Presenting a live 90 minute webinar with interactive Q&A Structuring Rooftop Lease Agreements: Legal and Business Considerations Negotiating Leases for Telecom Equipment, Solar Energy, Commercial Farming, and More Wednesday, January 7, 2015 1pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Stephen A. Kisker, Member, Wolff & Samson, West Orange, N.J. Hugh D. Odom, Founder & President, Vertical Consultants, Nashville, Tenn. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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Structuring Rooftop Lease Agreements: Legal and Business Considerations Presented by Stephen A. Kisker, Esq. skisker@wolffsamson.com January 7, 2015
Rooftop Lease Applications and Current Trends in Rooftop Leasing Types of rooftop leases Cell towers and other communication equipment PCS, broadband, FM and TV 6
Types of Rooftop Leases (cont d) Solar panels and micro wind turbines On-site consumption or grid feed Distributed generation of clean, renewable energy 7
Types of Rooftop Leases (cont d) Solar panels and micro wind turbines (cont d) United States now 5 th 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 8
Types of Rooftop Leases (cont d) 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 Rooftop bars and restaurants 9
Types of Rooftop Leases (cont d) Rooftop Oasis 10
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 11
Current Trends (cont d) Rooftop management companies Solar, Solar, Solar 12
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 13
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 14
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 15
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 16
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 17
Deal Structures (cont d) Option to Lease Benefits Free money Very little effort and limited obligations Detriments Loss of future opportunity Disputes and litigation 18
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 19
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 20
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 21
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 22
Practical Considerations in Structuring a Solar Rooftop Deal (cont d) Insurance End of term obligations Termination rights Indemnities Sale of host property Taxes Assignment 23
Financing Considerations for Solar Rooftop Deals Subordination, Non-Disturbance and Recognition Agreements What is the lender s collateral? Timelines 24
Thank you! 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: skisker@wolffsamson.com www.wolffsamson.com 25
Rooftop Leases- How Important Are They To Wireless Carriers? 26 Hugh D. Odom hugh@vertical-consultants.com
27 Increased Dependency on Wireless Services= Capacity Issues For Wireless Carriers
28 Rooftop Lease Purpose- To build out wireless network infrastructure in urban locations
Telecom companies are focused on both securing existing rooftop leased sites and developing new sites. 29
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.
There is no such thing as Market Rent. Every cell site has a different value.. 33
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?
Building Access- The most abused and problematic day-to-day issue for building owners. 40
Insurance- A telecom rooftop lease is a long-term agreement DO NOT have a Stagnant insurance section. 41
42 Indemnification- How a standard indemnification provision can open you up to un-capsulated liability
Assignment/Subleasing- Control the use of your building and value being derived from such use.. 43
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.
Thank You. Hugh Odom President and Founder Vertical Consultants, LLC 4005 Aberdeen Suite 100 Nashville, Tennessee 37205 Phone: (877)456-7552 E-mail: hugh@vertical-consultants.com Website: www.vertical-consultants.com 46