Mark,
You may also want to become familiar with current laws and regs as they relate to colocation rights in central offices and building easements. It would pay to become familiar with "Carrier Hotel" practices, too.
I have a few insightful articles on this topic, if you care I can email them to you. Or you can simply do a web search on "colocation" or "collocation" spelled variously different in different pubs, or on "carrier hotel".
The following article from Telephony Magazine may be of interest.
Regards, Frank Coluccio
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internettelephony.com
UPSTART Section January 25
Realty Bites, By Dan O'Shea
Your company and your network need homes, but don't let the real estate
business swallow you whole pace. The final frontier?
No. But a new telco has to think about finding space at some point. An office
headquarters for a small, but (hopefully) growing, organization. Well-chosen
locations for physical network facilities. And it better not be the last issue a
carrier confronts.
Certainly, others are thinking about it: property owners, real estate brokers, civil
planners, leasing agencies, property managers. For new carriers, it can be a
crazy ride. Them against us. Wildly varying prices. Buy vs. rent. Confusing
leases. Tense negotiations. Legal mumbo-jumbo. Future growth predictions.
Assessments of what you can afford now. Location, location, location.
Any consumer can tell you the dangers.
But the risk is greater for a telco. Having the right, or wrong, space can affect
business success. Doing things wrong can hamper network planning, contribute
to debt, strap an organization for the future. Doing things right can mean
manageable rent or payments, the most efficient space for technology, high
flexibility for future growth.
The trouble is: A shortage of experts. And: No shortage of opportunists.
New telcos constantly grapple with realty-related decisions. People still start
companies in their garages, but there's no room for a network next to the bike
rack. No room for sales or customer service people amid the bowling trophies.
Property is one of the first obvious needs of a young company. And one of the
easiest to put off. After all, choosing and deploying technology, building brand
identity, selling service, managing service all rank somewhere higher in the grand
scheme.
Thus, many new carriers have been inefficient, inconsistent about acquiring
space for their operations. Attempting "Do It Yourself" scenarios, they've lacked
experience and understanding of legal issues, costing them money and time.
They've confronted different prices/rents in different markets, different paces for
lease negotiations, different attitudes from different property owners, different
types of buildings with different physical requirements. Different regulations. No
general rules have applied.
The birth of an idea: master leasing.
Master the possibilities
It was only a matter of time. Someone would figure out a way to collect
properties, usage rights or management contracts for the commercial buildings
most likely to serve as headquarters, networks and sales fields for new carriers.
Two boyhood pals from Chicago's south side, friends since '47 who finish each
others' sentences, picked up the ball. Perry Ruda and Jordan Glazov started
U.S. RealTel in 1997. The Chicago-based landlord agency now controls telecom
access rights for more than 6000 commercial buildings nationwide.
That pool of properties serves as the playing field for USRT's Master Lease and
Master Sublease. The first document: USRT negotiates, engineers and manages
leases of any and all telecom clients for all of a property owner's holdings. The
owner signs one master lease, regardless of how many/where/what type of
properties owned. The second document: Upon signing one master sublease,
telcos get instant access to any number of properties they require among the
6000. They get to discuss rent, needs with a lessor that understands their
industry--USRT.
No more Do It Yourself.
"We've seen a DIY syndrome," says Glazov. "[Carriers] try it, but it's too costly.
Takes too long to get the experience."
"They'd end up spending less of their income by outsourcing," adds Ruda.
Experience is one part of what USRT offers. Ruda and Glazov have collected two
careers worth of contacts in both telecom and real estate. Glazov is a veteran of
real estate, law, asset management. Ruda ventured from commercial real estate
into telecom, starting the Cellular Realty Advisors, a wireless site acquisition
firm.
Early on, CRA eyed the PCS-driven boom in wireless network constructions.
Ruda and Glazov saw more shades of that with the emergence of CLECs.
"We asked the CLECs where their buildouts would occur, and we acquired the
telecom rights to those buildings," says Glazov now. Sounds easy, but a bigger
job. A difference between CRA's wireless clients and CLECs: The latter want to
be in every building. To them, a commercial building isn't just a potential spot for
an antenna or switch. It's also home to customers that high-margin hungry
CLECs need.
Methodically, the company amassed rights for building after building in the urban
cores and highway corridors in the top 200 markets. "The areas where all the
CLECs want to go," says Glazov. It took 18 months to build an inventory of
properties worth marketing to carriers.
In doing so, USRT not only convinced individual building owners to sublease
telecom rights, but also scored multisite contracts from some of the largest real
estate holding companies and property managers: Brandywine Realty Trust,
Simon Property Group, Glimcher Realty Trust, Urban Retail Properties, Equity
Residential Properties Trust, Chicago Title Insurance Co., First Union
Management. Properties such as office towers, high-rise apartment and condo
buildings, shopping malls, hotels, chain restaurants, service stations.
