A changing landscape for telecom landlords

As a large-scale telecoms landlord operating in Ireland since 2013, APWireless is an expert in their field and understands the perspective of a variety of different landowners who have a single telecoms site on their property.

Experience has shown the team at APWireless, based in Galway, that telecom landlords often lack the specialist up-to-date market information required when negotiating with their tenants.

Lease negotiations don’t just happen at the expiry of a lease, as telecom tenants regularly request lease amendments while in the middle of an existing contract. These types of mid-term negotiations have been a feature of the industry for a long number of years, but some of the more recent requests made by tenants could result in significant changes for landlords.

Ronan Loughrey, associate director of APWireless, said: “Because the telecoms industry is so niche, landlords see us as a reliable source to advise on what is happening in the wider market and what might constitute a fair and reasonable set of lease terms. Now more than ever, this is needed in order to navigate the market. While they do exist, it is not common to find property advisers and solicitors with specialist telecoms market knowledge and so while they are experts in their ability to deal with the specific clauses or variations being sought, they are not always able to judge what is being requested as against the wider market”.

APWireless is a fully owned subsidiary of Radius Global Infrastructure which trades on the Nasdaq (RADI) and its core business provides a market for landlords to capitalise telecoms rental income.

Eddie Joyce, associate vice president of APWireless said: “Recently, we have seen a number of landlords, who we have worked with in the past, present us with some of the changes in terms requested by their tenants. We have also been approached directly ourselves as an owner of multiple telecoms sites. We are concerned that some of those changes seek to deviate from what we would have considered to be market norms. In many cases, the terms proposed are changing what was previously a more balanced relationship between landlord and tenant”.

Being a large-scale landlord that operates independently of the mobile operators and Tower Companies, APWireless encourages telecom landlords to educate themselves on what is a fluid market, to the point where they are making fully informed decisions around the legal and commercial make-up of their tenant agreement.

In the company’s experience, telecoms agreements are not at all standardised. Rents and the rights and obligations of the tenant and property owner vary from site to site, yet many landlords are not aware of this.

When APWireless first entered the Irish market in 2013, its tenants consisted of the main mobile operators. Some of those original tenants have recently transferred the ownership of the majority of their infrastructure to Tower Companies. Effectively, the mobile operators have recently consummated a transaction for a large-scale sale and leaseback of their infrastructure in Ireland to tower companies, which in turn pay the majority of telecom landlords their rent.

“That changed dynamic, with tower companies now being the primary tenant instead of a mobile operator, is something we have witnessed across many of the 19 countries we operate in”, said Joyce. “Our experience in more advanced markets has shown tower companies can place greater focus on achieving commercial efficiencies via their lease optimisation projects. I believe we are starting to see the first signs of this happen in the Irish market.”

The advice to landlords from APWireless is, if asked by your tenant to amend your established lease terms, you must know exactly what these changes mean in real terms both from a commercial and legal perspective. Without due care and attention, you may be impacting the terms which you have previously accepted and enjoyed for many years.

Many economists believe we are entering into a period of high inflation and under those circumstances the buying power of an annual rent diminishes year after year, if the rent is not reviewed regularly.

“Historically a landlord could exercise a rent review at regular intervals that would ensure that the rent kept pace with inflation,” said Loughrey. “Any requests to change the rent provisions in the existing agreement should be carefully scrutinised to ensure that the rent still keeps pace with inflation and there is no loss, in real terms, during the course of the term.”

APWireless are seeing amended licence terms seeking to place greater restrictions on the property owner, with some clauses limiting what the property owner can do with their asset.

Joyce said: “It is understandable that a mobile operator or tower company would seek greater efficiencies in terms of limiting their operating costs, but there should always be a balance with the landlord’s ability to freely deal with their property on a day-to-day basis.

“Once any proposals are discussed openly between a property owner, their adviser and their telecoms tenant, a satisfactory and equitable solution should be achievable. It can only benefit the long-term relationship by bringing these discussion points to the fore during a lease negotiation. We at APWireless always seek to ensure a fair set of terms are adhered to across our portfolio and feel you, the ‘one-off landlord’ should equally achieve this.”

In its transactions, APWireless always works with site owners, their solicitors and financial advisers to ensure the landlord has utter clarity around what they are entering into. They equally recommend landlords closely review any paperwork received from their telecoms tenant.

For a property owner with a telecommunication site located on your property, APWireless would ask; are you abreast of ongoing market changes that can impact the financial performance of your telecoms mast site?

If you have any specific queries, or just wish to learn more, please phone 091-457880, or e-mail us including your name and inserting ‘Business Post’ in the subject line, on: info@apwireless.ie.