Cell tower site acquisition and ownership can be a complicated and risky endeavor if you don’t fully understand the complex rules and regulations involved. But, with increasing demand for capacity due to the explosion of devices in the market, it can also deliver hefty profits for those who know how to properly allocate their resources and build strong relationships with carriers.
“The operators will say this is an area where I need to improve my service and they will start asking for contractors and site acquisition professionals to start looking for solutions in that particular area,” said Brian Darr, president and CEO of Mosaik Solutions, a company that researches and maps vertical assets.
Knowing and understanding the needs of carriers such as Verizon Wireless, AT&T Mobility, T-Mobile US and Sprint are key to making a profit.
“There are a whole list of criteria that are generally defined by the operators themselves,” Darr added. “The operators know where they’ve either got a hole in their network or they want to expand their network or whether they’re having capacity issues.”
Alex Gellman, co-founder and CEO of Vertical Bridge Holdings, a vertical asset ownership and leasing company, agrees it begins with the carriers. Gellman said carriers are starting to lean away from owning towers themselves; instead choosing to lease towers, rooftops and antennas to meet coverage needs. Gellman said it is far more cost effective than investing capital to build a cell site themselves.
“The advantage for a carrier is if they own it, they’ve stranded capital in that site and that’s capital they can’t use to add more radios and capital they can’t use to get more customers,” Gellman said. “So I think as carriers have evolved their thinking, they have recognized that owning the site isn’t very strategic and they had varying degrees of success in terms of leasing it out. … The site would be more valuable to the tower companies.”
This creates an opportunity for vertical asset owners. Gellman says there are four main characteristics he looks for in a possible tower site. Location is first and foremost on his mind. The tower must be in a place where there is not much coverage so the value of the site goes up for the carriers.
Tower Source is a helpful resource for finding out where towers are, and more importantly for carriers, where they aren’t. In September 2014, Mosaik Solution acquired the antenna and tower site directory to help users find where towers are located, available rooftops for positioning equipment, coverage, fiber routes, types of towers, height and who owns them.
The second characteristic Gellman said to look for is whether the structure is physically sound and has the proper capacity. Third, is what Gellman calls “good paper,” which means the site has collateral value, a clean title and no environmental issues. Finally, Gellman looks at the creditworthiness of the tenant.
Maintenance responsibility is another issue that must be taken into consideration, Gellman said the responsibly often falls on both the tower owner and the tenant.
“What we maintain is … steel and concrete,” he said of Vertical Bridge’s end of the deal. “The electronics are not maintained by us, they’re maintained by the carriers so our business is really fairly simple. We have to maintain access to the site, the physical site itself, the tower, the foundation. But the electronics, the antennas, the lines, those are maintained by the tenants.”
Darr says zoning laws are also a very important issue to consider. “You might have an area where you’ve got two of three good spots where you could locate a tower, but knowing if you’re on this side of the line, the zoning authority is difficult to work with, [but] on the other side of the line, the zoning authority is a little more permissive and that can make a big difference in how long it takes, and frankly the success of ever actually being able to build a new site,” Darr explained.
Gellman’s final advice to potential owners who are looking to lease their site to a carrier is to build a solid relationship with the carriers and have your paperwork in order.
“Have your diligence together, have the documents … as far as environmental and title,” he said. “A lot of these carriers will want to see that to satisfy themselves because they’re planning to be at these sites for decades so they want to make sure they can stay there.”
