Determining the True Value of a Cell-Tower Lease: Insight for Self-Storage Property Owners

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By Hugh D. Odom
  
A prevalent question asked by self-storage owners who have a cell tower on their property is, “What is the true value of my cell-tower lease?” Unfortunately, there isn’t a universal answer, as every property is unique, and every cell-tower location and lease has a distinct market value. Whether you’re trying to calculate fair market rent on a current cell-tower lease or looking to buy or sell a property that has one, the true value is ultimately tied to the worth of the site to the cell-tower company.

A common misconception held by self-storage owners, real estate brokers and appraisers is a cell-tower lease is a real estate asset, when in reality, it’s a telecom asset. Consequently, in determining the value of a lease, you must evaluate the asset from the perspective of a telecom insider, not a real property owner, broker or appraiser.

How do you determine the value of a cell-tower lease? Following are some factors that come into play.

Utility of Leased Site

The most important factor in determining the value of a cell-tower lease is the utility of the site in question to the cell-tower tenant, which is founded on two variables: the importance of the site to a telecom carrier’s wireless network and the revenue being produced from the site. If the tenant is a wireless carrier (for example, AT&T, Verizon, Sprint, etc.), the first priority of the site is how it serves the needs of the wireless network in the immediate area. The  secondary interest is any revenue the wireless carrier can derive from subleasing space on the tower to other similar wireless carriers.

Conversely, if you’re leasing your land to a cell-tower company (for example, Crown Castle International, American Tower Corp., SBA Communications, etc.), the only interest of these tenants is subleasing space on the tower to wireless carriers. The more carriers they can lease to, the more valuable the site is. The problem for you is neither a wireless carrier nor a cell-tower company will ever disclose the true value of a cell-tower site to a landlord.

Location of Leased Site

If you're looking at factors such as population density or even ground elevation when attempting to determine the value of your site to a cell-tower tenant, you'll miss the mark. While these factors influence value, the major contributors to the worth of a cell-tower site and lease are the alternatives a telecom tenant has in the immediate area. These options are usually tied directly into local zoning and permitting restrictions.

While you might believe a cell-tower site in Salt Lake City, for example, could never be worth that of a similar site in Chicago, you'd be surprised. A Salt Lake City area in which a telecom tenant is restricted from relocating or placing antenna equipment on similar sites could have exceptional value. It could even have greater value than what a real estate broker or appraiser would estimate based on real property values. If you rely solely on property values to determine the worth of your cell-tower lease, you could be taking a costly misstep in the wrong direction.

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