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Lease Strategies

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This LARG contains the following items:

The Second Wave of Wireless Hits the Landlord’s Beach, and the Lease Clause Critique: Excerpts From a Pro-Tenant Telecommunications Site Lease.

Number of Single Spaced Pages: 12




Making a Smart Deal With the Wireless Service Company As A Commercial Landlord


This LARG looks at the next wave of wireless telecommunications services, and how the commercial landlord might cash in on it. The first article discusses why so many new antenna sites will be needed, the shape wireless deals might take, and what the landlord should be thinking about during negotiations. The Lease Clause Critique features extensive excerpts from a telecommunications site lease that are largely pro-tenant in flavor, though some provisions have been modified with the landlord’s interests in mind.

The Second Wave of Wireless Hits the Landlord’s Beach

During the past fifteen years or so, the cellular phone folks have been busy putting up about 22,000 radio transmission towers so that every American who wants what used to be called a “batphone” can have one. At this point, cell phones are pretty much everywhere, thanks to those ubiquitous antennas perched on 125 foot high towers, hidden in church steeples, and mounted on the top of commercial buildings.

Just how has this proliferation of wireless services benefited the landlords of America? It has given owners of tall buildings the chance to make some extra cash by executing a cell site lease for rooftop space. In a sense, it was like manna from Heaven. Who else is going to sign a long term lease for space on the roof, and actually pay decent rent for it?

If landlords liked the extra cash that cellular deals brought, they are going to love the deals produced by Personal Communication Service, the next wireless wave. PCS is already available which gives consumers light-weight portable phones and pagers at increasingly lower prices. Due to technological advances, it is just a matter of time before wireless networking and wireless Internet services are widespread, and PCS competes directly with the local bell company by offering low cost phone service.

PCS matters to commercial landlords because it will require the installation of 100,000 new antenna sites, five times as many as have been erected to date for cell service. PCS uses low powered transmitters. As more wireless customers are added to a particular antenna site, its effective range is reduced, stimulating the demand for still more antenna sites. Also, because PCS operates on a higher frequency than cellular, more PCS antennas are needed to cover the same service area. This all adds up to more antennas, more rooftop lease deals, and more cash for commercial landlords.

What Do the Deals Look Like?

Wireless service providers usually prefer to use their own site lease forms, and make deals that have some or all of the following components:

  • an initial term at flat rates that commences after the tenant gets required permits and zoning approvals;
  • multiple options to renew, often with rent increased by the CPI, often subject to a maximum;
  • many renewals are “automatic,” i.e., they take effect unless the tenant sends a notice indicating the tenant is not renewing;
  • broad tenant rights to install equipment and construct improvements in the premises without the landlord’s approval;
  • language indicating installed equipment remains the personal property of the tenant;
  • requirements for access (including elevators) to the premises 24 hours a day, 7 days a week; and
  • broad tenant termination rights for permit difficulties, interference with the tenant’s signals, and determinations by the tenant that the site is no longer “appropriate” for technical or economic reasons.

Addendum to Office Lease or Stand Alone Form?

Of course, the wireless tenant prefers to use its own site lease form for the deal, and is usually not anxious to sign a regular office lease for the space modified by a telecommunications addendum, even though some office space adjacent to the roof space may be part of the premises. This makes a certain amount of sense, because space taken by wireless rooftop tenants is not exactly suitable for other garden variety office tenants. The rent paid by the wireless tenant might not include contributions for operating costs, or for real estate taxes even though the premises include a small amount of square footage inside the building.

That being said, signing a deal without the standard features contained in the landlord’s office lease might justifiably make the landlord nervous. If the tenant will not be executing a regular office lease and proposes to sign only its standard form facilities or site lease agreement, the landlord has to decide how fundamental items normally covered in the lease (e.g., default, assignment, insurance, subrogation, taxes, casualty, indemnification, repairs, restoration, etc.) will be handled to its satisfaction.


End of Excerpt