January 30, 2013 - on for its cash-strapped water fund over a three-year period was approved by the Oxford Village Council last week.
Black Dot Capital & Real Estate group will pay the Village of Oxford $445,000 over three years to control a space atop its water tower for the next 50 years. (click for larger version)
And as if that news wasn't good enough, it's $100,000 more than the village was originally going to receive.
Council voted 4-0 to accept a proposal from Black Dot Capital & Real Estate Group, based in Mission Viejo, California, to buyout the village's existing lease agreement with AT&T Wireless for the cellular service equipment it has located high atop the municipal water tower on S. Glaspie St.
Under the deal, Black Dot will pay the village six installments of $74,166.67 each beginning Feb. 1 and ending July 1, 2015.
In exchange for these payments, the village is giving Black Dot control of the AT&T-occupied space on the tower for a term of 600 months, which equals 50 years.
"This is a common practice (for management companies like Black Dot)," explained Dale Wolicki, who serves on the village planning commission and has 25 years experience as a consultant to the wireless communications industry. "This is a very well-known company, (a) very large company. They handle leases all over the country. It sounds like they're offering you a very good financial deal."
Village attorney Bob Davis noted that even though this deal is "locking this (tower space) up" for "a long time," the municipality still has four other spaces up there to potentially lease to other wireless providers in the future.
Davis will propose to Black Dot that some language be added to the agreement stating that should the California company help the village secure tenants for any of the other four spaces, those lease proceeds would be split 80/20, with the village receiving the larger percentage.
All of Black Dot's installment payments will be placed in the village's water fund, which definitely needs a cash boost.
In a November 2012 memo to council, Manager Joe Young explained how 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.
Black Dot's purchase of the lease means it's assuming all the risk and in exchange, the village is receiving guaranteed payments. The main risk is AT&T terminating the lease, which is something it could easily do with 30 days notice and the payment of six months rent.
"I've always said I think it makes good business sense for us to do this," said village President Tony Albensi.
Black Dot will earn its profit by collecting the $2,845.70 monthly rent from AT&T for the next 14 years, which is how much time is left on the current lease. Essentially, this company will take over the role of landlord from the village.
Because Black Dot will control the space for 36 years after when the lease with AT&T expires, it can choose to either renegotiate for a new one or rent it to another wireless provider.
The same holds true if AT&T decides to terminate the existing lease. However, Black Dot does not have the power to terminate the lease with AT&T.
Wolicki advised council to make sure it has "good documentation (defining) what (Black Dot is) getting and what is the village's because . . . 50 years from now, you don't want to be contesting the lease and wasting the money you had in legal (fees)."
"That's what I've seen (happen) a lot of times," he said. "So, make it very clear in the exhibits that this is what you're getting, this is what you're allowed."
Davis noted if council didn't like the idea of being compensated in installments, he could get a $407,000 lump-sum payment from Black Dot up front.
"If the installment payments (were) over say six or 10 years, I might be a little leery about it, but seeing as it is only three years, I think that additional ($38,000) is worth doing the installment plan," Albensi said. "If we were to invest that $407,000, we wouldn't make $38,000 (in interest)."
Black Dot's offer is $100,000 more than the one it made back in November, which council voted to accept at the time.
However, council later decided to explore other potential purchasers for two reasons.
The first was AT&T's offer to increase the monthly rent it pays to the village by $200, so it could add some antennas and amplifiers to its space on the tower.
Council accepted that offer in December and the monthly rent went from $2,645.70 to $2,845.70. That made the current lease more valuable.
The second was the bidding war that erupted over AT&T's tower space because the company's decision to add wireless equipment to the site appears to lessen the risk of AT&T pulling out of the lease.
Three other companies offered amounts ranging from $300,000 to $568,000. The highest offer consisted of a $284,000 payment now for the next 20 years and when that expires, another $284,000 for the following 20 years.
But Davis noted there was no guarantee in the high offer for a second $284,000 payment.
Wolicki offered a possible explanation for the bidding war.
"Even though things are still slow out here, this is a growing area. Traffic is increasing – that might be why (there's) such interest in the water tower," he said.
"I'm a little surprised to see that (Black Dot is) willing to pony up so much money up front. If you were to come to me, I don't think I'd be that generous, but it's their deal and their money."
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.