GI117: Utilizing Cell Towers to Maximize NOI with Hugh Odom

GI117: Utilizing Cell Towers to Maximize NOI with Hugh Odom

Hugh Odom is an attorney and founder of Vertical Consultants; a full-service consulting firm that focuses on cell tower leases. He has secured over $600 million in cell site rents for clients and assisted with over 20k cell sites across North America.

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Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Hugh Odom. Hugh is an attorney and founder of Vertical Consultants; a full-service consulting firm that focuses on cell tower leases. He has secured over $600 million in cell site rents for clients and assisted with over 20k cell sites across North America. So thank you so much for being on the show, Hugh.

New Speaker:
Thanks Charles. I appreciate be part of your program.

Charles:
Yeah, it’s always great to have people come on the show, especially in niches like yours which is great to add you know, people with commercial property can add some value and add some cashflow to their bottom line.

Hugh:
Yeah. Something that we work with, commercial property owners all across the country, and it’s a great source of ancillary revenue for usually for space it’s not otherwise being used.

Charles:
Awesome. Awesome. So please tell us a little bit about your background both personally and professionally before getting involved with your current business.

Hugh:
Oh, sure. Well, I, I grew up in Memphis, Tennessee, and now live in Nashville, Tennessee. That’s where our home offices my background professionally as you mentioned, my background was being a real estate and telecom attorney for over 20 plus years. I was an attorney inside at and T for at and T for almost 11 years and mostly on the Western United States. And then about 11 years ago, we formed vertical consultants and had been the president and founder of that ever since.

Charles:
Interesting. And tell us a little bit about what vertical consultants does. I was reviewing your website. There’s a lot of different services, but just for our listeners, giving them an overview of your services.

Hugh:
Sure. We deal with a lot of consulting all across the telecom industry, but we focus on two main areas. First, if a property owner, whether it be a commercial property owner or any other type of property owner gets contacted to put something on their property, whether it be a cell tower or traditional cell tower, you see when you’re driving down the road or a rooftop antenna or any other type of equipment, we work with them to negotiate that new lease agreement with like an at and T Verizon or eight hub type of cell tower company. Alternatively, we also work with people who have existing agreements in place, and we work with them to renegotiate those agreements, not only to increase their revenue, but also protect their ma their main asset that being their property or, and or their building. And in regards to that, our average increase over the last four or five years in existing rents has been over 300% increase in rent immediately. So there’s a lot of untapped money there that people aren’t getting to.

Charles:
That’s very interesting. You know, you consult property owners with cell towers already on properties, and I’ve done something similar with billboards and we’ve done it before on sides of buildings. We’ve done them on individual properties, usually by highways and all that types of stuff. And it adds another another source of income to the property. So if someone says, you know, they have a property and they might talk to you guys, and how does the process work for a property owner that might be interested in additional revenue from a cell tower if they don’t have one already?

Hugh:
Sure. Well, the process we work with now is if they contact us via our website or phone call or something of that nature, they submit the property to us. And then we work with companies that are looking to build out a cell sites across the United States and see if there’s a fit. Now we’ll say, and we disclose this to everybody, contact us, you know, just because you have a property, you have 10 properties or a hundred properties. It doesn’t mean it’s gonna be a property that is needed by a cell tower company. It just gives you the ability to put in front of the right people and basically narrow the gap between you and the people that are looking for those cell sites to make sure that they’re looking in that area and your property fits that design and what they’re going to build out, that they have the information to, to contact you and start the process of negotiation of an agreement

Charles:
Other than the possibility that their, their property does not fit into the requirements of one of those providers that you that you work with, or that would rent it. What should own property owners consider when reviewing their property to add a tower?

Hugh:
Well, I think the big thing is, first of all, understand, we always say this with regards to the financial side of it and the non-monetary side of it, the financial side of is you’re. If somebody comes out to you today and said, look, I want to use your property for a cell site, at least. They’re gonna say I’m offering you X, whatever that number is, you need to understand what you’re offering the other side, because if that’s the biggest thing is people don’t understand what they’re offering the cell tower companies. So don’t worry about what you’re being offered, understand what you’re offering the other side. Second big thing on the non-monetary side, understand what you’re agreeing to. Now, that sounds very simple, but people get so focused on the money. They don’t realize that they’re leasing out space on a certain portion of the property, but they’re putting restrictions on all of their properties. So you can have a $50 million property and they’re leasing a thousand square feet and you think, oh, that’s just over here in the corner, but you’re putting restrictions on the rest of your property, how you can develop that or dispose of it in the future. So be careful, be careful getting, understand the other side of what you’re being offered or what you’re offering them and understand exactly what you’re agreeing to.

