Former Mobilitie Site Owners: Beware of Estoppel Letters with Additional Terms

SBA recently acquired Mobilitie’s tower portfolio of over 2,300 tower sites.

My friend and trusted colleague, attorney Mike Ritter of Tower Seekers has sent me a copy of an interesting (and potentially disastrous) letter being sent to tower site landlords by SBA, a tower company that acquired Mobilitie’s tower sites.

SBA (or one of its affiliates) is going after financing, and the SBA letter say, in part:

[SBA] or one of its affiliates is obtaining financing (the “Loan”) from a lender (together with its successors and assigns, the “Lender”), and will be pledging its interest in the Lease as collateral for the Loan and the Lender is also requesting confirmation of certain matters regarding the Lease.

In other words, SBA is going to take your wireless site lease and pledge it to secure a bank loan.

The next part of the letter asks the landlord to confirm certain facts about the existence and status of the cell site lease.  This is a request for the landlord to execute what is called an ‘Estoppel Certificate.’  The landlord is being requested to legally certify that the facts stated in the letter are true and correct, and the lender can rely on those facts when making its loan to SBA.   Commonly, there’s nothing wrong with such a request as long as the facts stated are entirely correct.

Once signed, however, the landlord is legally estopped (barred) from later claiming that some problem with the lease existed at or prior to the date he or she signed the Estoppel Certificate.  If there’s some undiscovered problem, but the landlord signs the Estoppel Certificate, then he or she can be giving up very valuable lease enforcement rights.  This is why it is critical for landlords to be exceptionally careful in ascertaining the accuracy of the facts before executing the Estoppal Certificate.  In some cases, you (or more likely your attorney) will want or need change the language of the Estoppel Certificate before signing it, if it can be truthfully signed at all.

For example, in a current matter I’m handling for one of my cell tower site landlord clients, a tower company — not SBA — sent a written request to my client asking that he execute an Estoppel Certificate. The tower company even offered to pay $500 for the landlord’s execution of the Estoppel Certificate. At that time, however, the tower company was in serious Rent arrears by many thousands of dollars.  Had my client signed the the Estoppel Certificate before I reviewed it, he would have wiped out major claim for the overdue rent for the token payment of $500. That’s a great business deal, but only for the tower company.

Now back to SBA and its zinger:  Not only does the SBA letter serve as an Estoppel Certificate, there’s also a lot of added language that is intended to be a legally binding formal amendment to the underlying lease. The amendment would have the landlord give up tremendously valuable legal rights. Here are the Zinger sections from the SBA letter, followed by my translations from Legalese to English:

(e)  If Lender exercises any rights of Tenant under the Lease, including the right to exercise any renewal option(s) or purchase option(s) set forth in the Lease, you agree to accept such exercise of rights by Lender as if same had been exercised by Tenant, and Tenant, by signing below, confirms its agreement with this provision.

Plain English Translation: If your lease requires that you receive notice of the tenant extending its term, you agree to accept that notice from the third party lender.

(f) If there is a monetary default by Tenant under the Lease, you will accept the cure thereof by Lender within fifteen (15) days after the expiration of any grace period provided to Tenant under the Lease to cure such default, prior to terminating the Lease. If there is a non-monetary default by Tenant under the Lease, Landlord will accept the cure thereof by lender within thirty (30) days after the expiration of any grace period provided to Tenant under the Lease to cure such default, prior to terminating the Lease.

Plain English Translation:If your tenant stops paying you and you are about to terminate the lease, the lender is given additional time to beyond the grace period to pay you. This negatively affects your rights to terminate the lease for non-payment, and to then enter into a new agreement with better terms…for you.

(g) The Lease may not be amended in any respect which would be reasonably likely to have a material adverse effect on Lender’s interest therein or surrendered, terminated or cancelled, without the prior written consent of Lender.

Plain English Translation: If you negotiate a lease modification in good faith with your tenant, the lender need only claim that amendment would likely have some negative impact on the lender to then nullify the amendment.

(h) If the Lease is terminated as result of a Tenant default or is rejected in any bankruptcy proceeding, you will enter into a new lease with Lender or its designee on the same terms as the Lease within 15 days of Lender’s request made within 30 days of notice of such termination or rejection, provided Lender pays all past due amounts under the Lease. However, this is not applicable to normal expirations of the lease term.

Plain English Translation: If the lease is terminated for virtually any reason, including bankruptcy of your tenant, you have no choice but to enter into a new lease on the same (perhaps lousy) terms of the terminated Lease. You lose virtually all rights to end your lease because of some bad act of the tenant…the most likely result is that the lender says, ‘do over’ and poof: A new lease on the same old terms as the one that you just terminated.

