Cell Tower Appraisals

[shannonmh]

I understand that there is a need for appraisals on cell tower (or communication towers in general). My company (located in Iowa) would like to look into doing this but is it so specialized that we don't know what is required or where to start. Any suggestions would be helpful - thanks in advance.

 

[Austin]

I have done about five appraisals that involved cell towers. Basically it involved valuing the lease fee interest in the income stream from the lease so the valuation process is nothing new. I am only aware of one sale locally of a cell phone tower site. I appraised a new high-tech wrecker service operation that had a cell tower leased site. As part of the appraisal I added the lease fee interest in the income stream from the cell tower. About two years later the tower site was sold along with the lease. I don't know for a fact but I will bet that the property owner read the appraisal, saw the value of the lease fee interest, and said: "Hey! I can sell that and get some cash." Most of the leases I have seen were for 25 years with inflation adjusted lease payments in the $500 to $750 per month range. The way technology is changing; I don't put a lot of faith in the continuation in the lease beyond the existing lease period. With at least 20 years remaining on all leases it is not that critical. In summary, in my opinion, in my market experience, this is an emerging market segment so the book on the subject you are looking for hasn't been written yet. Maybe we are writing it even as we speak. Who knows?

 

[shannonmh]

Thanks for the reply Austin - do you know if it requires the same licensing as a reqular appraisal? If so where should I start?

 

[Austin]

Shannon: The process is basically an appraisal of a lease fee interest, which would fall under the classification of a complex appraisal assignment in my humble opinion, thus requiring a general certified appraisal license. Given the number of cell towers, or any kind of tower for that matter in any given market, the volume of potential business and simplicity of the appraisal process would seem to indicate that it would not be a very profitable business for an appraiser. Once you know the yield rate, it is a simple matter of summarizing the lease, putting the cash flows on a spreadsheet, entering the formula, and hitting the enter key. You really would not have to inspect the property because you are appraising the lease. One person could probably handle the business for an entire region. When you have interest rates jumping around 4% in six months, the stock market acting like a roller coaster, and energy cost going in every which direction, commercial appraising is becoming a general crap shoot anyway. About all we can do is draw a box and say: “The answer will most likely be somewhere inside that box depending on the prevailing interest rate level, expense trends, and market yield rates at a particular point in time.”