Charles:
Yeah, that makes perfect sense. So how do these leases look? Are they leasing just a one company? I know you had like a several companies that would possibly lease a cell tower and what does a typical lease term and how many companies are they typically leasing it to?

Hugh:
Well, there’s a couple I’ll answer. The lease term lease term using runs between 20 to 30 years total term and that can be extended on the back end, which so these things are gonna go out for 50, 60, 70 years. They’d get added on the back end renegotiated on the back end of that, with regards to the number of companies, if you’re leasing out to a cell tower company, usually you’re leasing out to one major provider, one major cell tower company. And that cell tower company is in subletting space on that tower and, and on the ground to the carriers like at and T Verizon T-Mobile, if you have a building and you have a rooftop space, usually you can lease out to an 18. And, but you also may be the ability to lease out space to T-Mobile or Verizon. So it depends on your situation, but ultimately what you want to make sure of is that whoever you’re leasing out to the cell tower company, or to a, or to a wireless provider on your rooftop, you need to understand again, how to structure that, to make sure that you’re structuring it, to get the rent based upon how much value they’re getting from your property and not how much space are using.

Charles:
Interesting. Yeah, that makes a huge difference because I could see that someone with large property and you’re only taking a small portion of it, however they could impact future income from the property or a fruit future development that they might be locked into not being able to develop part of it or it’s it has to be combined into a specific type of a project, I guess, that they ever want to utilize more of the property.

Hugh:
Oh, definitely. We’ve had situations all across the country. One stands out if recent a developer out in Las Vegas had a property, they paid close to $50 million for had a sell side agreement out there. And the sell side, the wildfire said, no, you can’t move me where I am. And basically you put a monkey wrench in the whole development. And he had a $50 million stuck into it and was going to redevelop a hotel property. And he was at the mercy of a small little lease in comparison. And so it really is, you need to understand that’s where people, people don’t look in the details. And I always tell people, don’t worry what it means to you on the, when you’re negotiating this, understand what it means to them, understand how they’re going to try to enforce that agreement. So if you’re dealing with an at and T or Verizon, you need to understand what they think or thinking, not what you’re thinking, because that’s where people get into some problems down the road. And then they’re battling some of the biggest companies in the world.

Charles:
Yeah. I could definitely need to have someone on your side. It’s, it’s funny because just about a week ago, we were reviewing a property in Gainesville and a completely vacant property, but it was bringing like 10,000 plus dollars a month just on the cell towers. And the, and you know, the broker just mentioned there in like a sentence and they want to stay there and they want to renew and all this kind of stuff. And now there’s so many nuances to it. I mean, who knows what that’s being paid, if that’s even correct? I mean, there’s so much potential possibly for additional income in that, but obviously the broker was talking about the whole building. Wasn’t focusing on this fantastic income source that this property already has.

Hugh:
Yeah. It’s a situation by which, you know, we equate the telecom industry to the oil and gas industry and if you need it. And so it’s really, if you understand, it’s kind of like production, if you had, if, if that same property had an oil back there, you didn’t, it’s not how much space at oil takes up, but how many barrels of oil is it producing? Right. So, and not only today, but how many can’t produce maybe 10 years from now based upon technology and increase productivity. So really again, it’s really the cell tower companies. The wildfires understand the long-term value based upon how much they’re being able to produce and how much they would be able to pull out the ground. We tell people that like people used to think of all being this, you know, back a hundred years ago, this valuable commodity data is the new old or the 21st century. We use so much data every day in our cell phones, wireless devices, and all those cell towers are our data producing machines.

Charles:
Interesting. So when it comes to equipment and costs, I imagine the cell phone company is paying for a permit construction. They’re taking care of everything after you sign that, lease with them. Is that usually how it works?

Hugh:
That’s exactly correct. They go out and do the construction and they pull the permits. The one thing I’ll say on permits for commercial property owners, they need to understand when it’s a permit pulled against their property by an at and T or Verizon or cell tower company, it’s being pulled against them, not against the at and T. So be very, be very careful when you approve a permit application or, or if you don’t give over a power of attorney to a at and T Verizon, because then you lose control and he could be a problem because of reclassification of the property, et cetera, down the road with what you could do with reciprocity. We see so many issues. And then let’s say 18 T’s contractors violate the permit, guess who they’re coming to the midst of Holly’s coming to you as a property or not JT and T. So again, one of the things they pay for all that stuff, but understand you need to still have some oversight over.

