Cell Tower Lease Valuation and Appraisal

Cell Tower Lease Valuation and Appraisal

Across the United States, there are approximately 400,000 cell tower leases that exist. These leases include ground leases for towers, collocation leases on towers, rooftop leases, and leases on structures like water towers and billboards. At Steel in the Air, we specialize in providing expert cell tower lease valuation services. We are dedicated to aiding appraisers, financial institutions, and attorneys with their leases. Over our two decades of experience, we have reviewed 15,000 leases and delivered valuation services for more than 4,500 leases. Knowing how much your cell tower lease is worth can help inform your financial decisions. This information is crucial when making decisions about your lease or property.

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    Understanding Cell Tower Lease Valuation

    To calculate the financial value of a cell tower lease, we review the lease(s), amendments, and pay records along with the terms and conditions within. The standard cell tower lease consists of monthly or annual rent payments over a period of 25 years or longer. An understanding of the rent, escalation, and revenue sharing clauses helps ascertain how much a lease is worth. Known as the “fair market value,” this is the amount that “a willing buyer and seller agree upon, provided that they have equal access to information and are not under any duress to complete the transaction.”

    What Makes Cell Tower Lease Appraisals Different from Cell Tower Lease Valuations?

    Appraisal: An official process conducted by a licensed professional, appraisals produce a comprehensive report about the lease site. Appraisals are necessary for legal disputes, tax issues, or any time a government body requests it. Please note that SITA is not a licensed appraiser but has provided letters of opinions on the fair market value of cell site lease to other appraisers to “wrap” their appraisal around.

    Valuation: Compared to official appraisals, which have stricter standards, valuations are less formal and more affordable. They estimate a lease’s value without following all the strict guidelines of formal appraisals. Even if they are not as thorough, they are just as accurate and quicker to finish and offer crucial insights on market worth.

    Aspect

    Appraisal

    Valuation

    Goals

    Determine official value for legal and tax issues

    Estimate market worth for investment decisions or for simpler valuation purposes

    Process

    Conducted by licensed appraiser

    Conducted by cell tower lease expert

    Report

    Formal appraisal

    Letter of opinion on value

    Cost

    Higher Cost

    More Affordable

    Timeframe

    2-5 months

    3 weeks to 2 months

    Usage

    Required for legal disputes, tax issues, some eminent domain proceedings.

    Used for financial decisions, informal valuations, selling, investing. 

    Litigation

    Used in litigation in some cases.

    Used in litigation or by appraiser to support their valuation of a property.

    Standards

    Appraisal standards

    Does not follow formal guidelines

    Examples

    Lease of government land, tax assessments and contested tax cases, property valuations for eminent domain

    Market assessments, estate valuation letters for IRS, bank lending valuations

    Techniques for Determining Cell Tower Lease Values

    1. Rental Value of Cell Tower Leases

    Our method of evaluating rental values is based on comparable market data of other similar leases. We have approximately 15,000 leases with rate information in our exclusive cell tower database. By contrasting cell site leases with comparable ones in the same area, we use this database to determine the fair market value of the leases. Refinement of the valuation is aided by elements like lease terms and conditions, tenant identity, difficulty of relocation, and location quality.

    1. Leases for Cell Towers Valued by Lump Sum

    When a lease is going to be sold, we look at the total amount a buyer would pay to take over the lease completely. We use the “multiple of annual rent” method to compare similar sales from our large database. For example, a lease that makes $10,000 a year and is sold for $200,000 has a 20x multiplier. This method is the opposite of the cap rate calculations that are often used in real estate appraisals. (In the previous example, the cap rate is 5% or $10,000 divided by $200,000.)

    Method Description Example
    Multiple of Annual Rent Used to compare sales of similar assets with different lease rates A lease that makes $10,000 a year and is sold for $200,000 has a 20x multiplier
    Cap Rate Often used in real estate appraisals In the previous example, the cap rate is 5% or $10,000 divided by $200,000

    How Can Steel In The Air Assist You?

    Our services include:

    • Providing letters of opinion on cell tower lease values
    • Assessing ongoing and end-of-term fair market rent
    • Producing expert reports for litigation, eminent domain cases, estate valuations, and more
      • We have been qualified as experts in cell tower lease and communication tower valuation litigation matters.
      • The principal of Steel in the Air is an attorney and understands what is required of expert witnesses.
    • Supporting appraisers with robust data and expert opinions
      • We commonly provide letters of opinion to appraisers to “wrap” their appraisal around.
    • Offering referrals to reputable appraisers for formal needs

    It is important to note that we do not sell or trade our data independently—it is only provided as part of our comprehensive valuation services.

    Taking the Next Step

    Are you trying to figure out how much your cell tower lease is worth either on a lump sum buyout basis or an ongoing lease basis? Speak with Steel in the Air today to get the help you need. Until you choose to use our services, your initial consultation is free and confidential. Find out how our years of experience and highly qualified professionals can assist you in making well-informed decisions on the lease of your cell tower. As an FYI, we do not share or sell our lease rate or lease buyout data unless it is part of a letter of opinion.

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