We are pleased to introduce a new tBL Marketplace Partner, Hugh Odom of Vertical-Consultants. We felt our site truly needed an expert like Hugh to help our members and their clients with all of the difficult questions associated with dealing with telecom companies and the issues related to cell towers! Now we have Hugh Odom and his team as a tremendous resource! Thanks to the Vertical-Consultants team for joining and becoming a tBL Marketplace Partner. Here is a blog article from Hugh that we know you will all enjoy and learn much from! Look for more from Hugh in future blog posts!
Most property owners across the United States treat a cell tower or rooftop telecom lease as an after-thought or as ‘found money’ and this is what the telecom companies rely on to garner some of the highest profit margins of any North American corporations.
In 2011 telecom companies derived over two billion dollars domestically just from subleasing space on their landlords’ properties. At the same time these same companies paid, on average, less than 10% of this amount to these same landlords for the use of their properties. This disparity is continuing to grow due to the structure of most cell tower leases.
One reason for this disparity is the common misconception that a property owner, real estate broker, or an appraiser may have that a cell tower lease is a real estate asset, when in reality it is a telecom asset. To determine the value of a cell tower lease, you must evaluate this asset from the viewpoint of a telecom insider and not as a real estate property owner, broker or appraiser.
The following are some factors to use in determining the value of your lease.
Utility of Leased Site: The most important factor in determining the value of a cell tower site and related cell tower lease is the utility of that particular site to the cell tower tenant. The utility of a cell tower site is founded by two basic variables. First, the importance of the site to a telecom carrier’s wireless network and second being the revenue produced from the site. If the cell tower tenant is a wireless carrier (e.g. AT&T, Verizon, Sprint, etc.) the first priority of the site is how it serves the needs of carriers’ wireless networks in the immediate area.
Conversely, if you are leasing your land to a cell tower company (e.g. Global Tower Partners, American Tower, SBA, etc.) then 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 to that tenant.
Location of Leased Site: If your focus in determining the value of a cell tower site’s is primarily based upon population density or even ground elevation surrounding the site, your target is usually going to be missed when it comes to actual value of that site to a telecom company. While the above mentioned factors have an influence in determining value, the major components of determining the worth of a cell tower site and its corresponding lease are the alternatives/options a telecom tenant has in the immediate area where the cell tower is located. These options are usually directly tied into local zoning/permitting restrictions in that area.
As a result, if you rely solely on the property values’ factor to determine the worth of your lease you could be taking a costly misstep in the wrong direction.
Telecom Equipment on the Leased Site: As mentioned above, a cell tower lease is more of a telecom transaction than a real estate transaction. A perfect example of this is that part of the value of a cell tower lease to a telecom tenant is the investment a company has made in the site based on the construction cost of the tower and the functioning telecom antennas installed at the site.
A telecom tenant’s investment in a cell tower site is not only calculated by what it takes to develop the site, but what it would cost to decommission a cell tower if the lease expires or is terminated. This cost varies not only upon the tower facility located on the site but the cost to migrate the cellular antennas operating at the site to another location. The trick is knowing how to accurately determine these costs.
- Inaccurate valuation of a cell tower lease could mean the loss of hundreds of thousands of dollars over the term of that lease; and
- a correct valuation of your cell tower lease can be immensely beneficial whether you are faced with options associated with negotiating a new lease, the extension of your current lease, or a proposed buyout of your lease.
- If property owners rely on equating cell tower lease value to that of real estate value, they risk losing significant value they could otherwise capture.
Remember, the telecom companies have experts working for them, shouldn’t you?
By: Hugh D. Odom-President-Vertical Consultants www.vertical-consultants.com