TowerPoint Capital: Rising Inflation Poses Risk to Tower Lease Value

Jesse Wellner is a Principal and Managing Director at TowerPoint Capital, which is a leading institutional investor in cell site ground leases nationwide. There are a few factors that some believe may cause inflation for cell tower ground leases such as, the Federal Reserve’s sustained policy of providing monetary stimulus coupled with the slow economic growth we’ve been seeing.  “Elevated inflation levels,” Wellner says, “would greatly diminish the value of long term cellular ground leases. Generally, cell tower leases provide for rent escalations designed to keep pace with normal inflation. However, a hyper inflationary environment quickly outstrips these increases, particularly in leases with annual escalations below 4% or 5%. This dynamic results in a significantly diminished present day value of the lease as the future rental stream lacks the necessary growth over time.” It’s not certain that this trend of depreciation will continue but Wellner believes that, “”Right now, interest rates are at record lows and core inflation has been relatively nominal. This means cell tower ground leases are essentially at or in very close proximity to peak value. The good news for cell site owners is that you could still monetize your lease today and be confident your market timing is pretty near perfect. Those who choose to hold out for more money risk winding up on the wrong side of inflation with a significantly less valuable lease and increasingly stagnant monthly payments. As it relates to cell site leases, property owners have a choice not to fall victim to inflation and find a more defensive position for their capital.”

Kids, Schools, Towers, and Killers

As a founding partner of Inside Towers, a tower owner, and most importantly a parent of an only child, I feel compelled to state my position on the matter of cell towers located very near schools.  I know we’ve covered this issue in Inside Towers in several stories since our launch.  Here is my opinion:  I would like a multi-company carrier tower located on or very near every school my daughter attends.  Here’s why:  In the first seconds and minutes when the unthinkable events like Columbine or Sandy Hook commence, horrified students, teachers and administrators certainly seek shelter inside the deepest, most interior portions of the structures, often shielding themselves behind metal or concrete surfaces.  I’m guessing there’s not a desk phone handy.  We know that proximity to a cell service site (tower for now) is best way to assure building penetration.  I’m supportive of whatever means assures “three bars” deep inside the schools where kids and adults are trying to stay out of harm’s way and alive.  While there’s much debate about RF exposure and children, I’m sure there’s a higher RF level from the phone next to my daughter’s head than from a multi-carrier tower nearby.  The only way to stop a bad guy with a gun in a school is with an ability to get help fast.  A dropped call may be another dropped child.

–Eddie Esserman

T-Mobile Wants to “Decimate” Verizon’s Tower Map Campaign

We’ve all seen the advertisements where Verizon shows the map of their coverage compared to AT&T, Sprint, and T-Mobile. The map is supposed to illustrate the number of towers Verizon has equipment on, proving they have the best, most-reliable coverage in the nation. This map makes T-Mobile angry. “I want to decimate that ad campaign from Verizon,” T-Mobile Chief Technology Officer Neville Ray said to CNET in an interview Thursday. The company is taking legal action against Verizon, claiming that the campaign doesn’t accurately reflect T-Mobile’s network. Verizon’s coverage map only shows LTE capabilities of the company. Since Verizon and AT&T are almost complete with their rollouts, they have the advantage over Sprint and T-Mobile. “We prefer to compete in the marketplace, not in the courts. Our customers know what a true nationwide 4G LTE network experience feels like, map or not,” said a Verizon representative. But Ray argues that the map suggests that those few T-Mobile dots on the map represent all of the carrier’s coverage, and excludes its 2G Edge network, as well as its HSPA+ coverage, which T-Mobile considers 4G. (Source: CNET) T-Mobile has a goal to cover 250 million people by the end of the year, but Ray said he wants to push it to 280 million sometime next year.