So Glazov and Ruda understand what carriers are doing, where they want to go,
as much as they understand property management. And, besides experience,
cost benefits. With USRT's master lease in place and an in-house legal team in
the wings, legal fees don't spin out of control. In addition, the master lease helps
carriers better predict their budgets for rent and real estate. Moreover,
multimarket carriers don't need to conduct extensive, expensive searches for the
right sites. All that info is on the USRT Telecom Grid, a national properties
database the company updates about every two weeks.
Carriers can literally find the right sites and sign leases within days, or
sometimes even hours, says Glazov.
A growing carrier client list--TCG, Teligent, Media One, Nextel, PrimeCo, among
others--is evidence USRT's innovative approach is working. In the beginning,
though, some speculated it wouldn't.
Glazov begins: "Carriers thought we couldn't assemble the properties and work
out the master lease." Ruda finishes: "But they said they wanted to be first in
line if we did."
Independent property owners' opportunism and corporate landlords' acumen
looked to be hurdles. Ruda asks the begged-for question: "Would they agree to
documents they didn't draft?" While many real estate holders knew telecom
would be an explosive opportunity, they didn't know where to start.
"Telecom is an industry that [property owners] don't know, so we eliminated a lot
of leg work for them," says Ruda.
Get real
Still, there are options to USRT's master leasing. Though it's hard to match the
6000-property grid, ambitious leasing agencies could start pooling properties.
But, they'll have to settle for USRT's leftovers, Ruda points out gleefully. Glazov
adds, "At this point, we're a hard act to sneak up on."
Further options: Technology communities, buildings really, that offer space to
high-tech start-ups for office, sales, equipment needs. Infomart, outside Dallas,
dates back to the '80s. Neutral collocation companies also make room for
technology (see story on page 44).
More: If going it alone, carriers still don't have to go it alone. With various levels of
the real estate industry to navigate, various property options to consider,
corporate and independent real estate brokers can serve as guides. Some see
the telecom opportunity coming.
One is Adam Sharrin, Chicago-based managing director of Insignia, ESG, a
corporate real estate company. Sharrin, small-framed but steel-eyed, conveys
the lurking intensity of a dealmaker. Someone who's watched other industries
burst with growth as telecom is now. "When an industry gets this explosive,
there's always going to be a need for more real estate," he says. "Different
industries have special real estate needs and have to acquire the expertise to
deal with them."
Within these industries, especially telecom, the same goes for companies of
different stripes. Sharrin: "Some telcos might be big clients after a lot of
properties. Others might be two guys looking for a place to start."
Either way, aligning with a broker offers advantages: experience, connections.
Still, a broker can't tell you what you want. Some new telcos have to be coaxed
into figuring that out, into having a vision of their long-term needs, says Sharrin.
Also, repetitive mantras aside, location isn't always the most important real
estate consideration for new carriers.
Sharrin: "The technical support capabilities of a building are critical. So are the
financial requirements of the landlord and the space, any new investment it might
require. Also, support for future growth is important."
Technically speaking, old buildings in urban areas pose challenges. Price and
location might be right but physical structure limiting. No room for circuitry,
undependable power supply and environmental systems. Renovation is a must.
Enter firms like Riser Management Systems. RMS has retrofitted spaces such
as NYC's "55 Broad Street" technology complex, says prez Jerry Marmelstein.
A man in his element: Marmelstein used to build networks for the Columbus of
CLECs, MFS. He now leverages telecom expertise with real estate developers
and understands the special space needs. "We have to put sophisticated fiber
distribution systems in some of the older buildings to deal with the lack of room."
The need for such technical work is just one financial consideration. Another:
Finding or negotiating the best sale price or rent. "The right economic deal can
be more important than the right location," says Sharrin. Example: Focal
Communications located its HQ in a downtown Chicago building worth more
today than when the company bought into it.
Message: With the real estate market in an upswing, investing correctly now
could yield extra digits later. But deals don't hinge on a carrier's readiness to
write a check. Again, property owners see the telecom opportunity coming, but
trend cachet isn't a deal-closer for them. "Start-up companies don't have a lot of
credit worthiness as clients. Landlords are always afraid of that risk," says
Sharrin. "Even a big, well-known start-up might not be profitable."
Call it a realty reality check: Carriers need to be ready to prove their credit worth
to property owners. Meaning: Facts about finances, future plans, estimations
about profitability. Realty's a two-way street: Buyer, seller. Lessor, lessee. New
carriers have ideas about how big they will be, how valuable their ideas are, how
profitable they can become. Most of this, though, is in their heads for now. An
intangible brew of hopes, dreams, personal confidence, general direction.
Carriers need to get real about it: Establish a long-term plan that includes, on
some level, real estate needs, the wherewithal to support them. "Long-term might
be two years for some companies, and they have to be pushed to see that far,"
says Sharrin.
But beyond a carrier's needs, that's a bare necessity for finding the right deal:
Convincing entrepreneurs to think long-term, getting them to convey this to
landlords, a sense that they will be tenants "who can grow to be really big,
valuable tenants." |
