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Bidding war erupts over cell lease space atop water tower

December 19, 2012 - Oxford Village has found itself in the middle of a bidding war as a total of four companies are attempting to buy out AT&T's lease for the space it occupies high atop the municipal water tower located on S. Glaspie St.

On Nov. 27, the village council voted 4-1 to approve a proposal from Black Dot Capital & Real Estate Group, based in Mission Viejo, California, to buy out the village's existing lease agreement with AT&T, which allows the company to have wireless communications equipment on the tower.

Black Dot was going to pay the village a lump sum of $345,000 for the lease and have control of that tower space for 600 months, which equals 50 years.

However, since then, two significant things have happened and the village is keeping its options open.

The first is AT&T's offer to increase the monthly rent it pays to the village by $200.

Last week, council voted 4-0 to accept it. As a result, the monthly rent will increase from $2,645.70 to $2,845.70.

In exchange, AT&T will be adding some wireless equipment to the tower including three antennas, six remote radio heads (which are essentially amplifiers mounted to the back of the antennas) and three small cables that connect the ground equipment to the antennas on the tower.

As a result of this decision, the AT&T lease is now worth more, so Black Dot is working on submitting a new purchase offer to the village.

Prior to the $200 monthly bump in rent, the AT&T lease was projected by village attorney Bob Davis to generate $554,670 for the village over its remaining 14 years, assuming an annual Consumer Price Index increase of 3 percent.

Based on those calculations and assumptions, Black Dot's original $345,000 offer would seem to represent a $209,670 loss for the village and profit for the California-based entity.

But Davis calculated the present value of that $554,670 over 14 years is $233,652 in today's dollars, so in that respect, Black Dot's original offer was worth more in today's dollars.

Not only does Black Dot have to factor in the $200 per month rent increase from AT&T as it comes up with a new offer, it also must consider the fact that three other companies have now submitted bids to the village to buy out the lease.

"Everyone's coming out of the woodwork," Davis said.

Davis believes this bidding war was sparked by AT&T's plan to add more wireless equipment to its leased space. This would appear to lessen the risk of AT&T pulling out of the lease, which only requires 30 days notice and the payment of six months rent.

"The certainty (that AT&T will stay) has risen," Davis said. "It's like with a house – if someone's looking to move, they don't start redoing their kitchen. If they start reinvesting in their house, it's a pretty good sign they're not moving.

"I think the reason we shook up the industry is that AT&T furthered their commitment to the site. Now, everyone's getting the impression that AT&T is there to stay and it's a very good deal to buy (the lease) out."

Telecom Lease Advisors, based in Marina Del Rey, California, has offered to buy out the lease for $402,000 and have control of the tower space for 480 months (40 years).

The company is offering to split future revenue with the village on an 80/20 basis – 80 percent for the village and 20 percent for Telecom Lease Advisors.

Davis indicated this future revenue involves rental of the four vacant spaces atop the water tower.

"If they go out and they find (the village) a tenant and they secure us a tenant, that's how they're proposing to split that revenue," he explained. "It's only if they are 100 percent responsible for securing the new tenant and we actually negotiate and get a deal with that tenant that we're happy with. They're sort of the broker . . . It's really just a sales commission. That's not too bad of a deal and it's not uncommon."

Communications Capital Group (CCG) has submitted two offers, both of which would give it control of the AT&T space for 50 years. The first offer, which came directly from the company, was for $392,500. The second, which was submitted via a broker, was for $430,000.

CCG is offering to split the revenue from future tenants on a 70/30 basis in favor of the village.

"Obviously, I like the 80/20 (split offered by Telecom) better," Davis said.

Unison, which is based in New York City, has offered the village two options. The first involves it paying the municipality a lump sum of $376,000 for which it would control the tower space for 40 years.

Option two consists of Unison paying the village $284,000 now to control the space for the next 20 years. When that period expires, Unison would give the village another $284,000 for the next 20 years. In essence, the village would be paid a total of $568,000.

Davis is evaluating all the offers and is expected to report back to the village with his findings at the Tuesday, Jan. 8 meeting.

Any money the village receives for the AT&T lease buy-out would be placed in the municipality's water fund, which is in serious need of a cash infusion. Over the last two years, the village has transferred a total of $500,000 from its sewer fund to its water fund in order to cover deficits and avoid rate increases to water customers.

CJ Carnacchio is editor for The Oxford Leader. He lives in the Village of Oxford with his wife Connie and daughter Larissa. When he's not busy working on the newspaper, he enjoys cigars/pipes, Martinis/Scotch, hunting and fishing.
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