How Should Average Rent Be Calculated?
By Mark Christenson
Recently we heard from an operator that their average rent per site was lower than that of one of their competitor’s. We consider measuring and analyzing network rents to be one of our specialties, and we were curious how they determined this laudable accomplishment. They said that they looked at an annual report from their competitor and simply divided the amount listed for rent by the estimated number of sites in the competitor’s network.
Although that would provide a ballpark figure, we suggested that a bit more analysis is required to understand whether or not their rent is higher or lower.
The reason we suggested that more work needs to be done is because although their analysis did provide a generalized estimate of a particular expense item, the one or two line items used from that annual report do not necessarily provide a level of accuracy against which a comparison should be made. For example, although simply dividing the number of sites into the total rent does give an average rent per site, it does not consider how that total rent is being calculated. Apart from lease contract-mandated rent itself, there may be other items that can significantly skew the numbers enough that it is not an apples-to-apples comparison. In other words, is the rent line item only showing the actual rent being paid to a landlord, or are other factors included or even netted against it? At least one operator in the world nets colocation revenue for shared sites against the network rent, significantly decreasing the apparent rent. Analysis such as this could lead to a lost opportunity to reduce the actual rents being paid to landlords, or create a false sense of security if this metric is only compared against other operators and those other operators are not calculating rent the same way.
Another example that could significantly impact the validity of the comparison is that some operators have significant “owned tower” portfolios thus lowering the average rent since those sites will have zero rent, or perhaps a minimal ground rent that is much less than the rent associated with a tower site or rooftop. (Although there is a depreciation expense from the capital expenditure, it will likely show up elsewhere in a financial report).
These two examples alone can provide either a false sense of high performance (“our average rents are 10% lower than the competition—great!”) or a false sense of low performance (“darn, our average rents are 15% higher”).
To compound the potential lack of accuracy, we contend that the correct comparison metric should not even be the rent being paid by a competitor. Instead, an operator should compare what its rent could be if it managed this critical real estate asset like it manages the other segments of its real estate portfolio (office space and retail space). In other words, rent should be compared against what the rent would be from another landlord in the same area. We have found that, on a per-square-foot or per-square-meter basis, operators pay rents 60-100% higher than space in the same geographic areas—and this has held true for years, regardless of whether we are looking at rural areas in the United States or city centers in Europe or anywhere else.
The wireless industry has always had its own, isolated view of network real estate costs. The result of which is that operators around the world have overpaid for rents since the first networks were deployed over 30 years ago. But, in order to calculate the size of the opportunity and how it can be addressed, it is important to consistently calculate the rent and compare it consistently as well.
The Seasoned Traveler
By John Cahill
Vice President of Business Development
As a seasoned traveller, typically logging 80,000+ airline miles and over 75 hotel nights in a year, you become accustomed to and prepare for Airport parking hassles, TSA security requirements, clogged airport terminals, weather delays, long lines, cramped planes and just plain waiting. I’d have to say, in general, the best way to prepare is to lower your expectations for service and comfort, whether it’s Airport personnel, vendors or the Airlines. Not to say there are not service agents who will truly try to be helpful. There are good people and good experiences to be found out there. But, however exciting travel sounds, business travel is just not a glamorous activity.
To cope and compensate, you develop certain routines. One rule you see used by many travelers is to bring a carry-on bag and not check luggage. For some, this may be strictly to avoid baggage fees but for most active business travelers these fees are waived and not applied based on the quantity of flights with a specific airline. However, often not checking a bag is one key to speed and convenience when arriving at an airport and not having to wait for luggage at baggage claim. I am one who adheres to this policy unless I have excessive luggage for a lengthy trip or planned extracurricular activities, e.g., golf clubs.
Recently I was traveling on a usual route leaving from my home Atlanta airport on my usual, loyal airline. But this time, I had arrived early. I knew the plane would be full and crowded and I wasn’t necessarily in a hurry so I decided to check my usual carry-on bag. Being a frequent flier, I knew my bag would be tagged priority and I would not have to wait long for my bag at my destination. And besides, the airline has a 20-minute bag delivery guarantee! I was able to traverse the airport a little easier and boarded my cross-country 4+ hour flight.
