Rooftop Leases: Legal and Business Considerations Negotiating and Structuring Lease Agreements for Telecom Equipment, Solar Energy, Commercial Farming, and More

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THURSDAY, JANUARY 9, 2014

Presenting a live 90-minute webinar with interactive Q&A

Stephen A. Kisker, Member, Wolff Samson, West Orange, N.J.

Hugh D. Odom, Founder & President, Vertical Consultants, Nashville, Tenn.

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Rooftop Leases: Legal and Business Considerations

Presented by Stephen A. Kisker, Esq.

January 9, 2014

6

Types of rooftop leases

Cell towers and other communication equipment

PCS, broadband, FM and TV

Rooftop Lease Applications and Current Trends in Rooftop Leasing

7

Types of Rooftop Leases (cont’d) Solar panels and micro wind turbines On-site consumption or grid feed Distributed generation of clean, renewable energy

8

Types of Rooftop Leases (cont’d) Solar panels and micro wind turbines (cont’d) United States now 4th in the world in installed solar capacity United States has over 10,000 MW of solar capacity, which

is enough to power more than 1.7 million homes The US solar industry now employs more than 119,000

people fulltime nationwide Micro wind turbines are small, lightweight and can be made

of plastic

9

Rooftop bars and restaurants

Rooftop farms Distributed generation of high quality

produce in urban areas Rainwater recapture and reuse Decrease heat gain – Lower heat

loss Vancouver, New York and

Philadelphia

Types of Rooftop Leases (cont’d)

10

Rooftop Oasis

Types of Rooftop Leases (cont’d)

11

Current Trends Site / lease buyouts Lump sum up-front payment for existing

leases and/or locations Developing secondary market

Options to lease Small income stream reserving rights to

lease in the future Allows company to “lock up” territory

12

Current Trends (cont’d) Rooftop management companies

Solar, Solar, Solar

13

Benefits of a Rooftop Lease Income – either up front or over time Benefits of the use itself Roof repairs and/or maintenance at little

or no up-front cost Increase value of remainder of building

14

Detriments to a Rooftop Lease Forgo future opportunities for easy cash up front Roof repair and maintenance Loss of flexibility (casualty, condemnation,

financing, sale, redevelopment, expansion) Frequently requires use of more than just the roof

(staging areas, utility easements, parking, access, data rooms, inverter pads and cable runs)

Structural issues

15

Deal Structures Simple Single Lease Benefits

Monetize your roof with lump sum up-front payment or periodic rent payment

Condition lease on roof repairs or upgrades up front and/or place burden of roof maintenance on tenant

Little effort for building owner Detriments

Sacrifice future opportunities Roof leaks / maintenance issues Redevelopment / sale / reconstruction restrictions or

complications May not maximize value of entire roof Financing

16

Deal Structures (cont’d) Multiple Leases for One Roof Benefits

Opportunity to maximize value of roof Monetize your roof with lump sum up-front payment or periodic

rent payment Condition lease on roof repairs or upgrades up front and/or

place burden of roof maintenance on tenant Detriments

Coordination of and interference by multiple tenants Maintenance/repair obligations and disputes – who caused that

leak?!? Much more effort to put together and manage Multiple seats at negotiating table upon sale, redevelopment or

major reconstruction

17

Deal Structures (cont’d) Buyout of Existing Leases and Location Benefits

Monetize future income stream now Eliminates future management/administrative burden Removes the risk of payment defaults

Detriments Long term agreements that are very difficult to terminate Sacrifice future opportunities Greater redevelopment / sale / reconstruction restrictions or

complications May not maximize value of entire roof Frowned upon by lenders

18

Deal Structures (cont’d) Option to Lease Benefits

“Free” money Very little effort and limited obligations

Detriments Loss of future opportunity Disputes and litigation

19

Rooftop Lease, License or Easement Lease Benefits

An estate in land that provides the tenant with greater protection and an alternative financing method (leasehold mortgage)