Eastern Companies Look To United States for Tips on RAN Sharing

Chinese tower companies are looking to American Tower and Crown Castle International to learn tips of how radio access network (RAN) sharing construction can be utilized in order to save money for telecom and radio operators. The China Times reported, “RAN sharing significantly reduces infrastructure costs for telecom operators by mutually sharing those resources — including cell sites and towers, base station equipment, and transmission networks. This could theoretically eliminate duplicate structures, a salivating prospect considering the daunting up-front investments needed to build new 4G networks.” As 4G technology expands around the world, international companies are looking at the United States’ infrastructure. American Tower and Crown Castle use RAN sharing, and they do it well. Both companies have become very successful buying or constructing towers and leasing space to multiple users. “In Taiwan, all towers are already shared across cell phone carriers, making the US “rental model” not an immediate option. But it may become the rising standard now that more professionals will be needed to maintain 4G systems. Taiwan’s National Communications Commission, however, will encourage cell phone carriers to continue sharing remaining towers because of concern over public complaint. Available land is an ever-present issue in the construction of new towers and facilities on Taiwan’s cramped and mountainous terrain,” the China Times reports.

More Toys, Tablets, and Phones Results in More Towers and Small Cells

Every time Apple or Microsoft introduces a brand new, must-have product the demand for wireless capabilities skyrockets. At NATE UNITE 2014 in San Diego, Michael Fitch, Principal of Fitch Strategies and former President and CEO of PCIA, shared that newer smart phones use about 600x the amount of data than feature phones, and tablets use about 800x more data. This is driving the demand for wireless infrastructure, but it’s also dictating what type of infrastructure we need. Rural America is a huge expanse of geography and there, towers will very much be the preferred option instead of crowded, metropolitan areas. However, this wasn’t always the case. “A few years ago it was macro site towers. In a few exceptional circumstances a DAS installation was justified,” Fitch explains. “At that time the industry was not as enthusiastic about DAS, it was expensive, more complicated, unlike the tower side DAS hadn’t sorted itself out. If there was going to be host sites or the mobile carriers were going to build and install their own DAS sites. There were a number of issues of DAS in the front end, but the situation flipped when people realized the benefits of DAS compared to macro cell sites. So then there was a pressure to do DAS instead of macro sites for a while. All of that has leveled out to a large degree. Local jurisdictions understand that they each have their trade offs and they each have their issues—as does most infra in one way or another.” Continue reading here. 

Tower Upkeep Plays a Big Role When Using Data in Court Cases

When prosecutors attempt to use cell tower data in criminal cases, there are a lot of important factors regarding the tower that matter. For a long time, the information collected by towers was referred to as “junk science” by law enforcement agencies that saw the unreliability of cell phone tracking in the field. However, with technological advancements this data has been used to convict criminals and secure prison time. Currently, tower data is being used in the case against two men who are charged of killing a California Pinyon Pines family in 2006. The reliability of this technology is being questioned and a lot of what determines reliability deals directly with the towers. Michael Cherry of Virginia-based consulting firm Cherry Biometics Inc. spoke to The Desert Sun explaining, “Factors such as tower maintenance, the use of temporary towers and the load of traffic on the cell network can bounce calls around to different towers. As long as multiple towers are within range, a call doesn’t have to go to the closest tower or the tower with the strongest signal.” In order for police and attorneys to use this information to prosecute criminals, it’s important to maintain the equipment on your towers.

What Does $80 Million Get You?

When you see the headline “Peppertree Capital Commits $80 Million in Equity and Debt Financing to Blue Sky Towers,” you may wonder why they are spending so much money on towers. “We’re at a very unique time in the industry,” said CEO Tom Remillard, formerly principal of Norfolk-based Wireless Realty Advisors, which is being merged into the new company. “When they initially designed cell networks, they thought people were going to talk on phones.” (Source: Boston Business Journal) Now these cell phones are used more for messaging, downloading data, surfing the web, or playing with apps. This is why towers have become such an important part of our wireless infrastructure needs. Remillard said the company will focus on beefing up cell and data coverage in the “top 20 cities,” first building in cities in the Northeast corridor over the next five years. He said his goal will be to build 700 to 800 cell towers and smaller “micro cells,” essentially smaller devices that are attached to the roof of a building or the side of a building. He said he was also hire 20 to 30 employees by 2017. (Source: Boston Business Journal)