Thoughts on buying Cell Towers...

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A friend of mine owns a cell tower which pays him out $1,500 monthy. All the time these towers are upgraded (5G, etc) and telecom companies lease them out. Also after holding for some amount of time, often times you will be offered cash from the telecom company when a lease expires, etc. Has this community thought about or have experience with Cell Towers?

Is the cell tower on land by it self or on the same land as one of his rental properties? And how'd he come about the deal?

I am in the cell tower game.  There are two ways to play.  

1.  Own the actual tower itself.  This is the most lucurative, but its not really for home gamers or mom & pop investors.  A tower can be built for $100-$200k.  Major carrier lease rates can be $2k-6k per month.  You can have many carriers on your tower but you are limited to the carriers that operate in your market.  Most markets in the US have 4-5 carriers.  Just because they are in your market however does not mean that that specific location works for them.  There are many 1 carrier towers, and quite a few that are 0 carrier towers as well.  Don't ever build a tower without a committed tenant...... You really have to be in the industry with connections to the carriers to put one of these deals together.  

2.  Own the ground/building with a tower/cell site on it and collect the lease revenue.  Carriers and tower companies will approach you if you have a good location.  Unless you are in the business it is almost useless to try to seek out a carrier or tower company to build on your property.  If you are lucky enough to get that call, sign a lease, and the tower is built.... it becomes the easiest mailbox money you will ever earn.  You can also sell your lease via easement to buyers like me for a lump sum payout.

I am currently buying a building with a cell tower that had the lease sold, I am buying it from an investor and I plan to put in my retail location into the building. I am having trouble trying to figure out who owns the rights to the lease. Any insight you can give me?

@Mike Halim - If the owner does not know, the only way to find out would be to pull title and look for the SNDA (Subordinated Non Disturbance Agreement) that was recorded on title.  From there you may be able to track down the company that has it.  There are many different ways these deals are structured so I would try to get a copy of the agreement to see if the revenue ever reverts back to you as the owner. It is a long shot, but worth looking at.  

@Jonathan Farber - The carriers hold all the cards on where the sites are needed and they distribute the locations to strategic partners that build the towers and lease them back.  These build lease back agreements are very favorable to the carriers and the margin is not all that good (unless you luck out and get a 2nd or 3rd carrier).  The other way is by cherry picking locations where they could be needed (areas of high growth, difficult zoning, past attempted locations, etc.).  This is not easy to do and requires industry knowledge, but it is more profitable in general.  

You can also purchase properties that already have cell towers on them that are already income producing.  I'd FOIA some of the local city governments/school districts/etc... to see what real estate they are selling and ask if any of them already have cell towers on them.  That would be a good start to see what opportunities already exist.  

@Account Closed Many apartment owners have cell towers on their properties which allows them to collect additional income. It's similar to how buildings have cable, internet and power contracts. It's a great way to juice income!

You have to be careful with towers. Some will mount them on the roof of a retail building and others have a post with satellite on the corner of the building that runs to the tower.

We had one before my client was looking at. The lease was vague and did not cover what happens if the pole attached to the retail building and satellite damaged the roof (leaks),etc. who would be responsible to fix it. There were other items in the cell tower lease as well such as the way the seller of the retail center was counting the cell tower value and buy backs and assignability rights.

Typically a cell tower revenue, monument sign for tenants revenue, free standing ATM machine, billboard is not counted and weighed the same as the building revenue with tenants themselves. There are any number of things that can happen where that revenue can go away or severely diminish in value.

The ATM could have a monthly withdrawal volume rate that has to be achieved or they could reduce rent or terminate the primary term of lease early. Billboard makes a difference if static kind, flip board, or digital. The first two if an advertiser stops paying it costs money and time to get a new one on there. Digital is more the flick of a button on the computer. Shared tenant monument signs generally they do not have rental increases so the cash flow stream counted in the NOI diminishes year over year in value. Cell towers technology can change where the tower is no longer needed for a carrier, they can find a better spot to move to, cell companies can merge and now no longer need duplicate sites, etc. With cell towers most leases have primary term and then lot's of options for renewal in small 5 to 10 year blocks. Professional cell tower investment companies generally offer 25 to 50 cents on the dollar of the potential future revenue stream. They discount it heavily because they say some of the options do not get renewed or are renegotiated so the full revenue stream with options is not realized.