LEASE AGREEMENT REFERENCE GUIDE 1570: DOING TELECOMMUNICATIONS DEALS $49.95
DOING TELECOMMUNICATIONS DEALS AS A COMMERCIAL LANDLORD
This LARG takes another look at the impact of telecommunications on commercial property. Competition in the wireless PCS market and the continuing explosion of fiber optic cable installation offer the landlords of America a chance for some extra cash. The first article talks briefly about the effect of these two factors on commercial real estate. The Lease Clause Critique features extended excerpts from three separate telecommunications deals—one for a private network for a single large tenant, and two from telecommunications companies expanding their reach.
Turning the Roof and Basement Into Cash Cows
It used to be that a commercial landlord could quietly go about its business and worry only about real estate. The Telecommunications Act of 1996 changed all that by transforming tall buildings into ideal sites for the gear to provide wireless communications. Experts think 100,000 new PCS antenna sites will be needed, and the bulk of those are probably going to wind up on tall buildings. And that estimate may be conservative.
The Wall Street Journal reported in 1998 that 23 out of the 25 largest cities in the country had at least five different competitors slugging it out over the PCS market. That means lots of antenna deals for lots of tall buildings, and extra cash for landlords. And that only covers PCS wireless deals by the telecommunications companies. It doesn‘t include individual tenants who want their own private roof top microwave gear.
High Fiber Diet
The ‘96 Act also allowed long distance carriers such as AT&T, MCI and their ilk to sell local wired phone service. AT&T, for example, has been drooling over the prospect of providing high speed voice and data services to its existing stable of corporate customers. You know, those Fortune 500 guys with the huge airline reservations centers, massive data networks, customer service centers, and so forth.
Not surprisingly, AT&T announced an $11.3 billion buyout of Teleport Communications Services, which owns thousands of miles of fiber optic cable already in place in 66 major US cities. That deal is supposed to close before the end of 1998, and it will precipitate a scramble to get the cable in the street hooked up to the customers in the buildings.
AT&T isn’t the only one. Consider the fiber optic network unit of the Williams Cos., the pipeline people. It is extending its 1,800 mile line running from Houston to Washington another 250 miles to continue on through to New York. Williams is also building a 4,500 mile fiber optic cable line from Los Angeles to New York, and currently has a functioning 11,000 mile national network.
If you are the landlord of a large complex with big corporate tenants, there is a good chance you’ll be hearing from somebody soon about installing fiber optic gear in your buildings. And why not? It certainly couldn’t hurt to have your very biggest tenants in the complex wedded to fiber optic cable connections adjacent to their premises in your buildings. This could be opportunity knocking, both for landlords and for the telecommunications companies.
The Lease Clause Critique in this LARG looks at numerous sample clauses and comment from three separate deals for telecommunications improvements to commercial buildings. All three contemplate roof top gear (antennas, cables, and dishes), but that’s where the similarity ends. They include:
Deal #1: A series of clauses negotiated by a large corporate tenant for its own private microwave antennas and communications dishes. The tenant is leasing a large portion of the building, and wants the right to put its own private gear on the roof.
Deal #2: An access agreement for a telecommunications company to install fiber optic cable into office buildings. The company also wants the right to install roof top antennas, and needs a modest equipment room for its network gear. However, the company is not a tenant in the building, per se—it just wants to provide telecommunications services to large tenants already present in the building. Note the excerpts contain no express reference to any rent payable by the company for the agreement.
Deal #3: A lease addendum deal for a telecommunications company that is an existing tenant in the complex to allow it to install equipment and roof top gear.