Charles:
Okay. That makes perfect sense. So is there a specific, I mean, obviously every city and town and district’s different, but is there a specific zoning that’s usually, is this like an [inaudible]? So if I’m in a it’s, if this is, you know, there are certain zoning that this works in and it’s usually not in just a multifamily, it’s usually in a mixed use type zoning. Like, you know, I guess it’s a [inaudible]. I mean, what do you usually see when you’re looking at a property initially

Hugh:
Very, so much with the guards across the country and really, you know, most commercial properties, I’d say the majority of commercial properties will fit with regards to zoning and permitting for a cell tower most. Okay. Not dominion as again, we have variation with regards to zoning and then you can start getting into some specialty sites and churches, schools, things like that, and other things, but usually unless you’re a multifamily unit, a pharma building, things like that next, a little tricky because of one location, proximity to other housing developments, things of that nature. So it gets a little tricky, but so much particular to the, to the miss of Holly. The, you know, if you’re talking to me and we’re talking about a property in California, that’s totally different from property in Nevada, totally different from a property in Ohio with regards to classification and the subsets of that classification as well.

Charles:
Yeah. Obviously once you’re getting more into Rez potential, that’s when you’re going to have more hurdles to overcome. I imagine with with zoning in everybody and in that community. So when we’re going all to 5g and that’s been this thing that’s been going on with when they’re upgrading the equipment, that’s all the companies coming on, they’re upgrading it. I imagine they have to put a separate meter for electricity on your property. And it’s a whole process. Is that correct?

Hugh:
Correct. It is. So when you’re seeing upgrades to 5g, yes, you’re definitely going to have, you should already have separate meters to dedicate to the utilities, make sure that they’re not pulling retrofit your from your building or your property and not, not paying you for it. That’s number one. But the other thing real quick about 5g and upgrades, if you have a building and you currently are property, you see upgrades going going is a perfect opportunity to renegotiate that lease because basically it’s more, it’s a more efficient, more productive piece of equipment. They’re getting more value from your land. So allows you to go back and sometimes go back and renegotiate based upon how your lease is structured.

Charles:
How, how, I mean, how far are these towers? Usually, if you might know between each other, that they have to, to keep a continuous blanket, if I’m driving in my car,

Hugh:
Well, again, topography and equipment, but, but let’s say in general, let’s say between one and one half miles apart, depending on how the intersection of the circles of all the tower, but when you’re getting into five G right now there’s about a half million cell towers out there, approximately give or take 5g, you’re going to have to add up to a million new cell sites in the next five to seven years. So triple what you currently have right now. So because 5g, your, your, your proximity of those towers have to be somewhere between three to 500 feet. Okay. So, so that’s really that. So it’s becoming to densify the network to allow 5g to work. You’re gonna have to have more cell sites, which means more opportunities, property owners, et cetera. So

Charles:
Very interesting. Yeah. It’s almost like a, what you would need for being so from your wifi hotspot of your house or something like that, you know what I mean? It’s interesting. So what mistakes, other than we were talking about doing the you were having the issue like people, knowing the development and permits are being pulled, what other mistakes you see property owners make in regards to cell towers and leases that you consult with?

Hugh:
Well, the biggest, the biggest mistake we see is I tell people there they’re playing the wrong game. They’re totally, I mean, they can. I tell people it’s like a great baseball player trying to play football. Some of the skills translate. But if you go out in the field on Sunday, you’re going to get killed. You may be, have a little speed. You may be a big guy, but those guys are a lot bigger and they’re a lot faster and they will kill you. So what happens is especially commercial property owners. They say, Hey, I’ve done leases all the time. I do leases all the time. I do this all the time. And I say, you’re playing the wrong game because these are really utility agreements. And I mean that with regards to, you need to think about not what market rents are. There’s no such thing as market rents in the telecom ministry, every site has own individual value.

Hugh:
You need to think about structure. So if I said to you, Charles, I’m going to give you a lease today for a sell side, gonna be $3,500 a month, 3% escalator, and I’ll, and I’ll get 30 year term. He said, that’s the thing. It’s like a pretty good deal. Cause that’s kinda what the real estate market works off of. But, but what I’ve done is I’ve done exactly what I want to do. The telecom company. What have I done? I’ve fixed my cost over the next 30 years. I can just run the number $3,500 a month, 3% escalator over a year, over 30 years, the maximum I’ll have to pay you as a certain amount, right. But if I keep on adding value on my side and you never see another penny beyond now, I keep on, I keep on getting value and my margins go up.