If properly perfected it can be binding on future property owners In some states it offers landlord protection from construction

liens filed by a tenant’s contractor Detriments

Frequently more difficult to terminate and regain possession Subject to state and municipal lease formalities and tenant

protection measures such as a duty to mitigate damages and statute of frauds

Frequently requires lender approval

20

Rooftop Lease, License or Easement (cont’d) License Benefits

Not an estate in land but rather a right in contract Frequently easier to terminate and regain possession Not subject to state and municipal lease formalities and tenant

protection measures such as a duty to mitigate damages and statute of frauds

Does not always require lender approval Detriments

May subject owner’s property to construction lien resulting from licensee’s non-payment for licensee improvements

May not be sufficient protection to get the deal done

21

Rooftop Lease, License or Easement (cont’d) Easement Benefits

An interest in land that provides the holder with greater protection Not an executory contract subject to termination in bankruptcy Runs with the land Not subject to state and municipal lease formalities and tenant

protection measures such as a duty to mitigate damages Detriments

Difficult to terminate and regain possession Not easily financeable Unorthodox May be subject to technical state formalities applicable to estates in

land, such as the statute of frauds Almost always requires lender approval

22

Practical Considerations in Structuring a Solar Rooftop Deal Roof warranty Roof leaks / maintenance issues Casualty and condemnation Staging and parking Term Bonds, guarantees or other security

23

Practical Considerations in Structuring a Solar Rooftop Deal (cont’d) Insurance End of term obligations Termination rights Indemnities Sale of host property Taxes Assignment

24

Financing Considerations for Solar Rooftop Deals Subordination and Non-Disturbance

Agreements What is the lender’s collateral?

25

For more information, please contact: Stephen A. Kisker, Esq. Chair, Renewable Energy and Sustainability Group Member, Real Estate Group Wolff & Samson PC One Boland Drive West Orange, New Jersey 07052 Phone: (973) 530-2074 E-mail: skisker@wolffsamson.com

www.wolffsamson.com

Thank you!

Why Rooftop Leases are becoming

more important to telecom

companies!!

Hugh Odom

Increase in demand for wireless services= Increase in traffic on the wireless networks

Hugh Odom 27

Rooftop Lease Purpose

To build out wireless network

infrastructure in urban locations

Hugh Odom 28

Telecom companies are

focused on both securing existing rooftop leased sites and

developing new sites.

Hugh Odom 29

How does a property owner maximize their rooftop lease with a telecom company?

Hugh Odom 30

A rooftop antenna lease is not a “real estate” transaction…it is a “telecom” transaction.

Hugh Odom 31

Rooftop Lease vs. Rooftop License What real choice do you have?

What does it really matter?

Hugh Odom 32

The value of a rooftop lease is

tied into the utility of space being

used by the telecom company.

Hugh Odom 33

There is no such thing as “market

rent”; Every site has a different value..

Hugh Odom 34

Getting rent right throughout the lease is excellent.

Hugh Odom 35

Negotiating key provisions of a telecom rooftop lease is the key to avoiding

unintended results.

Hugh Odom 36

Correctly defining a telecom company’s

permitted use to protect your property and add to the value

of the lease.

Hugh Odom 37

Rent is not the only monetary obligation that a landlord needs to make sure it gets

right.

Hugh Odom 38

Access to a building’s rooftop is

important to a telecom company, but it should not be

a carte blanche right.

Hugh Odom 39

Relocation Rights Make sure a

landlord’s use of the property does not

become subordinate to a telecom tenant’s use of the property.

Hugh Odom 40

Assignment/Subleasing Control the use of your building and value being derived from such use.

.

Hugh Odom 41

Who is

responsible for government

approvals and compliance?

How does one monitor this

ongoing obligation?

Hugh Odom 42

Indemnification How a standard telecom lease indemnification

provision can open you up to unforeseen liability.

Hugh Odom 43

Insurance A telecom rooftop

lease is a long-term

agreement, do not have a stagnant

insurance section.

Hugh Odom 44

Why rental stream offers are becoming more common, more misunderstood and more detrimental

for property owners.

Hugh Odom 45

Conclusion Telecom Rooftop Leases can be a

win-win transaction.

Hugh Odom 46

Thank You. Hugh Odom President and Founder Vertical Consultants, LLC 4005 Aberdeen Suite 100 Nashville, Tennessee 37205 Phone: (877)456-7552 E-mail: hugh@vertical-consultants.com Website: www.vertical-consultants.com

Hugh Odom 47