As another wave of wireless communications carriers prepares to enter the L.A. market, mobile phone users aren't the only ones to profit. Property owners who have buildings in the right places are already reaping financial rewards.
Antenna sites are becoming more in demand by the wireless carriers seeking to build up their networks, and property owners are getting savvier in their negotiations.
"I used to feel like Santa Claus when I started this job," said Larry Levine, the manager of site development for AirTouch Cellular. "Once I explained it to (the landlords) that we'd pay them rent in exchange for practically nothing, they couldn't believe their fortune that their property just happened to be in the right location."
Levine said he routinely receives about three offers each week from landlords offering their land for cellular sites. Several big landholders have struck bulk leasing agreements with the telecommunications companies and some large real estate holding companies have even formed divisions to handle the leasing contracts.
Karl Schwass, vice president of Metropolitan Life's corporate property management division in Los Angeles, said his company formed a special rooftops program two years ago in an effort to attract more telecommunications tenants.
"We realized that there was a tremendous opportunity to generate revenues," said Schwass, who said that a building with multiple antenna leasing agreements could bring up to $1 million from its telecommunications tenants. "This was the best way for us to maximize our income and minimize our liability."
The new wireless carriers, including Pacific Bell Mobile Services, Nexttel Personal Communications Systems and Sprint PCS, will join the already established AirTouch Cellular and L.A. Cellular in the Los Angeles market. Pac Bell launched its local services in July and Nexttel and Sprint plan to start their operations later this year.
The wireless carriers offer so-called personal communications services, which use digital technology rather than the cellular carriers' analog or soundwave technology. AirTouch and L.A. Cellular are also adding digital technology to their services. Digital carriers will eventually have the capacity to offer call waiting and caller ID.
In this seller's market, wireless lease agreements are often sweet deals for landlords. Telecommunications companies often pay about $2,500 each month to lease space on a rooftop or on the side of an office building. They're low-maintenance, long-term tenants that pay their own utility bills and the cost of installing and camouflaging the equipment.
In exchange, landlords must provide unlimited access to the sites, where tenants place multi-directional antennas and small mobile home-sized computer centers that are often placed in the building's parking lot or buried underground.
As with all real estate, location dictates value. The wireless company's engineers first decide where they need to place antennas, depending on coverage and capacity needs. Then a few locations are identified. The permitting and entitlement process can sometimes take up to 14 months.
While the Federal Communications Commission has safety standards regulating cellular antennas, community groups sometimes balk at their installation, arguing that they are a health risk namely that they emit electromagnetic radiation.
For some landlords, appearance of cellular antennas is a primary concern. Bart Porter, senior vice president of Arden Realty, which owns 51 buildings in Southern California, prohibits any antenna on the side of a building.
"We don't want our buildings looking like mission control center in Houston," he said.
It's often easier for a wireless communications company to place its equipment where a competitor has already planted a tower.
Ron Egdorf, manager of Sprint PCS's L.A. district, said his company is looking mostly at co-locating as it establishes its network. "It fits into the community needs and cuts down on the amount of our labor," especially paperwork, he said.
That means a handful of landlords receive multiple rent checks from their rooftop tenants. Some companies and organizations, such as the Roman Catholic Archdiocese of Los Angeles, the California Transit Authority and Sam's Club stores, have made bulk land-leasing agreements with telecommunications carriers.
Porter said the bulk agreements are mutually beneficial to both landlords and carriers, because they reduce the legal fees. But he added that Arden has been hesitant to enter into one because the Beverly Hills-based real estate investment trust has been deluged with offers from wireless communications companies, satellite operators and fiber optics companies in recent months.
"We're trying to learn what this is all about," he said, adding that the company hopes to balance the revenue potential with tenant and aesthetic concerns.
"We plan to enter into (leasing) through measured strides," he said. "Because this could potentially get out of hand."
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