Gus Dahleh is one of the most reputable real estate investors in the Chicago, Illinois area, and his take on cell tower lease contracts is that telecommunication companies offer a tremendous opportunity for a savvy investor.
Cell tower lease contracts have become very popular lately. Signing a commercial cell tower
lease is a great way to generate extra cash flow. Due to the COVID pandemic, the demand for cell towers has increased. As a result, telecom companies are looking for spaces to set up cell towers in rural areas.
If you are planning to lease your commercial roof to a telecommunications company, then you need to understand the factors used to determine the rate of your lease and how you can leverage this to reduce your cost basis on the property.
Typically, a cell tower lease contract is termed for twenty years, fifty years, or one hundred years, meaning the property owner will continue to receive fixed payments on a monthly basis regardless of market fluctuations for the duration of the lease contract.
Larger cell tower companies, such as Verizon, can pay up to $10,000 per month for a cell tower site depending on the location of the property and the amount of roof space rented. If you have a commercial property with an open roof space, you can transform it into a money machine.
When a communication company approaches a property owner, they use pre-evaluated data to make an offer, such as neighbors getting paid for their cell tower lease. So, property owners don’t typically set the price, but they can negotiate it.
One of the ways Gus Dahleh leverages cellular tower lease contracts is by reselling the lease contracts to publicly traded REITs, such as SBA Communications and American Tower for a fraction of the contract value.
Real estate investment trusts, just like any real estate investor, jump at the opportunity to buy an asset for a fraction of what it is worth. One of the most important principles of long term investing and wealth creation is understanding that time works in your favor, not against it.
To set an example, a cell tower lease term of 99 years with a lease payment of $1,400 per month would add up to approximately $1,000,000 in income over time to the property owner. As the property owner, you have two options:
- Collect $1,000,000 over 99 years
- Sell the $1,000,000 contract to an interested party such as an REIT for 30 cents on the dollar, for a lump sum of $300,000
A cash injection like this can greatly reduce the cost basis on a commercial property and allows for more liquidity for the property owner.
Gus Dahleh suggests that property owners should hire a professional to assist them in determining the value of their commercial roof space for a cell tower lease. Once you know how much the telecom companies will be willing to pay you for your roof, you will have a strong base for your price negotiation. However, before you negotiate the cost of your cell tower lease, it is vital to understand how your rental rates are determined.
According to Gus Dahleh, these are some of the primary factors that affect the cost of your commercial cell tower lease:
Just like all the other real estate markets, the location of your property is a major factor in determining the price of your lease. Suppose your roof is located in a moderately populated area that has similar commercial properties with available roof space. In that case, the communications company can easily go to another property owner and negotiate a fair market price with them. But, if your land is located beside a major highway and there is no other cell tower nearby, you will get a better value of your space. If the demand for the network is high around your property, the price of your lease will increase. Additionally, if your property is located at a higher altitude, you will be able to get a slightly higher rate as the cell tower would be able to serve a wider area of users.
Proximity to adjacent towers
As per local zoning jurisdictions, telecom companies must use existing towers first before setting up a new one. If there is a cell tower within one mile, telecom companies won’t build another one nearby. If your property is located in an area where there are no towers, there is a chance that you will get a lease and reap the benefits.
Density of population
Gus Dahleh believes that the value of your cell site depends on the demand of the network in your area. If your neighborhood is densely populated, but there is no cell tower, you can turn your roof into a valuable asset.
Zoning of your property
Gus Dahleh suggests that the telecom companies are more likely to offer a high value for your land if it’s located in an industrial zone surrounded by residential properties. On the contrary, if the land is located in the residential zone but is surrounded by industrial properties, it would be difficult to get a cell tower lease.
Cell tower tenant
The value of your site is also dependent on the tower company as different companies have different budgets and target locations.
If you are planning to sign a commercial cell tower lease, try to get long leases that offer annual increases. Commercial cell tower lease contracts are a lucrative way to earn bigger payoffs. If you still have doubts about commercial cell tower contracts, you can get guidance from real estate investor Gus Dahleh.
About Gus Dahleh
Gus Dahleh is a real estate entrepreneur that specializes in distressed assets. Dahleh has accumulated more than $50 million in commercial real estate assets since 2010, and has long-term lease agreements with JP Morgan Chase Bank, AT&T, Walmart, Sam’s Club, and Cubesmart. Gus Dahleh has also established a niche for himself in the cell antenna industry by selling leasing revenue to publicly traded REITS like American Tower and SBA Communications Corp. Gus Dahleh began his financial markets career at the Chicago Board of Options Exchange as an equity options trader. Based on seasonal and technical patterns, Gus Dahleh has developed proven option strategies for the US 30 Year Treasury Bond and Gold Futures. Gus Dahleh has a track record of advising clients on how to get the most out of commercial real estate and financial market assets. For more information, follow him on social media or visit his blog at GusDahlehBlog.com