Cell Tower Valuation and Appraisal
Here at SteelintheAir.com, we get multiple requests for the valuation of cell towers. Many requests come from real estate appraisers who have been called upon to evaluate a cell tower for eminent domain purposes or for taxation purposes. If you are just leasing property and do not own the cell tower, please see our Cell Tower Lease Buyouts and Reductions page for more information on valuation of cell tower leases.
Cell towers have been traditionally sold on the basis of a multiple of net cash flow. The multiples range according to the buyer and can be manipulated by the manner in which they are calculated. It must be noted that after reaching relative high points since 1998, the multiples have declined along with the general market.
Despite this, a number of tower owners are still selling. Primarily, they see an opportunity to continue building more towers or see another investment opportunity and need the capital that is unavailable from other traditional sources.
The point of all this is that the valuation of towers is high. Many appraisers who contact us believe that they can apply traditional real estate appraisal techniques to tower valuation. By looking at comparables, i.e. sales of similar towers, they can establish value. Unfortunately, traditional real estate does not have the same level of federal protection as vested in the Telecommunication Act of 1996, nor are other commercial types of real estate subject to the low churn our industry sees. To further complicate matters, it is difficult to procure a statistically sufficient sample of transactions, especially current ones, to be able to do an accurate comparison.
The multiple established for cellular tower purchases is a combination of a number of factors:
- Current Tenant Base on the Tower: Are any of the tenants likely to terminate their lease prior to the last term? Are any of the tenants a financial credit risk?
- Age of the Tower: How long has the tower been standing? How aggressive or conservative has the lease-up on the tower been?
- Zoning Protection: Is the tower in an area where local zoning regulations will prohibit competing towers from being built up?
- Location of Competing Towers: Are there other towers within a given distance that offer competing service to wireless clients? If there are nearby towers, are they really competing for the same clientele?
- Structural Capacity of the Tower: How many tenants was the tower originally designed for? How much capacity remains?
- Ground Space Availability: Is there ground space available for current tenants’ expansion or for future tenant’s equipment?
- Location of Tower: What are the coverage objectives of the tower? Is the tower primarily in a rural/suburban/urban area?
It should be clear from the factors above that cell tower valuation is based not only on existing tenants but on future capacity for tenants as well. While the valuation of an existing tower that is fully loaded is relatively straight forward, the valuation of an existing tower with significant capacity remaining is not.
That is why attempting to appraise a cell tower solely on the basis of comparables fails to provide proper valuation. Each tower is unique as the parcel of land it is on. We can assist you in evaluating a tower or portfolio of towers. Please feel free to contact us for additional information.
If you own a cell tower (meaning that you actually own the steel) and are curious about its value, please contact us for a free cell tower valuation. We will need copies of your leases on the tower with the wireless carriers. If you do not have a PCS or cellular carrier or TV or FM/AM broadcasters leasing your tower, we can't provide a valuation because it is outside of our expertise. Please note that this offer only extends to the direct owner of the tower.