STPUD Verizon Cell Lease Term Sheet with Comments_20180108Memorandum
DATE:
September 27, 2017
TO:
Shannon Cotulla, Assistant General Manager
South Tahoe Public Utility District
FROM:
Gary M. Kvistad
RE:
Term Sheet for Proposed Verizon Wireless Cell Tower Site Option and Lease Agreement
This memorandum outlines the more significant business and legal terms for an option and lease agreement with Verizon Wireless. The proposed terms are based on our review of the proposed
Verizon lease, our experience in negotiating other similar leases, the District’s requirements for such a lease and our internal discussions with District management. The term sheet
should be presented to Verizon for their consideration and then a meeting arranged to discuss these and any other significant terms. Once agreement is reached on these terms, the option
and lease agreement can be drafted.
Revised December 15, 2017 with STPUD Responses
Parties
Lessor: South Tahoe Public Utility District
Lessee: Verizon Wireless
Property
The Site shall be located on Lessor’s property located at 1275 Meadow Crest Drive, South Lake Tahoe, California.
Option Term
12 month term with right to extend term for additional 12 months
Option Payment
$1,000 per 12 month term, payable within 30 days Payable within 60 days.
Agreed
Signing Bonus
$10,000 upon execution of the Option/Lease Agreement VZW could possibly accept $5,000 signing bonus but the rental rate will need to be adjusted as indicated below.
The cost of legal review of contract docuemnts is becoming prohibitive for this effort to continue without an expectation of Verizon covering the District’s legal costs. Our legal expenses
(not including District staff time) already exceed $18,000. We are willing to split the current cost and agree to $9,000. VZW will need this to remain at $5,000 but is willing to increase
rent in exchange.
Option Investigation
Optionee has right to investigate the site and perform testing. If option is not exercised, Site is to be restored to its prior existing condition.
Optionee and its consultants, contractors and agents to maintain insurance acceptable to the Optionor.
Optionee access is through a security gate. Optionee or its consultants, contractors and agents are required to call for access. The District’s property is operated and staffed 24/7.
Option Investigation
Optionee has right to investigate the site and perform testing. If option is not exercised, Site is to be restored to its prior existing condition.
Optionee and its consultants, contractors and agents to maintain insurance acceptable to the Optionor.
Optionee access is through a security gate. Optionee or its consultants, contractors and agents are required to call for access. The District’s property is operated and staffed 24/7.
Site
35’ x 45’ – 1,575 square feet with designated route for access and utilities
Lease Term
5 year initial term with right to extend for 4 extended terms of 5 years each, after which the Lease terminates. The parties may negotiate a new lease prior to termination.
The District would be interested in a single 25 year term. This lease effectively works this way but Verizon prefers it to be broken up for their internal review processes.
Lease Payment
$42,000 per year payable $3,500 per month in advance with a 10% late fee. This is much higher than the rent that was previously discussed. This is an unacceptable rate. We previously
discussed $2,000 per month for 900 sqft. We can increase the rental rate due to the compound enlargement but this is not going to increase based on a fixed price per square foot rate.
The rent still needs to remain within the typical wireless rental rates. We are working to see if we can reduce the compound at all but Verizon has increased the rate offer to $2,300
per month.
The District previously agreed to a rental rate of $2,000 for 900 sq.ft. However, you then supplied us with a draft lease for a larger rental area with no discussion or notice of the
change. Since you decided to change the terms of our conceptual agreement without notice, we do not consider ourselves bound by previously agreed rent. As a result it is necessary
renegotiate the rent given the substantial increase in area. We are willing to consider a rent of $3,000 per month as a compromise. Agreed, based on lower signing bonus.
Lease payment Adjustment
3% per year
Rental Documentation
No such requirement as a precondition to Lessee’s obligations as Lessor is a public agency I can provide some revised language for review.
Please provide revised language.
Use
Constructing, maintaining, repairing and operating a communications facility including a security fence
Approvals
Lessee is responsible for securing all regulatory approvals. Lessor will provide reasonable cooperation at Lessee’s expense.
Access
Lessee access is through a security gate. Lessee or it contractors are required to call for access. The District’s property is operated and staffed 24/7.
Partial access is over a paved road and then onto unpaved road. The unpaved road cannot be paved and Lessee will be responsible for snow removal.
Lessor has right to relocate access route as long as Lessee is given similar access route. As long as access is not impeded in any way.
Agreed as described above.
Maintenance
Lessee to maintain the Site and its facilities in good condition and repair.
Utilities
Lessee is required to bring in its own utilities to the Site.
