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Rooftop Leases: Legal and Business Considerations Negotiating and Structuring Lease Agreements for Telecom Equipment, Solar Energy, Commercial Farming, and More
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THURSDAY, JANUARY 9, 2014
Presenting a live 90-minute webinar with interactive Q&A
Stephen A. Kisker, Member, Wolff Samson, West Orange, N.J.
Hugh D. Odom, Founder & President, Vertical Consultants, Nashville, Tenn.
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Rooftop Leases: Legal and Business Considerations
Presented by Stephen A. Kisker, Esq.
January 9, 2014
6
Types of rooftop leases
Cell towers and other communication equipment
PCS, broadband, FM and TV
Rooftop Lease Applications and Current Trends in Rooftop Leasing
7
Types of Rooftop Leases (cont’d) Solar panels and micro wind turbines On-site consumption or grid feed Distributed generation of clean, renewable energy
8
Types of Rooftop Leases (cont’d) Solar panels and micro wind turbines (cont’d) United States now 4th in the world in installed solar capacity United States has over 10,000 MW of solar capacity, which
is enough to power more than 1.7 million homes The US solar industry now employs more than 119,000
people fulltime nationwide Micro wind turbines are small, lightweight and can be made
of plastic
9
Rooftop bars and restaurants
Rooftop farms Distributed generation of high quality
produce in urban areas Rainwater recapture and reuse Decrease heat gain – Lower heat
loss Vancouver, New York and
Philadelphia
Types of Rooftop Leases (cont’d)
10
Rooftop Oasis
Types of Rooftop Leases (cont’d)
11
Current Trends Site / lease buyouts Lump sum up-front payment for existing
leases and/or locations Developing secondary market
Options to lease Small income stream reserving rights to
lease in the future Allows company to “lock up” territory
12
Current Trends (cont’d) Rooftop management companies
Solar, Solar, Solar
13
Benefits of a Rooftop Lease Income – either up front or over time Benefits of the use itself Roof repairs and/or maintenance at little
or no up-front cost Increase value of remainder of building
14
Detriments to a Rooftop Lease Forgo future opportunities for easy cash up front Roof repair and maintenance Loss of flexibility (casualty, condemnation,
financing, sale, redevelopment, expansion) Frequently requires use of more than just the roof
(staging areas, utility easements, parking, access, data rooms, inverter pads and cable runs)
Structural issues
15
Deal Structures Simple Single Lease Benefits
Monetize your roof with lump sum up-front payment or periodic rent payment
Condition lease on roof repairs or upgrades up front and/or place burden of roof maintenance on tenant
Little effort for building owner Detriments
Sacrifice future opportunities Roof leaks / maintenance issues Redevelopment / sale / reconstruction restrictions or
complications May not maximize value of entire roof Financing
16
Deal Structures (cont’d) Multiple Leases for One Roof Benefits
Opportunity to maximize value of roof Monetize your roof with lump sum up-front payment or periodic
rent payment Condition lease on roof repairs or upgrades up front and/or
place burden of roof maintenance on tenant Detriments
Coordination of and interference by multiple tenants Maintenance/repair obligations and disputes – who caused that
leak?!? Much more effort to put together and manage Multiple seats at negotiating table upon sale, redevelopment or
major reconstruction
17
Deal Structures (cont’d) Buyout of Existing Leases and Location Benefits
Monetize future income stream now Eliminates future management/administrative burden Removes the risk of payment defaults
Detriments Long term agreements that are very difficult to terminate Sacrifice future opportunities Greater redevelopment / sale / reconstruction restrictions or
complications May not maximize value of entire roof Frowned upon by lenders
18
Deal Structures (cont’d) Option to Lease Benefits
“Free” money Very little effort and limited obligations
Detriments Loss of future opportunity Disputes and litigation
19
Rooftop Lease, License or Easement Lease Benefits
An estate in land that provides the tenant with greater protection and an alternative financing method (leasehold mortgage)
If properly perfected it can be binding on future property owners In some states it offers landlord protection from construction
liens filed by a tenant’s contractor Detriments
