Cell Site Lease - Colocation Rents
You want the most out of your cell tower lease? Of course, you do. The problem is no cell carrier is going to tell you that you might be able to share in this additional income. You could lose out on 10s of thousands of dollars of value. Let's get into the sublease clause and why you want some of the action.
Carrier's Right to Sublease
Virtually all cell site leases are going to have the right for the cell carrier or tower company to sublease space on their site. These sublease rents are probably more than your carrier is paying you, maybe a great deal more.
Example of 'Colocation Rent'
You may be able to negotiate for a portion of additional rents. These sub-lease rents are referred to as colocation rents or 'colos.'
Let's get into an example. Let's say AT&T has approached you and has offered you $1,500 a month for a 100' by 100' site on your property. AT&T will contact other cell phone carriers to provide them to sublet a portion of the site for $2,000. They may be successful in enticing 2, 3, or more additional cell phone carriers to sublet space. When you negotiate your lease, you want to make sure to try and get a percentage of these colocation rents. If you do, congratulations, you hit the jackpot and probably added 30 to 50% to the value of your lease. If not, you may have leverage to get something else or turn something down that doesn't enhance your contract. (Take time to read Important Lease Terms)
Lease Buyout Firms
I want to make sure you differentiate this provision when you are negotiating your original lease and when/if you are selling your contract. Once your lease is signed, you or whoever may purchase your contract are stuck with the original lease terms for the balance of the original lease. Colocation rents need to be discussed, before, not after the lease is in effect.
Buyout Firms: Co-location Rents
There are some classes of 'buyout firms' tell you that you will get some co-location rents when they add a carrier. The fact is they don't have any more right to add carriers than you did until that original lease term is up or after a renegotiation when there is a carrier reason for one. More rent, more value, as much as 200 times the monthly rent increase. The tricky part is that not all buyers even try to add carriers. Some use this omission to get you to give them a better price. It is essential to know the players.
Essential reading - other cellular lease clauses you want, and one you don't ever want.