower space. Here are some insider tips to keep in mind.

tower space

Build it and they will come ... NOT! I've been in the businesses for more than 20 years and one thing I will assure you: Having an existing tower or building a new tower doesn't ensure you will ever have a lease opportunity. Some of you are thinking, Well if my tower site is next to a busy road or population center, carriers will flock to it. Wrong. Wireless system operators, particularly wireless carriers, have very specific location criteria based on a number of factors: What is in the coverage footprint of the site, what sites are adjacent to it, how far your site is from their adjacent sites, amount of voice and data traffic that the site is predicted to handle (based on population density in the area), future growth in the area, amount of dropped calls in the area and the list goes on, but you get the idea.

Tower site management companies will not always bring you customers. Almost everyone with a tower or a rooftop that appears to be a potential lease opportunity has been approached by companies claiming they can lease and manage these assets for a fee. One of the claims is that they have relationships and aggressively market these to the carriers and other radio system operators. In many cases this may be true, but the reality is that the carrier will make contact with a tower owner directly through its site acquisition contractor, not the management company. Unless the management company brings other value to the deal, you are probably throwing away a large portion of the potential lease revenues.

Ground space is as important as tower space. It really doesn't matter how much additional structural capacity the tower/rooftop can handle if there isn't enough room to place the ground equipment. Wireless operators can mount equipment in a number of configurations; typically there should be room to place a concrete pad or shelter. The equipment can weigh a lot. If the site is in a flood plain, the tenant may elevate the shelter or build a steel platform. Space inside an existing building will also work if it is a proper size, can support the weight and grants 24/7 access. Equipment can also be mounted on rooftops if the building can structurally support the weight. Typically rooftop equipment installations require the construction of a steel platform attached directly to the building steel, necessitating penetrations through the roofing material. Keep in mind that most wireless carriers require 200 - 400 square feet of space to mount equipment.

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Get rid of unused equipment on the tower or rooftop. Curb appeal creates a good first impression. Like home buyers, most site acquisition contractors find potential collocation candidates by driving around a specific area that has been identified by the wireless operator as a place it needs to have a site; this is called a search ring, usually a mile in diameter or less. Towers and rooftops that have excessive equipment may appear to have little opportunity for another tenant, possibly causing the site acquisition contractor to look for easier candidates. While you are clearing unused equipment off the tower have the tower company provide an updated map of the tower including antenna/transmission line types, elevation, mounting (which leg or face), any structural modifications, etc. Follow this with getting a full structural analysis (under the current structural code) performed by a qualified structural engineer; this will give you a baseline of what structural capacity is available. This should also be provided to anyone that inquires about leasing space. Tip: Even if your tower is at or near capacity, it is not unusual for wireless carriers to perform structural upgrades at their cost. I've had carriers spend more than $100,000 upgrading a tower that would cost $80,000 to replace. I've also had carriers extend existing or completely replace towers, and the owner keeps the new tower.

Understand the zoning requirements where the tower/rooftop is located. Most municipalities have ordinances specifically for communications towers and rooftop sites. In general, these ordinances were enacted only in the past 10 years. Any towers or rooftop installations built prior to those ordinances are grandfathered until a material change is made to the site. It is important to understand specifically how the ordinance affects the ability of a potential tenant to locate on this asset. Consider that most broadcast transmitter sites were built many years ago on the cheap real estate outside of town. Now these same sites are surrounded by residential developments, commercial buildings and highways. Even adding new antennas to an old tower may invoke the need to get a variance or some other approval. Getting a variance typically requires at least a hearing before the appointed board and in most cases, that notifications are sent to all adjacent property owners; basically the same people who aren't happy there is a tower there in the first place. Tip: If a carrier wants to lease your site, it will assume all the expenses associated with the zoning/permitting process. A representative from the tower/rooftop ownership may also need to attend since application can only be made by the legal owner of the property. Keep in mind that some of these hearings draw a good amount of crowds and press coverage that may not reflect well on the owner.

Watch your current tenants. Many stations already have wireless tenants leasing space on assets. If you are responsible for managing these sites it is important that you have copies of the lease documents available. You should also be aware of any new changes -- renewal, modifications or amendments to the lease. Understand the lease terms for the amount of antennas and transmission lines, size of antennas and transmission lines, ground equipment space and electrical requirements. Annually verify this information against what is actually on site. Tip: As wireless technology grows the carriers look for ways to add equipment while staying within the lease terms. For example, some leases do not specify an amount of transmission lines, just antennas. There are now panel antennas that use up to eight lines per panel, not very common but possible.

Beware of lease renegotiation letters. Most carriers are actively trying to renegotiate existing leases. They have contracted with one of a few companies that have been formed for the specific business of renegotiating wireless leases. The renegotiations come in the form of reduced rent, longer terms or one-time buyout (payment) in return of no additional rent over an extended period. These companies get paid on a percentage of the savings, similar to collection companies. Some threaten that the carrier is going to leave the site and you will get no more revenue. If you have received such a letter, find a consultant who has experience with wireless carriers before trying to negotiate; such consultants can provide a higher level of guidance in dealing with these companies and the carriers to keep the revenue flowing for a long time.

McNamara is president of Applied Wireless, Cape Coral, FL.

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