cell tower w/ lump sum payment

[ryan remle]

I've got about a 10 acre tract of land with a cell tower ground lease on .006 acres of the tract. The lease has a 99 year term for which a one-time lump sum payment of lets say $150,000 was made. I understand that the PV of the lease is the $150,000 payment. I am thinking I need cap rates from similar sales of ground leased parcels to figure out the value of the lease. Is this correct or does anyone know any other ideas?

 

[incognito]

Ryan, I hate to be the one who responds first, but you probably will find the consensus here that as a trainee, you should be asking your supervisor. This a potentially VERY complex assignment, nothing to be cutting your teeth on. Good luck.

 

[William Rightsell]

I'm no general and I may be COMPLETELY wrong on this, but if the owner has already received his lease payment then it is worth nothing to a potential purchaser, as the next owner will not receive any benefit.

It follows then that the lease would be a negative in that the next owner has a partially encumbered property and will never receive compensation for it.

Just my .02...

todd

 

[Y-TOWN]

I'm no general and I may be COMPLETELY wrong on this, but if the owner has already received his lease payment then it is worth nothing to a potential purchaser, as the next owner will not receive any benefit.

It follows then that the lease would be a negative in that the next owner has a partially encumbered property and will never receive compensation for it.

Just my .02...

todd

Give the guy a cigar - correct answer

 

[Y-TOWN]

Give the guy a cigar - correct answer

Or take the position a 99 year lease constitutes a quasi fee simple transfer of property rights and do not value the tiny parcel. That my be supportable if you read some case law.

 

[PropertyEconomics]

Or take the position a 99 year lease constitutes a quasi fee simple transfer of property rights and do not value the tiny parcel. That my be supportable if you read some case law.

Rich ... I would think your approach is most reasonable as a potential purchaser would not have any use of the site, and most probably never would, depending upon how much longer the lease runs. The reversionary value of a .006 acre parcel discounted to a present value from 80 years into the future (that would be an interesting analysis wouldnt it) would either be nil or so unreliable, based upon the assumptions one had to make regarding appreciation over the time period, as to have no credibility.
Comparable sales would best be those sales which were also impacted by cell tower locations within their boundaries under similar lease conditions as of the date of sale.

 

[Michigan CG]

Just thinking out loud...I wonder when a property with a cell tower is sold and the former owner runs off with the $150,000 what are the tax implications for the new owner. How does the assessor value this "improvement"?

So we now have a physical or external (economic) obsolescence problem?

 

[Hamlet]

Just thinking out loud...I wonder when a property with a cell tower is sold and the former owner runs off with the $150,000 what are the tax implications for the new owner. How does the assessor value this "improvement"?

So we now have a physical or external (economic) obsolescence problem?

It would be physical wouldn't it, since it is part of the property?

 

[Michigan CG]

It would be physical wouldn't it, since it is part of the property?

external obsolescence
An element of depreciation; a defect, usually incurable, caused by negative influences outside a site and generally incurable on the part of the owner, landlord, or tenant.

Yes, but I was thinking of the old term economic obsolescence (replaced by external obsolescence). Wish I still had that old Appraisal Dictionary.

 

[PropertyEconomics]

Just thinking out loud...I wonder when a property with a cell tower is sold and the former owner runs off with the $150,000 what are the tax implications for the new owner. How does the assessor value this "improvement"?

So we now have a physical or external (economic) obsolescence problem?

What are the tax consequences to the new owner of the former owner pocketing $150,000??? Im sorry but I dont follow your logic here. The property is held by the Tower Company via lease ... I would think they would be taxed on the underlying and and their improvements.

Obsolescence, if any, would depend on what comparables you used to value the subject .. wouldnt it???