Hugh:
So you need to think of a utility again, as I said before, when you’re thinking as to the financial side, think about not how much space you’re leasing, but how much value they’re getting from that space and be able to re-enter that as agreements based upon certain things happening to reevaluate and renegotiate those that’s from a monetary side, from a non-monetary side. As I mentioned before, really understand what your exposure is with regards to future disposition of the property, future development, the property liability issues. Don’t get yourself in an open-ended and capsulate liability situation. What I mean by that, if you do damage to their equipment, you have unlimited liability because if you shut down as tower site for let’s say a week or two, they’re going to send you a bill for a couple of hundred thousand dollars. And if you’re collecting a few thousand dollars a month in rent, you say the impact on that. And you may say, well, I have insurance, but do you have insurance for consequential damages relate to that? So that’s where people need to understand this in a bigger picture.

Charles:
Wow. That’s a, there’s a lot of things to, to look into. I had a question like on your website, you obviously have all this data. And so is, this is this information of people’s leases with cell phone towers is this public information that you’ve put together. So you know that if I’m here on main street and two miles away, what somebody else is getting for a lease or something like that, is that the information that you are able to find. So when you’re consulting with clients,

Hugh:
It’s 11 plus years of being in business and collecting data over that period of time. Secondly, it’s pulling out public records. We can pull out municipal records with regards to [inaudible], what they’re being paid in certain areas. So there’s a lot of accumulation of rents in those areas. But what I’ll say again, people contacted us, ask us about what people are getting paid and that we’d kind of like people want to be served the candy or the dessert that gets people to have a discussion, but we tell people almost immediately, I don’t care what the guy across the street guy got paid or cross country got paid. It really matters in your particular situation. The worst thing you can do is follow what market has done over the year, because the, who has been to the biggest advantage of that, the cell tower companies. So all you’re doing is you’re perpetuating the same model, our deal.

Hugh:
I was speaking to a representative today from one of the larger wireless carriers. And they said, well, this is how the market works. And I say, we’re changing the market. We, we set the market. We’re not going to fall the market. We look at each individual site, so you can sit there and you can fall the NetScout off the bridge. We want you to not to jump off the bridge. We want you to accept the market with regards to what your site is getting based upon the value of your one site. So that’s it. So your answer question is yes, we have that data. We’ll use that as a method to show you what other people are getting paid, but not to follow that same example interest.

Charles:
Awesome. Well, that’s a lot of great information other than carving out this fantastic niche that you and your business have. What are some main factors that have contributed to your success?

Hugh:
Well, I think the manufacturer from day one, I’m persistent. I think persistency has been my from from a early age to, to right now. But I think the other thing I’ve learned as I got older don’t talk so much and listen more. You, you get a lot more done and you don’t have to be the guys talking to most of the room. You just have to, God says that the best things in the room and the most pertinent and informational and gets results. So listen, if I were talking to somebody, if I was saying, Hey, talk to yourself 25 years ago, and what advice would I give myself 25 years ago? It’d be just shut up and just listen. So I think be persistent, be observant. And we were talking to a client, let talk to them about what they want to talk about first and then try and talk to them about what you want to talk about. Second. Don’t do it the other way around.

Charles:
That’s fantastic. That’s a fantastic advice. So how can our listeners learn more about you and your business?

Hugh:
Well, the easiest way is to go to our website, which is cell tower, lease experts.com. Again, that cell tower lease experts.com. There’s a lot of information about us and contact information, either via email or phones phone numbers we have on the, on the website.

Charles:
Awesome. So I will look forward to putting all those links into the show notes. Thank you so much for coming on today.

Hugh:
Thank you again. Appreciate the opportunity.

Charles:
Have a great rest of your week.

Hugh:
Thank you.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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About Hugh Odom

Hugh has accumulated over twenty (20) years of legal/transactional experience concentrating in the areas of real estate and telecommunications. For the ten (10) years prior to founding Vertical Consultants, Hugh worked with AT&T, providing legal representation and counseling as it relates to the Fortune 10 company’s acquisition, disposition and management of both real and personal property assets. This representation included thousands of transactions that involved both fee and leasehold interest assets, with such assets being located throughout North America and abroad. The afore-mentioned assets included retail, equipment, office, raw land, and industrial locations and represented over five (5) billon dollars of financial commitments.

Prior to this, Hugh was in private practice with the prestigious law firms of Snell & Wilmer and Martin Tate Morrow & Marston. During this time, he was responsible for providing representation that included being directly involved in the structuring, financing and negotiation of the acquisition and disposition of various real and personal property assets. Hugh has a law degree from University of Mississippi, MBA degree in Finance from Vanderbilt University, and a B.B.A. degree in Finance/Economics from the University of Memphis.

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