This letter shall be binding on Landlord and Tenant and their respective successors and assigns and shall inure to the benefit of Lender. Tenant shall have the right to record this letter and it shall serve a as a memorandum of the Lease. Tenant shall have the right to record this letter and this recorded letter shall be deemed to provide notice of all of terms of the Lease.

Plain English Translation: This letter is NOT ONLY an Estoppel Certificate, it’s a binding amendment to your lease adding terms that are not very good for you as the landlord, but REALLY good for the lender and the tenant.

Please indicate your agreement to the foregoing matters by countersigning this letter in the space provided in the presence of two witnesses and a notary public and returning an original, countersigned, witnessed and notarized copy of this letter to Tenant in the enclosed prepaid Federal Express envelope.

Plain English Translation: Sign on the dotted line in front of a couple of witnesses and we’ll spring for the cost of returning the stuff to us. Oh boy!

If you are a tower site landlord and get one of these letters, I strongly urge you to talk with your attorney before you even think about signing it. As your attorney will likely tell you, you should not agree to a modification of your lease without knowing all of the upsides and downsides of the modification, and in some cases trying to balance the downsides with new benefits.

Now you know my opinions on regarding letters like the one being sent out by SBA. Be very careful.

Facebooktwitterredditpinterestlinkedinmail

Municipal Cell Site Lease Transactions

A couple of years ago, John Pestle and I conducted a cell tower lease rent analysis for the International Municipal Lawyers Association.  That study was valuable to show that cell site rents were all over the spectrum by location, deal points, time, and other components.

To assist my municipal attorneys and municipal consultant colleagues evaluate offers and craft better terms for leasing government property for cell sites, I’m starting a separate page here at CellTowerSites.com to track cell site transactions (leases; licenses; amendments; terminations; etc.).  The page will contain links to actual documents, and a short analysis of the key points of each transaction.  Brief general information about new cell site documents uploaded to this site will be posted in public view.

Note that the tracking site page will only be available to registered users who prove themselves to me to be municipal attorneys, private attorneys who work for municipalities as outside or contract counsel, or selected municipal consultants.

If you’d like to have access to the private site page and you are not already a registered user here, you’ll need for first register for access to this site using THIS PAGE.  Once you’ve registered, come back to this page and fill out the form below.  I’ll upgrade your registration to note your access to the private page area.

    Your Full Name (required)

    Your Government/Firm Name (required)

    Your Government/Firm Website (required)

    Your Telephone Number (required)

    Your Email (required)

    To verify your credentials please provide a reference to at least one municipality or public agency you serve:

    Finally, please prove you are most likely a real human being by filling out the recaptcha form (you'll be doing a good deed at the same time):

     

     

    Facebooktwitterredditpinterestlinkedinmail

    Did Sprint+Network Vision-Lightsquared = Sprint+Clearwire+Softbank?

    I’ve been thinking about why Sprint has now decided to sell itself to Softbank.

    It seems to me that one possible answer would be to blame Clearwire and then LightSquared.

    Clearwire was to be Sprint’s first (but not last) 4G answer, but WiMax never took off.  In fact, the only thing about Clearwire that took off were some of its major investors, like Google looking elsewhere to invest and actually make money on the investment.

    Comes then Lightsquared, with its grand plan to deploy 4G services to various existing carriers using a very odd frequency band adjacent to the widely-relied upon GPS downlink band.   Sprint loved its new 4G provider, especially since Lightsquared was to pay $9 billion-ish to Sprint to use the new Network Vision platform.  While Lightsquared would be free sell its services through other carriers, it would be in a sense captive to Sprint since it would be a major network platform provider for Lightsquared’s services.  It seems clear that Sprint’s Network Vision project moved forward, certainly in significant measure because of Lightsquared’s funding commitment.

    Then came that nasty little GPS interference problem and sunk Lightquared, and resulted in a bankruptcy filing.

    Sprint was left holding a $9 billion bag looking for another funding source for Network Vision.  Before Softbank, no major replacements had stepped up.  Sprint began shuttering Nextel sites as quickly as they could to reduce that ongoing lease load while pushing new Network Vision sites out into the field.

    Not fast enough, apparently.

    Now comes Softbank to offer up a huge capital infusion and other goodies for a 70% stake in Sprint.  And, Softbank is eyeing Sprint’s nearly-kaput first 4G love, Clearwire.  Word on the street is that Sprint, tracking Softbank’s longing eye, will try to take actual control of Clearwire, which was something denied it by the original investment agreement that kept Clearwire as a separate entity from Sprint.  That would certainly make Sprint’s current love very, very happy.

