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Telecommunications: Maximizing today's real estate

They can be seen in cities both large and small, towering above high-rise office buildings and hidden within church steeples, astride water towers and in cemeteries. They're towers and transmitters, placed by telecommunications companies to service their customers and generate additional revenue for building owners.

"There's an enormous amount of revenue to be generated from rooftop leasing, or parking lot leasing, or the leasing of other property locations," says Perry Ruda, chairman of U.S. RealTel, real estate for telecommunications, Chicago. Offices, hotels, fast food chains and yes, even churches and cemeteries, are renting unused space for telecommunications towers.

Though towers have been a common sight on rooftops for more than half a decade, the current wave of popularity in rooftop leasing began in 1995 when the U.S. government, through the Federal Communications Commission (FCC), issued permits for wireless phone companies to provide wireless phone service throughout every square inch of the country. "Phone companies immediately began putting up their antennas to make their business work, and paid for the units through the dollars collected from subscribers," Ruda says. Meanwhile, the government raised some big money itself -- more than $12 billion-- by issuing those licenses. Property owners soon learned there was extra income to be had by leasing out rooftops, and though they generally weren't familiar with the rates, risks or proper documentation needed, many were anxious for a piece of that pie.

The tremendous growth in rooftop leasing has burgeoned, too, because it has become more and more difficult for wireless companies and those with additional licenses to sell wireless service to get the zoning necessary for placing antennas where needed. "There has been increased resistance in placing towers in metropolitan areas in many cases," says Tim Burningham, marketing director with Nextel Communications, Norcross, Ga. "The metro areas are filling up and in some regions there's very little space left for antenna placement."

Companies like Nextel have been generating alternative locations for placing antennas on existing towers or buildings to secure locations in densely populated areas. "More and more companies are placing antennas not only on rooftops, but also on billboards, church steeples and anywhere they're able to rent the space," Burningham says.

At the same time, this age of high technology has many office building property managers wanting to get a leg up on the competition by upgrading their buildings with fiber optic cable or digital broadband radio antennas on the rooftop for tenants who may desire high speed voice, data and video services. The installation of cable or antennas provides for increased bandwidth, which generally refers to the capacity of a communications link, and the amount of voice, data or video signals that can occupy the length. With increased bandwidth capability, tenants have access to cyber-age services like video conferencing with personal computers, desktop Internet access, unlimited voice lines, high-speed data lines and personal computer on-screen video. In fact, there may be a time in the not-too-distant future when landlord services for tenants will revolve around this technology. Clients will increasingly write the specs for what they need, and, in turn, will be able to set the price point themselves. And landlords across the country are marketing their buildings based largely on the buildings' high-tech capabilities.

But in order to gain that technological competitive edge, the proactive building owner must first make the decision to lease his rooftop to telecommunications access providers who can place antennas on the building and beef up bandwidth. To help educate building owners while simplifying their rooftop leasing activity, telecommunications services companies were formed.

"When building owners decide to site an antenna, we're there to market, lease and manage their rooftop," says Ruda, whose company is one such servicer. U.S. RealTel, for example, utilizes a unique methodology: the company created a national antenna grid to which property owners join their properties by entering into a master lease agreement with U.S. RealTel. The company has a marketing group that markets sites on the grid to national companies, paging companies, SMR companies, phone companies -- any organization in need of placing an antenna on a property. Then, companies sign a sublease with U.S. RealTel, choosing sites throughout the country on the national grid. "Sites on the grid become most attractive to the wireless industry because they deal with one sublessor, have one professional point of contact and pay with one rent check," Ruda says. Wireless companies often go out of their way to check the spaces on the grid, he says.

As a benefit to the landlord, telecommunications service companies prepare the proper lease documents for protection, do the engineering studies to ensure that antenna installation doesn't adversely affect the structural integrity of the building and some do their own radio interference studies to ensure an antenna on the rooftop won't interfere with the transmissions of televisions, computers and other items on the property. "There's a fair amount of physical engineering and radio engineering done by the service company for the protection of the property owner," says Jim Janowiak, director of telecommunications services for U.S. RealTel. "It's important that the service provider do all the documentation, supervise the installation, collect the rent and remit the property owner's share."

One of the most obvious benefits to the property owner, of course, is just that: the service provider does it all. Business owners can focus on their business without worrying about how the rooftop is being managed. "The property owner has no risk and no expense, but receives a rent check," Janowiak says. Numerous companies have caught on and now REITs, large developers, insurance companies, pension funds and banks have jumped on the bandwagon and are renting their rooftops, too.

"Rental revenue from rooftop leasing will rise to a $3 billion market over the next few years," says Jeff Ginsberg, managing partner with Apex Site Management of Conshohocken, Pa. "That adds up to a huge opportunity for landlords that they may not really know about yet," he says. It's up to site management companies and service providers to educate the building owner, Ginsberg says. Carriers are looking for sites throughout the country, too, he says. "Firms like ours help increase the visibility of the property.

