Site Improvements

by Mary
(AZ)

Hi, I'm doing a report on the best practices in the industry for negotiating rental rates. I noticed that rental rates typically increase annually based on a fixed rate or CPI adjustment. I was wondering how rental increases are accounted for (or if they even are) when significant improvements to the facility are made, i.e. switching to a 4G network and thus expanding profitability for the cell company.

I would appreciate any input you may have.

Thanks

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Oct 13, 2010
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Cell site rental increases and 4G
by: Sean - Airwaves

Mary... Unless a cellular carrier is taking more space than they originally leased for the improvement there would be no increase in rental price. Think of a wireless lease as you would a retail rental. Say you are a landlord and you rent space to MacDonald's, should you be compensated more for that space if MacDonald's starts to sell pizzas or a new line of chicken sandwiches within the footprint they originally leased? Would you be willing to craft a deal at the based on profitability of the tenant... no because that particular store may not make a profit for the first three or four years and that would break your back. Rental increases are intended to keep any cell site lease in or around the rental numbers for fair market value as the cell tower lease matures.

Now if the MacDonald's wants to expand into another rental space... yes, like any new or expanding tenant, a lease will be amended to include a rental fee and increases for the new space.

Also you can really assume that switching to a 4G network will expand profitability for the cell company. Sprint is the first Carrier to offer 4G, yet due to past debt, customer base loss and competitive price practices they are the least profitable of the major cellular carriers. Unless carriers place a pricing penalty on those who are the heaviest data users and they stop bundling unlimited data plans, they may never see a real return on their investment in 4G technology. I hope this helps you.

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