Frequently more difficult to terminate and regain possession Subject to state and municipal lease formalities and tenant
protection measures such as a duty to mitigate damages and statute of frauds
Frequently requires lender approval
20
Rooftop Lease, License or Easement (cont’d) License Benefits
Not an estate in land but rather a right in contract Frequently easier to terminate and regain possession Not subject to state and municipal lease formalities and tenant
protection measures such as a duty to mitigate damages and statute of frauds
Does not always require lender approval Detriments
May subject owner’s property to construction lien resulting from licensee’s non-payment for licensee improvements
May not be sufficient protection to get the deal done
21
Rooftop Lease, License or Easement (cont’d) Easement Benefits
An interest in land that provides the holder with greater protection Not an executory contract subject to termination in bankruptcy Runs with the land Not subject to state and municipal lease formalities and tenant
protection measures such as a duty to mitigate damages Detriments
Difficult to terminate and regain possession Not easily financeable Unorthodox May be subject to technical state formalities applicable to estates in
land, such as the statute of frauds Almost always requires lender approval
22
Practical Considerations in Structuring a Solar Rooftop Deal Roof warranty Roof leaks / maintenance issues Casualty and condemnation Staging and parking Term Bonds, guarantees or other security
23
Practical Considerations in Structuring a Solar Rooftop Deal (cont’d) Insurance End of term obligations Termination rights Indemnities Sale of host property Taxes Assignment
24
Financing Considerations for Solar Rooftop Deals Subordination and Non-Disturbance
Agreements What is the lender’s collateral?
25
For more information, please contact: Stephen A. Kisker, Esq. Chair, Renewable Energy and Sustainability Group Member, Real Estate Group Wolff & Samson PC One Boland Drive West Orange, New Jersey 07052 Phone: (973) 530-2074 E-mail: [email protected]
www.wolffsamson.com
Thank you!
Why Rooftop Leases are becoming
more important to telecom
companies!!
Hugh Odom
Increase in demand for wireless services= Increase in traffic on the wireless networks
Hugh Odom 27
Rooftop Lease Purpose
To build out wireless network
infrastructure in urban locations
Hugh Odom 28
Telecom companies are
focused on both securing existing rooftop leased sites and
developing new sites.
Hugh Odom 29
How does a property owner maximize their rooftop lease with a telecom company?
Hugh Odom 30
A rooftop antenna lease is not a “real estate” transaction…it is a “telecom” transaction.
Hugh Odom 31
Rooftop Lease vs. Rooftop License What real choice do you have?
What does it really matter?
Hugh Odom 32
The value of a rooftop lease is
tied into the utility of space being
used by the telecom company.
Hugh Odom 33
There is no such thing as “market
rent”; Every site has a different value..
Hugh Odom 34
Getting rent right throughout the lease is excellent.
Hugh Odom 35
Negotiating key provisions of a telecom rooftop lease is the key to avoiding
unintended results.
Hugh Odom 36
Correctly defining a telecom company’s
permitted use to protect your property and add to the value
of the lease.
Hugh Odom 37
Rent is not the only monetary obligation that a landlord needs to make sure it gets
right.
Hugh Odom 38
Access to a building’s rooftop is
important to a telecom company, but it should not be
a carte blanche right.
Hugh Odom 39
Relocation Rights Make sure a
landlord’s use of the property does not
become subordinate to a telecom tenant’s use of the property.
Hugh Odom 40
Assignment/Subleasing Control the use of your building and value being derived from such use.
.
Hugh Odom 41
Who is
responsible for government
approvals and compliance?
How does one monitor this
ongoing obligation?
Hugh Odom 42
Indemnification How a standard telecom lease indemnification
provision can open you up to unforeseen liability.
Hugh Odom 43
Insurance A telecom rooftop
lease is a long-term
agreement, do not have a stagnant
insurance section.
Hugh Odom 44
Why rental stream offers are becoming more common, more misunderstood and more detrimental
for property owners.
Hugh Odom 45
Conclusion Telecom Rooftop Leases can be a
win-win transaction.
Hugh Odom 46
Thank You. Hugh Odom President and Founder Vertical Consultants, LLC 4005 Aberdeen Suite 100 Nashville, Tennessee 37205 Phone: (877)456-7552 E-mail: [email protected] Website: www.vertical-consultants.com
Hugh Odom 47
