Long story very short: good friend (and her family)owns property with a cell tower in Los Angeles. They are exploring the pros and cons of selling vs. renewing the lease, possibly at a much higher rate if the value warrants it.
My friend has done some research, And what I am hoping to help her with by posting this question is some leads on how to really determine the true value of the cell tower. I believe it has something to do with determining how much traffic is the tower routing, what the costs would be for the company to lose it/replace it, etc.
The reason I’m asking is because one of the things that my friends research uncovered is the fact that it’s hard to get that information. So does anyone have any inside knowledge, experience, suggestions, websites, tricks of the trade, routes for her to find the best information for her family to use to make this decision? Because based on what she has learned so far, the answers could make an extremely significant difference in the sums at issue…like the difference between $350,000 and $700,000, potentially.
Thanks for any help or insight you can provide.
Also, any guidance on finding useful information for weighing the possibility that cell towers are going to be replaced by newer technology any time in the next 5… 10…20 years. (Currently thinking that newer technology will be more of an issuein areas with sparser co erage currently, given the investments already made in cell towers and upgrades to cell towers, no one is going to be rushing to dump them all to replace them any times soon. But perhaps thats wrong?)
I’m not sure how much the cell tower traffic matters. If there are other properties nearby that are just as good for the cell phone companies, then I don’t see why they’d pay any extra to lease space on your friend’s property above the amortized cost of building a replacement elsewhere.
First do some research into current lease rates for cell tower land. You might hire a commercial property appraiser to do this for you. Ideally you want to look at the most recently negotiated lease rates.
These rates are likely to vary widely due mainly to the negotiating skills of the land owner. Based on this information negotiate the best lease rate that you can. It’s that simple.
As far as evaluating whether to sell or sign a new lease you need to determine if the land is more valuable with or without the cell tower/lease in place.
If the land has rugged/unbuildable terrain the income stream from the lease might be the most valuable aspect of the property. If it is a potential homesite in a desireable location the cell tower might diminish the overall property value.
If you are leaning toward selling it might be best to renegotiate the lease first (if that is the most profitable use of the property). A lease with a short expiration horizon is not worth as much as a longer term lease due to the uncertainty of the continued income stream. (Some investors will look at this property as simply an income stream similar to purchasing a bond, and will base its value to them using a discounted cash flow method.)
Again, commercial real estate appraisers can help you with these types of analysis.
Good luck.
My father has a cell tower on his property (12 acres) Verizon leases the like 30’x30’ patch for $1K a month and verizon set up their own drive way, power and data lines from the road.
My college had a cell tower and they sold it for a million (give or take). Just the structure itself, not the antennas or the equipment boxes outside.
Things that I would think that would impact the value of a tower:
Grand-fathered in due to laws and restrictions on towers:
After 9/11 a lot of stuff was put into place as to how tall something can be.
Some jurisdictions state that, in case the tower falls, the area around the tower needs to be clear which is equal to the height of the tower plus some.
Expanded air traffic which prevents new towers from being built.
Other factors:
Location, location, location!
Population density of your existing/potential customers.
Availability of utilities.
Height and its line-of-sight to the surrounding area.
The equipment on the tower is not an issue as I doubt your friend and his family don’t own it. But, in LA, that tower has got to be worth a whole lot. California has A LOT of restrictions when it comes to building due to earthquakes and such. Plus, the numerous laws concerning safety, liability, etc, etc. My school is in the DC area but its on the outskirts, almost farmland. That thing has got to be worth much much much more. Maybe 10 million?
I’d call up the FCC or look at their website for cell tower location and info. Also, you might try and look at any carrier that is publicly traded as they have to put up a lot, but not all, information in an annual report to the SEC. You might be able to find the valuation of assets and properties which should include the towers.
I thought I’d pass along to you guys that your comments were extraordinarily helpful to my friend! What she learned from you led her to very valuable information that ultimately made the decision easy and clear, so thank you all so much, from her!
(And they are keeping it… Extremely valuable to keep rather than sell)