Indemnification
Lessee to indemnify, defend and hold harmless Lessor from Lessee’s acts and omissions except for lessor’s gross negligence or willful misconduct. Verizon Legal Counsel to review
Please provide results of review
Insurance
Lessee and its contractors and agents to maintain the following insurance during the term:
1. Commercial General Liability - $2,000,000
2. Automobile Liability - $2,000,000
3. Worker’s Compensation – Statutory
4. Pollution Liability - $3,000,000
Endorsements – additional insured, waiver if subrogation, notice re termination/cancellation. Verizon Legal Counsel to review
Please provide results of review
Radio frequency interference
No interference with Lessor’s existing or future radio frequencies given the public health and safety issues of providing water and wastewater services to the public 24/7. Verizon
will have opportunity to power up site for intermittent testing in the event of interference until resolved.
Agreed
District antenna
The Lessor shall have the right to install an antenna on the Lessee’s facilities at no cost to Lessee. This might be accepted but it would need to specify what equipment and at what
centerline on the tower. This would need to be low on the tower if at all.
We would need an antenna at 100’, and as this elevation is not available per our discussion, we withdraw this request.
Environmental Issues
Lessee responsible for doing its own due diligence of the Site and accepts the Site “as is.” Lessee responsible for all environmental contamination. Verizon responsible for Premises
but Lessor must be responsible for Property condition.
Agreed unless and to the extent Verizon adversely impacts an existing property condition.
Relocation of Site
Lessor may require Lessee, at lessee’s expense, to relocate the Site once during the term if Lessor determines it needs the Site for its own operations. No, Verizon Wireless will not
agree to this condition.
Per our discussions, we may require relocation one time at our expense. Please review and confirm that this is acceptable. Landlord may require one relocation during the life of the
lease at the expense of the landlord. Landlord must allow for temporary installation of cell service so as not to disrupt service. New location muct be mutually agreed upon and provide
similar coverage to the satisfaction of Verizon Wireless.
Subleasing
Lessee may sublease a portion of the Site or space on Lessee’s facilities upon lessor’s reasonable approval and payment of 50% revenue share. No, Verizon will not agree to this term.
Verizon Wireless does not do revenue sharing. They will agree to require any additional carriers that lease space on the tower to obtain additional ground space from the underlying
property owner (Lessor). Lessor would then be able to approve or deny additional ground space as they see fit and charge their own separate rental amount. Verizon required to retail
rights to sublease tower space without approval of Lessor.
Our issue is that we do not want to go through the time and expense of negotiating a series of subleases. This effort with Verizon has already proven costly with limited potential for
return on our investment. Further, if the District were unable to negotiate a sublease, then Verizon could not sublease to them. We have learned that revenue sharing is not unusual
in the industry. In exchange for revenue sharing, the District would only require notice (rather than approval) of a sublease from Verizon. Alternatively, the district would consider
the subleasee paying the same amount as Verizon’s rent with the same escalation rate. Although some tower companies in the industry agree to revenue share, Verizon Wireless will not.
Unfortunately, this is not on the table. Their work around is what was described above.
Subleasing
Lessee may sublease a portion of the Site or space on Lessee’s facilities upon lessor’s reasonable approval and payment of 50% revenue share. No, Verizon will not agree to this term.
Verizon Wireless does not do revenue sharing. They will agree to require any additional carriers that lease space on the tower to obtain additional ground space from the underlying
property owner (Lessor). Lessor would then be able to approve or deny additional ground space as they see fit and charge their own separate rental amount. Verizon required to retail
rights to sublease tower space without approval of Lessor.
Our issue is that we do not want to go through the time and expense of negotiating a series of subleases. This effort with Verizon has already proven costly with limited potential for
return on our investment. Further, if the District were unable to negotiate a sublease, then Verizon could not sublease to them. We have learned that revenue sharing is not unusual
in the industry. In exchange for revenue sharing, the District would only require notice (rather than approval) of a sublease from Verizon. Alternatively, the district would consider
the subleasee paying the same amount as Verizon’s rent with the same escalation rate. Although some tower companies in the industry agree to revenue share, Verizon Wireless will not.
Unfortunately, this is not on the table. Their work around is what was described above.
Assignment
Lessee may assign lease to its principle, affiliates and subsidiaries upon notice to Lessor and subject to Lessor’s reasonable approval. Verizon will allow reasonable approval for lease
assigns to entities other than their principle, affiliates and subsidiaries only.
Agreed
Taxes
Lessee pays all taxes associated with the Site and its facilities. Lessor is a tax exempt public agency.
Sale of the Property
Lessor may sell or transfer the Property at any time subject to the lease. No right of first refusal. Verizon Wireless ROFR language only pertains to the sale or transfer of property
“for the purpose of maintaining a telecommunications facility. This is a very limited scope of ROFR language. What is the concern with this limited ROFR language?
We will probably want to clarify this language, but agree to allowing ROFR that is limited to a purchaser that would be “maintaining a telecommunications facility”
Removal at end of the term
Lessee shall remove all improvements on the Site and access route prior to the end of the term and restore the site and access route to their prior existing condition. With the exemption
of concrete footings below grade.
Concrete footings removed to at least 2’ below grade. Agreed