Market Analytics

Valuations and Historical Prices for Utility Leases. 

SiteBid’s analysts track the offers for wireless leases and tower purchases made by aggregation firms to property owners allowing us to predict the overall trend of value for the leases in the industry.  Based on a review of lease data, we compile the following information and trends:

Market Outlook for 2024 for Wireless Leases and Cell Towers:

What does the future look like for the value of wireless leases, rooftop antennas and cell tower assets?  Here are some of our thoughts:

• In the short term, prices are likely to have stabilized at the current level.  While few alternative investments are available that have the security of tier one, investment grade, parties like the remaining carriers (AT&T, Verizon, T-Mobile, and Dish), we believe current multiples/cap rates have peaked.
• In the long term, prices for the assets will come down for the following reasons:
  • Inflation and the increase in the cost of borrowing will result in decreases in prices to sellers.
  • Commercial real estate businesses and values will be negatively affected.  Properties reliant on rent from retail, office, and apartment buildings will likely see significant reductions in their cash flow.  This will result in defaults and reduced debt-service-coverage ratios which may mean banks that hold mortgages on commercial properties that have cellular revenue will be less likely to consent to the sale of those assets. 
  • The number of buyers may eventually be reduced as firms that are not capable of competing exit the business or fail.  Less competition will mean lower prices.   

Recommendations:

Landlords and tower owners should consider monetizing these assets while the market continues to be hot. Further, if a property owner is also looking to sell the underlying property/business/building that wireless infrastructure is on, they should sell the wireless leases/tower first and THEN look to divest the actual property.  The cap rates on wireless leases are typically much lower than they are on the underlying property and combining the assets will lower the overall appraised value for the property.

Other Valuation Considerations:

Buyer Focus is on Possible Upside via expansion of the size of the easement being purchased and shorter remaining terms on the leases:

The most significant differentiation in pricing for both rooftop and tower ground leases can be seen in offers structured with upside potential for the buyer.  The highest prices in the market today for lease/easements are available to sellers if;

• Their lease and all renewals expire within 10 years, providing an opportunity for the buyer to increase rents.,
• Their escalations are at 3% per year or 15% every 5 years or higher,
• They are willing to accept a general or expanded easement purchase structure. The highest offer prices for tower ground leases and rooftop leases are coming with general and/or expanded easement areas that hope to capture either new tenant or expansion needs by existing tenants down the road.  Offers to share with the seller in this potential future upside tend to only be structured for new tenants and range from 50/50 to 70/30 in the seller’s favor.

Disclaimer: Information provided is based on publicly available resources, experience in the industry, as well as frequent conversations with industry professionals.  It is opinion and thus should not be relied on for financial purposes.