The City of Sierra Madre, CA, (City) located in San Gabriel Valley in Los Angeles, had leased property to several cell tower companies, which provided valuable revenue streams for the City’s general fund. Alongside industry changes that were unfavorably impacting municipalities, the City was approached by tower company representatives seeking significant rent reductions and suggesting that without rent relief, relocation of the towers would be considered. The City worked with TowerPoint. a cell tower management company, to mitigate the risk of proposed rent reductions and relocations; and develop a solution for new tenants to follow local regulations allowing the City to maintain control over new construction.
• Rent Reduction/Relocation: The City was approached by the tower company tenants who proposed significant reductions in future rental rate along with unfavorable changes to the lease terms. The tenant representatives cited unsustainable economics in their current lease arrangements and considered relocating the towers if they didn’t receive more favorable lease terms.
• Industry Consolidation: One of the three telecom leases Sierra Madre wished to sell was owned by Sprint, which was in the middle of the now-complete merger with T-Mobile. T-Mobile previously announced plans to decommission 35,000 sites following the merger, most suggested to be owned by Sprint. Additionally, new federal and state regulations designed to expedite the rollout of 5G are imposing unfavorable requirements on municipalities.
• Regulations: The City of Sierra Madre also wanted to comply with local regulations in selling its leases; and maintain control of over future tenant(s) construction after the sale of tower leases; and ensure non-interference with City operations after selling the leases.
Objectives: To mitigate the challenges, the City of Sierra Madre partnered with TowerPoint to:
• Lessen risk of proposed rent reductions and loss of income;
• Secure funding for ongoing and future city projects covered by monies generated by cell tower leases; and
• Complete a closing process that conforms to local regulations; and addresses the City’s needs after selling its cell tower leases.
Solutions: TowerPoint and the City’s manager worked together to:
• Sell two of the three towers at their current value before any rent reductions took place;
• Worked with the City’s attorney to get enact a municipal resolution to approve the cell tower sale;
• Structure a master lease to include construction drawing approval for new tenants and non-interference language to protect the City after selling its tower leases; and
• Establish a future source of revenue through tower carrier renegotiations with TowerPoint.
By selling its wireless real estate assets to TowerPoint, the City of Sierra Madre received an immediate influx of cash to support its multiple city projects and improvements; and entered a mutually agreeable lease document that protects the City needs after closing and conforms to local regulations