"If you went to list your house on the market, you could find 80 brokers in the yellow pages," Ginsberg continues. "It's not exactly that straightforward in the telecommunications services industry. Communications companies spend all their time leasing space and while they're working on their 800th antenna lease, the landlord is on his first. He needs advice." Service providers and site management companies address the technical and specialized questions put forth by the landlord and bring pro-active marketing to the table, Ginsberg says.

Motorola Inc., too, doesn't just lease out the rooftop space to a telecommunication company and leave. A full-service management company, it takes full responsibility for managing the rooftop, according to Steve Johnson, marketing specialist, North American antenna sites, Motorola Inc., in Schaumburg, Ill. "We take very seriously our responsibility as a management company," he says. "We follow all the EME regulations, FCC rules, etc."

The primary goal in rooftop management, Johnson says, is to make the leasing of that space an equitable and profitable project. "It's set up to be a win-win situation," Johnson says. "And it can be, when the rooftop is managed properly. We do whatever we can to maximize the use of the site without compromising anything."

Motorola has been placing antennas on leased rooftops for more than 40 years, and the business is growing more now than ever before, Johnson says. "But the peaking of the industry is yet to come," he says. While original antennas were placed for television and radio usage, the popularity of pagers and wireless communications are necessitating today's antennas. "The last decade has seen a huge trending in this industry," Johnson says. "Rooftops are now being set up as multi-use facilities." PCS companies and digital technology companies, among others, don't necessarily need placement on the highest buildings in every market, but also are seeking locations at lower elevations. What's important for these companies, Johnson says, is not necessarily the height of the antenna, but the quantity of antennas placed. "They just need hundreds of sites," he says.

Johnson says he anticipates the industry peaking around the year 2000, and though there may be some decline in the trend, there still will be a great deal of demand for antenna placement in third tier markets. "Once the metropolitan and suburban market areas are covered, the rural areas will be next," he says. "These companies are needing to fill in the gaps in coverage."

By providing full service rooftop leasing and management to building owners, by educating them about their rooftop leasing program and by removing any concerns they may have about renting their uppermost spaces, service providers and management companies are giving building owners more, much more. "When we get on a building's rooftop, we're upgrading that building's telecommunications systems, giving the tenants a choice of service provider and providing them with all the bandwidth they'll ever need," says Cynthia McKee, senior manager of national marketing programs for real estate with WinStar Wireless Inc., Tyson's Corner, Va. "The building owner will never again need to upgrade his system," she says. Through their presence alone, McKee says, the telecommunications company is creating a pipeline into the building that will service the tenants within to run all their high-speed data applications and provide for all their high-technology telecommunications needs. "This is another way for the building owner to provide his tenants with the best building possible."

Indeed, by leasing the rooftop, the building owner is putting the very best in telecommunications services in his building, and frequently without any cost to him. "We try to place our equipment on the rooftop for free whenever possible," McKee says. In turn, the building owner is able to attract a better level of tenant with his improved building and can garner a better price per square foot for his space. "Technology is the enabler that can help keep these buildings full and meet tenant needs," says Doug Morgan, vice president of marketing with WinStar.

"We used to say the answer to a building's successful occupancy level was location, location, location," Morgan says. "But today's answer may be "bandwidth, bandwidth, bandwidth."

Companies that utilize large scale documents, such as real estate organizations and law firms often find the presence of improved telecommunications networks invaluable, too, Morgan says. "Telephone networks were never designed to carry the high-speed data that is needed today," he says. "Speed is a competitive edge in today's market. Everything is instantaneous today and speed is a competitive advantage. High-tech telecommunications can provide that speed."

Bringing high-speed communications to the building owner easily, quickly and entirely at the expense of the provider is an immense opportunity, Morgan says. "This is technology that will help the savvy landlord attract better tenants and keep current ones," he says. "It is technology that can transform the building into a communications powerhouse and boost the owner's bottom line."

These kind of communications enhancements will provide tenants with a choice for voice, high-speed data and Internet connectivity, Morgan says. Features that today's technology-conscious tenants demand, and savvy building owners and managers regard as absolute necessities come with rooftop rentals.

High-speed Internet access, too, is among the technologies available to tenants in buildings with upgraded telecommunications systems. "That can be a great appeal to tenants as more and more companies spend more time on the Internet," says U.S. RealTel's Ruda. "More companies are looking for better technology to hook up to the Internet." It all becomes revenue-producing for the provider, too, he says.

Low-rate telephone service also is possible in buildings where rooftop antennas are placed, Ruda says. "The advantages are self-evident. This is a revenue-producing opportunity for property owners while benefiting the tenant at the same time.

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