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Structuring Rooftop Lease Agreements:
Legal and Business Considerations Negotiating Leases for Telecom Equipment, Solar Energy, Commercial Farming, and More
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Wednesday, January 7, 2015
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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Structuring Rooftop Lease
Agreements: Legal and
Business Considerations
Presented by Stephen A. Kisker, Esq.
January 7, 2015
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 5th in the world in installed solar capacity
United States has over 16,000 MW of solar capacity, which is enough to power more than 3.5 million homes
The US solar industry now employs more than 150,000 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, Non-Disturbance and
Recognition Agreements
What is the lender’s collateral?
Timelines
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!
27
Increased Dependency on Wireless
Services=
Capacity Issues For Wireless Carriers
28
Rooftop Lease
Purpose-
To build out wireless
network infrastructure
in urban locations
29
Telecom companies
are focused
on both securing
existing rooftop
leased sites and
developing new
sites.
30
How does a property
owner Optimize their
rooftop agreement
with a telecom
company?
31
A rooftop antenna agreement is not a
“Real Estate” transaction…
it is a “Telecom” transaction.
32
The Value of a
rooftop lease
should be tied into
the Utility
garnered from the
space being used
and not the
amount of space
itself.
33
There is no such
thing as “Market
Rent”.
Every cell site has
a different value..
34
Overall Lease Structure is the key to
maximizing the value of any
agreement… it is a Marathon, NOT a sprint.
.
35
Protect your property by understanding
why certain provisions are in any agreement
and how they are being used by telecom
tenants.
36
Rooftop Lease vs. Rooftop License-
What real choice do you have?
What does it really matter?
37
Permitted Use-
The “Gateway” to
maximizing the value
of any agreement and
minimizing the impact
to your property.
38
Relocation Rights-
Make sure a
landlord’s use of the
property does not
become
Subordinate to a
telecom tenant’s use
of the property.
39
Compliance
Issues-
Who is
responsible?
How does one
monitor this
ongoing obligation?
40
Building Access-
The most abused and
problematic
day-to-day issue for
building owners.
41
Insurance-
A telecom rooftop
lease is a long-term
agreement…DO NOT
have a Stagnant
insurance section.
42
Indemnification-
How a standard indemnification provision
can open you up to un-capsulated liability
43
Assignment/Subleasing-
Control the use of your building and value being derived from such use.
.
44
Lease Buyout
Offers- More
common; more
undervalued; more
misunderstood; and
more detrimental
for property owners
45
Conclusion-
Telecom Rooftop Agreements
can be a win-win transaction.
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
