Alternative Investment Spotlight: Cell Towers and Antenna Towers

Investing in Cell Towers and Antenna Towers

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Society is increasingly reliant on the powerful computers in their pockets – also known as their smartphones. Smartphones are virtually necessary for most Canadians’ daily lives. Whether it’s getting around, performing work, watching a movie or managing finances, our lives depend on reliable access to cellular data.

Table of Contents - Investing in Cell Towers and Antenna Towers

We often take for granted what powers the devices we love so much, but wireless technology is quite physical and requires significant real estate. For those able to secure income from cell tower real estate, new wireless technology will make this an even hotter investment.

The arrival of 5G

5G is the fifth generation of wireless technology for digital cellular networks. It runs significantly faster than previous generations. Areas that can run the 5G network are divided into cells, which are serviced by individual antenna towers. This is the standard practice for wireless technology. Every telecommunications company will eventually deploy their antennas to activate the 5G network if they haven’t already.

The hardware required to meeting the increasing demand for fast, reliable 5G network coverage has implications for real estate; namely, the demand for space to erect the hardware.

Rogers was the first telecommunications company to activate its 5G network in Canada in January 2020. The network is up and running in parts of Toronto, Ottawa, Vancouver and Montreal. However, smartphone users in those areas won’t notice a change just yet, as devices have not yet been authorized to connect to 5G. Turning on the network is the first step in signalling to devise manufacturers like Apple and Samsung that the Canadian market is ready for 5G.

When it’s time for the nation to make the switch to 5G, there are several thousand cell towers across the country ready to be deployed. These towers are shared by the Big Three telecommunications companies – Rogers, Bell and Telus – plus other smaller companies. With the arrival of 5G and society’s increasing reliance on smart technology, the geography of cell towers will become denser, with thousands more expected to be built in the next few years. Additionally, small-cell sites with smaller devices will be installed in inconspicuous places. These devices range in size but can help to boost network coverage by up to 400 meters.

Cell towers and real estate

A property with a cell tower has two leases: the cell tower lease and the real estate. Telecommunications companies own and operate their cell towers, though they often share. They lease the land from the property owner. If real estate brokers don’t understand how cell tower leases work, they could over or underestimate the value of the property based on this important feature.

If you come across the opportunity to buy a property or land with an existing cell tower, you shouldn’t assume that you’ll automatically be collecting rent from the telecommunications companies. These companies have created and are heavily invested in this real estate market and have created favourable terms for themselves. Their existing contracts are complicated and lack transparency. You’ll likely need the help of an expert in cell tower leases rather than your usual real estate attorney.

Should you decide to move forward with a property with a cell tower and wish to talk to the cell carrier about the terms of your lease, you’ll likely have a hard time. That could be a costly issue when it comes to the early termination clause. Most cell carriers designed their leases so that they can leave the lease at any time and without much warning. Some entrepreneurs are taking advantage of these leases, offering to buy out the cell tower lease by paying 10 to 15 years’ worth of rent upfront to collect rent for several more decades. This type of scheme quickly devalues the property. It’s important to ask for rent checks before purchasing a property to determine if the property is still collecting lease revenue.

If you want to propose a new space for a tower, cold calls and old-fashioned marketing won’t work. Instead, the cell carrier will have to come to you. Cell carriers decide to build a new cell tower based on their internal data about service in the area. They’ve likely received enough complaints about dropped calls or poor service that they’ve decided to invest in another tower.

The company will then contract with a third-party broker specializing in cell towers who will locate and secure an ideal spot. If you have a property that would be good for a cell tower you can try to get on the broker’s radar, but it’s highly unlikely you’ll have a cell tower unless a cell carrier decides they want one to be there.

The small cell devices are also unlikely to go on private property. Instead, cell carriers prefer to put these devices in public spaces like highways and light poles. They can negotiate deals with local municipalities in exchange for better coverage for residents. It is unlikely that small cells are placed on residential or commercial property.

Cell tower REITs

Managing a property with a cell tower can be a complicated ordeal. Instead, you can take advantage of the growing demand for 5G coverage by investing in a REIT specializing in cell towers. With a real estate investment trust (REIT), you can reap the dividends from the technology without having to worry about managing the property or the lease.

Telecommunications companies in Canada have rejected the REIT model, but it’s popular in the United States. Cell tower REITs have outperformed much of the real estate sectors within the last four years in the American market. The sector should comfortably grow for the next few years and even the next decade as cell coverage becomes increasingly crucial. Cell tower REITs comprise 10 percent of the REIT ETFs on the American market and own nearly half of the cell towers in the U.S.

It can be difficult to break into the cell tower real estate sector, but if you find yourself in that position you can earn a great return on investment. If you’re going to make any deals involving cell towers, it’s important to do your research and employ the help of an expert before finalizing an agreement.

Smart Cell Tower Investing


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Scott Dillingham

Scott Dillingham

I have been investing and lending to real estate investors for nearly 10 years now. After thousands of successful deals between flips, rent to owns, student properties and commercial assets I have developed a deep knowledge of real estate investments and have a passion of sharing this information with the world! If your looking for a lender who specializes in rental property financing you're going to want to connect with me at team@lendcity.ca.