Cell Tower Lease “Market Rent” – The Reality Is, It Doesn’t Exist

“Market rent” does not determine the value of your cell tower lease. Many cell tower landlords are being approached to extend their current leases, and they, unfortunately, continue to rely upon “market rents” that have been set by the same companies who are leasing the land. Relying on so-called “market rents” to determine how to negotiate a new or existing cell tower transaction can cost you hundreds of thousands of dollars over the life of a cell tower lease.

Why? First of all, a cell tower lease is not a real estate asset for the purposes of valuation. Wireless cell phone carriers and tower companies value these leases as telecom assets, and so should you. A property owner should turn the mirror toward the cell tower company and see how valuable the tower site is to them, either through the importance of the cell tower site to them in how it serves their current and future customers, or in the case of a cell tower company that has no customers, how much in current or future revenues they can derive from their tenants on the cell tower.

Every cell tower site has a different value. For example, you can have two cell towers within one mile of each other—both paid the same amount of rent, both leased by the same company and have the same basic lease terms—but they can have significantly different values. This is because value can be based on:

  • Revenue being derived from the equipment located on the tower
  • Revenue generated through sublets at the site
  • Importance of the tower site to the overall wireless network
  • Options the tenant has in the immediate area to relocate the site
  • The costs associated with relocation

Furthermore, cell phone carriers and cell tower developers rely upon these market rents because they are the ones who set them and will continue trying to perpetuate them. If you use their market rents as a guideline, you will not be paid correctly. Look at the 2011 revenue figures in the accompanying chart and learn why:

 

The revenue and profit margins produced by these companies are not only staggering and some of the highest of any corporate sector, but are directly tied to the market rents these companies have been able to maintain for years. This is important for new cell tower leases, but even more so for existing ones.

The cell tower companies know the value of the cell tower lease to you, via the amount of rent they are either offering you or already paying you. Isn’t it about time you know the value of the cell tower lease to the cell tower company?

 

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