Gus Dahleh is one of the most recognized commercial real estate investors from Chicago, Illinois who has been known to leverage cell tower lease contracts to reduce the principal cost basis on his commercial properties.
Understanding Commercial Cell Tower Lease Contracts
As the demand for cell towers is skyrocketing, telecom companies are scrambling to add more towers in rural blind spots and improve cell tower coverage in the race for 5G. Telecom service providers such as AT&T and Verizon are aggressively searching for land and property owners willing to lease their property and engage in cellular tower lease contracts.
Investors are often told that leasing your roof to a cell tower is easy money, but the jargon used in the lease contract can easily overwhelm anyone and it best to consult with a professional before signing your first long-term contract for your property.
Gus Dahleh has used these types of commercial leases to reduce his cost basis on commercial properties and in some cases, Gus is able to recoup his principal investment into the property entirely by selling the lease long term contract to an Real Estate Investment Trust for a large sum of cash, but we’ll get more into that later.
First, we’ll start with the basics.
What is a cell site?
A cell site is the piece of land or property where the cell tower is set up. It could be situated on open land or a roof of a building. Gus Dahleh will typically lease the roof of a commercial property that qualifies for building a cell site for fifty to ninety-nine years, and this is where things start to get interesting.
In an example case, Gus Dahleh leased a 13 story commercial roof in Chicago which he owned in 2010 to a telecommunications company for ninety-nine years, for a total sum of $1,000,000 to be paid in the amount of $1,400 per month or $16,800 annually. Instead of waiting nearly a lifetime to collect the full one million dollars, Dahleh leveraged his relationships with some of the worlds largest REIT and knowledge of their investment strategies to offer a lucrative sale of his end of the commercial cellular tower lease contract. For a lump sum of $300,000, which happened to be Dahleh’s down payment on the commercial property, the REIT purchased the contract, or more simply, Dahleh’s right to receive the total $1,000,000 over ninety-nine years. In combination with this strategy and others in Gus Dahleh’s wheelhouse, this commercial property ended up costing him $0 to own, generate income from, and sell for a substantial return years later down the line.
What to do if you have been approached by a telecom service provider regarding a cell tower lease contract?
Ideally, companies would only reach out to a landowner after completing a thorough review of the local market before making an offer. Negotiating rates can become a long and exhausting process in some cases.
Gus Dahleh suggests that you hire a legal and telecommunications expert to guide you in the right direction. Don’t make a hasty decision if you have been approached by a telecom service provider regarding a new cell tower lease contract or renewing an existing one. If you sign a lease without understanding all the clauses, it could be detrimental in the long run. In addition, a cell tower lease contract is different from a usual commercial and residential lease agreement. So, before you pull the trigger and sign a lease, you need to understand exactly what the lease entails.
How Do Cell Tower Lease Agreements Work?
A cell tower lease is an agreement signed between a telecom service provider company and the property owners, allowing telecom companies to set up cell towers on a designated piece of the property in exchange for rent.
There are 338,000 cell towers in the United States that cost $175,000+ to build. The yearly cell phone tower lease rate varies from $45,000 to only $10,000 per year. The rent of a cell phone tower depends on various factors, such as location, population density, etc.
A cell tower lease usually has a twenty to thirty-year duration, with the possibility to go as far as one hundred years. Gus Dahleh recommends you sign the lease only after consulting an experienced expert in the field, to ensure you are positioning yourself to come out on top in any event, even if you decide to sell the property later on.
Gus Dahleh also suggests that you need to ensure that your cell tower lease will never convert into an easement. In case of an easement, the landowners could lose full access to the property. You should also check that only landowners have the ability to dictate the terms of access to the site.
Lastly, only the landowners should have the right to modify the property. Being a landowner means you have more power in the agreement. Remember, the telecom companies reached out to YOU to lease YOUR land, so you have more power than you think.
Are you ready to sign a commercial cell tower lease contract? After the COVID pandemic, the demand for cell towers has increased substantially. Gur Dahleh believes that now is the right time if you are thinking about signing a commercial cell tower lease.
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