I arrived on time, proceeded to baggage claim and waited for my bag. After waiting 10 minutes or so, I began to notice people picking up bags without priority tags and making their way out of the airport. Could it be that the one time I voluntarily checked my bag, it didn’t make the flight? I was at the airport plenty early for my flight. With all these thoughts going through my mind, I heard my name paged to please come to the Airline baggage service desk. There I found the reason my bag was not on the baggage claim conveyer (see attached picture). Ouch! The very courteous and helpful baggage service agents surmised my bag had either been stuck in the routing conveyer after being checked, had fallen off the delivery trolley, been dragged and run over, or, all of the above. Well the airline did compensate me for my bag and the agents made the experience as painless as possible. For that I am grateful. Also a big shout out to Briggs & Riley luggage! Although my bag was destroyed, the contents were unharmed!!! From the picture, you may notice a bottle even survived. Unfortunately for me, it was not a bottle of Bourbon – I could have used it just then.
Now I am even more dedicated to my “never check a bag”’ policy.
How the Smartphone has Impacted Our Lives (Keeping Our Family Safe)
By Tom Leddo
The Smart phone has revolutionized home and family safety. There are hundreds of apps for home monitoring that can be linked with a professionally installed home security system or a self installed video monitoring system (i.e. a Nanny Cam).
Jeff Sayegh, Director of Operations for Md7 in San Diego, is a pretty technically savvy guy who uses both a professional and self-installed version.
“We use the Cox Security and Belkin NetCam app to ensure our loved ones are safe. While I am traveling, I can ensure they are safe at night because I can remotely arm our home from my smartphone, check video of who has entered the house, inform me of any open doors or windows and it is all date & time stamped. When my wife and I both work, we have a babysitter pick up the kids and we occasionally peek in on them at any time using the Belkin NetCam app. Additionally, we have left the garage door open once or twice with no one at home. We placed a camera in the garage just to ensure we have closed it when we are rushing out.”
Another option is wireless locks for home doors that allow you to lock or unlock the door from anywhere you have a wireless signal and provide temporary e-keys to anyone you want to let in your house. This is extremely handy if you have houseguests. You can give them a temporary code that works for the length of their stay without having to worry about handing keys back and forth.
Some versions operate just like the wireless remote on your car to unlock the door automatically as you approach the door with your arms too full to find your keys.
The smartphone and Wi-Fi controlled garage door were recently highlighted in the Wall Street Journal. You can open/close your door remotely, sync with your HVAC to activate cooling or heating systems as you come home and receive updates each time the door opens/closes if you are tracking teenagers.
Probably the most common apps for keeping our families safe are tracking apps. Whether you want to find your lost phone, keep an eye on your teenage kids or spy on your spouse, there is an app for you. A husband and wife who are friends of mine have a healthy use of the spouse-tracking app when he commutes to and from work on his bike. She worries when he is riding in traffic and wants to know that he is safe and when he will be home. Since it is not easy, and dangerous, to answer the phone or text while riding in traffic, she simply tracks his phone using Find my Friends on their iPhones.
These are all good examples how the smartphone is impacting our daily lives in unbelievable new ways.
Two Great Companies, Now Together, and Better: Md7 and Lexcom
The wireless industry is constantly changing and so is Md7.
Exponential data growth, 100% handset penetration and flattening revenues require a new network deployment model, one in which wireless operators must significantly grow network capacity at lower price points while improving reliability and delivery speed. Together, the wireless technology companies and service providers who support the operators must develop that new model.
In response to this need, Md7 continues to innovate. Since our inception in 2003, we have developed and implemented our internal tracking software, known as LiveTrack™, to manage thousands of negotiations simultaneously from our central office in San Diego. We have mastered high-volume lease negotiations and, in the process, improved the overall quality/consistency of the lease documents delivered while keeping rents down. Subsequently, riding the LTE build-out wave, Md7 also scaled zoning, permitting and site acquisition management services, completing tens-of-thousands of site modifications and new builds.
Lexcom was founded on the perspective of an industry veteran, who, after decades of building teams, managing large-scale carrier programs and working with hundreds of site acquisition firms, sought to create a better site development model. Joining with other industry veterans, they started with a simple idea that great people will do great things with the right vision, motivation and systems.
While focused on streamlining processes and eliminating inefficiencies, Lexcom also emphasized its core values-respect, trust and integrity. In just over three years, this focus and philosophy fueled growth and enabled Lexcom to become a leading site development service company in the Pacific Northwest.
With a strong focus on continuous improvement and a need for superior systems, Lexcom became an Md7 customer when it began utilizing LiveTrack™ to manage deployment projects for its customers. While working together, it became apparent that the two companies had much in common, including:
- A similar vision of the direction and coming needs of the wireless infrastructure business
- A similar desire to offer our customers a better and faster level of service at lower price points
- A common customer and employee-focused value system with a desire to be a stable, growing and innovative company in a highly competitive market
Thus, it simply made sense to combine Md7’s centralized efficiency with Lexcom’s localized know-how.