Executive Summary:

The City of Monrovia, California engaged with TowerPoint to address a series of thoughtful concerns regarding the future of their wireless real estate assets. The City’s management demonstrated a highly sophisticated understanding of the telecommunications industry and the rapid evolution currently taking place in order to accommodate the roll-out of next-generation 5G technology. Closely following public policy and regulatory changes, which are paving the way for 5Gs deployment across public infrastructure at a fraction of today’s rental costs, city managers decided to seek out an appropriate long-term hedge. Against that backdrop, the City spent considerable time conducting further analysis of its existing 4G cell tower leases to arrive at a solution that provided an optimal level of protection from future changes in cell tower technology, while also supplying a substantial one-time infusion of cash.

• Background/Challenges

• 4G-5G Implications: The wireless telecommunications industry is evolving rapidly in order to accommodate the next generations of 5G wireless technology. The architecture for 5G will use “small cell” facilities, cell phone carriers, tower companies, and even cable television companies to facilitate this transition.
• Regulatory Change: Given the emerging regulatory framework governing small cell sites, municipalities are likely going to have to provide a compelled subsidy for the telecommunication industry by capping the rents that can be charged to private wireless carriers and tower companies for use of public infrastructure. This cost structure means that in the future, small cell facilities will be significantly cheaper to operate than traditional cell towers, both in terms of acquiring the underlying property rights, as well as for facility and equipment costs.
• Decommissioning Risk: Telecommunication companies, wireless carriers, and cell tower companies have tremendous leverage in renegotiating existing lease terms for current 4G cell sites. There’s also a financial and technological incentive to dismantle existing tower sites that have fewer capabilities and are more expensive to operate and maintain than 5G technology.
• Termination Risk: The City of Monrovia owned three 4G cell tower leases with AT&T, T-Mobile, and Verizon. All three carriers had the right to terminate these leases with the City for any reason, with no penalties, giving the carriers leverage in renegotiating the lease costs. In such negotiations, AT&T and T-Mobile asked the city to lower their monthly payment by 39.3% and 36.9% respectively.

• The TowerPoint Solution

• Transfer Risk: As a means to mitigate the risks associated with these lease arrangements, city leaders recommended selling the rights to all three leases to TowerPoint.
• Efficient Process: At no cost to the City, TowerPoint engaged in a 30-day due diligence process. During that time, TowerPoint ran title reports on the existing properties in question, assessed the equipment located on the City’s infrastructure, and coordinated an escrow process through which the transfer of funds occurred.
• Future Revenue: Additionally, TowerPoint agreed to grant the City 55% of any new revenues from renegotiations with the three carriers and provide the City with 55% of any potential revenue earned from new tenants.

Outcome

After reviewing multiple options and taking into account current market trends, the city managers chose TowerPoint for providing the best option for the City moving forward. The TowerPoint solution gave the City of Monrovia what it was looking for: protection of its interests in a rapidly changing technological environment; peace of mind regarding future changes in regulations; the ability to invest a lump sum of cash into pressing city projects and improvements.