    One thing for sure: The T-Mobile+MetroPCS and Softbank+Sprint+Clearwire equations equal big trouble for the rapidly-disappearing smaller regional wireless carriers.

    It would not surprise me to see virtually no regional carriers, and only four major wireless carriers in the U.S.: Verizon, AT&T, T-Metro, and SoftSprint.  Following, I envision a T-Metro split-up shortly after it figures out that all it did was to replicate the dumb Sprint Nextel technically incompatible deal that started Sprint’s slide into the current Softbank sale.

    Then there would be 3.   Then you’ll hear the pin dropping on the table.

    Facebooktwitterredditpinterestlinkedinmail

    4 a.m. EDT Webcast: Is Sprint going…going…gone?

     

    Just sent out by Sprint…a 4 a.m. press conference?  Seems like they’re about to announce their deal with ________________.

     

    Sprint to Hold Webcast

    OVERLAND PARK, Kan. (BUSINESS WIRE), October 15, 2012 – Sprint (NYSE: S) will hold a special webcast at 4:00 a.m. ET on October 15, 2012. Interested investors, analysts and media should monitor the Sprint website at http://newsroom.sprint.com/news/ at approximately 3:55 a.m. for a link to the webcast for this special event. For those unable to view at this time, replays will be available.

    Facebooktwitterredditpinterestlinkedinmail

    Jonathan Atkin on the pending T-Metro marriage

    Jonathan Atkin analyzes the wireless sector for RBC Capital Markets, LLC.

    Better put, Jon dissects the wireless sector, looking at the players, numbers, and technologies in multiple contexts and from multiple angles spotting nuances leading to a much deeper and more complete worldview of wireless.

    I have had the pleasure of hearing Jon present at several AGL regional conferences, and I always walk away from his presentations with a much keener view of the wireless industry and its direction(s).

    Jon released a research report a few days ago on the pending T-Metro marriage that is well worth reading and understanding. He summarizes his research this way:

    Our initial take is that a potential business combination between T-Mobile and MetroPCS is of dubious merit for Deutsche Telekom under business conditions and public-market valuations. We expect few regulatory barriers to such a deal, and believe Sprint could benefit competitively.

    Jon points out that the proposed T-Metro intermarriage is one of different transmission technology religions. This rules out quick systems’ integrations and synergies as each partner will continue to practice its own signal transmission religion for for foreseeable future. He cites Sprint as a much more suitable marriage partner for MetroPCS given that both of them practice the same signal transmission technology religion. (Hey, it’s my metaphor…go with it.)

    Not mentioned in Jon’s analysis is that with Sprint’s deployment of its Network Vision project, that firm will be in a much better position to rapidly deploy MetroPCS services from the new Network Vision sites. This would allow Sprint to shutter some/many MetroPCS sites quickly, substantially reducing site lease rental costs, especially at existing collocated Sprint/MetroPCS sites.

    The funny thing is that a Sprint+MetroPCS marriage would be much more likely to succeed compared with the disastrous Sprint+Nextel marriage, which, like the pending T-Metro marriage, is based on each marriage partner practicing a different and incomparable signal transmission religion.

    Jon notes that even if the T-Metro marriage is consummated, the new shared life of those partners will be distracting early on in their new union, opening the door for Sprint (and Leap Wireless) to push forward. My gut feeling is that a consummated marriage between T-Mobile+MetroPCS will prompt a Sprint+Leap marriage.

    Read Jon’s report by clicking here: Hello, Hello, Hallo – Thoughts on Potential DT/PCS Tie-Up.

    Jonathan

    Facebooktwitterredditpinterestlinkedinmail

    T-Mobile and MetroPCS to Merge (“T-Metro”?)

    [Updated: Some clever person registered T-Metro.com in May of 2012! jlk]

    Merger announced today. T-Metro (my name; not theirs…yet) will be the 4th largest carrier after Sprint Nextel.

    According to Fierce Wireless, the deal is structured as a recapitalization. MetroPCS will perform a reverse stock split (1 new share for every two existing shares), and make a $1.5B payment to MetroPCS stockholders. MetroPCS will then buy all of T-Mobile’s stock from T-Mobile’s parent, Deutsche Telekom for 74% of MetroPCS’s common stock. Deutsche Telekom will roll the debt owed to it by T-Mobile into $15B of new senior unsecured notes of the merged company. The result is that T-Metro will have an unsecured credit line of $500M, and $5.5B of additional loan commitments.

    T-Mobile and MetroPCS site landlords: Expect tons of collocated/nearby sites to be shuttered. Let’s talk now.

    More detail shortly.

    Leap/Cricket Wireless…Are you next to go?

    Jonathan

    Facebooktwitterredditpinterestlinkedinmail