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Cell Tower Lease Cap Rates | 4 Tips

By Nick G. Foster

June 16, 2015

Years ago when I was a commercial real estate broker with Cassidy Turley San Diego (now known as Cushman & Wakefield), cap rates were of the utmost importance to investors. Back then Shopping centers were trading for around a 5% cap, value-add office buildings were trading for around a 8% cap, and the rare multi-tenant office building, maybe with an underlying land-lease, would trade at a 10% cap. Every property has a story to tell – and a cap rate is a metric used to help assess the property return on investment.

The challenge I faced, with my unique expertise in cell towers, was how to communicate to the commercial real estate world how cell tower lease buyers value cell phone tower leases. Let’s get started:

1. Buyers Of Cell Towers Leases Don’t Use Cap Rates

It may come as a shock, however, investors acquiring cell phone tower leases make offers based on a specific multiple of annual or monthly rent – not on a cap rate.

By example, an investor using a monthly rent multiple would ask, “Can I buy this lease at 120x, or 100x (x = months of current rent) if I am lucky?”

While other investors will look at cell phone tower leases on an annual multiple and ask, “Can I buy this lease at 10x or 8.3x (x = years of annual rent)?”

The point is that there is no standard metric across the cell tower lease buyout industry, but most importantly investors in cell tower leases don’t use a cap rate as a metric on the value of a cell tower lease.

2. Both My Client And I Do Use Cap Rates – How Can You Help?

This is when you need a cell tower lease expert on your side, such as Airwave Advisors, who can speak both your language, and the language of cell tower investors.

There is no standard cap rate for cell tower leases, instead there is a range. Where a cell tower lease falls in that range is dependent on a number of variables:

* Who is the cell phone tower lease tenant?
* When does the lease expire?
* What is the current rent?
* What is the rent escalation amount?
* Does the tenant have a right of first refusal in the lease?

Once we have the answer to those questions, and the lease has been properly underwritten, then we can identify the correct cap rate.

3. Often You Will Make More Money Selling The Lease Separate

One tip that many savvy commercial real estate investors hold secret, is that often you will typically make more money selling the cell tower leases separately from the property.

If the property is going to sell for a 10% cap however the cell tower leases are going to sell for a 9% cap, then the seller will make more money selling the leases separately from the property.

Some brokers may argue that buyers will not purchase a property where the leases have been sold separately, however that is simply not true. Thousands of properties trade every year where the leases have already been sold on the property, and they will continue to trade far into the future. As the saying goes, everything sells, its just a matter of time.

4. Engage A Cell Tower Lease Expert To Maximize Value

Airwave Advisors has an exceptional track record of securing the highest purchase prices for sellers. With over $30,000,000.00 in cell tower lease buyouts we have sold leases on office, industrial, retail, and every other type of real estate property in existence. We track the cell tower lease market so that you don’t have to. Are you looking to maximize your opportunity?

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(888) 443-5101

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4 Comments

  1. Ivan on March 1, 2018 at 7:22 am

    Hi, what is the 2017-2018 cap rate range for cell towers? is there any website or publications where i can find this information?

    Thank you!

    • Nick Foster on March 6, 2018 at 9:00 am

      Hi Ivan,

      Most cap rate range information you will find online will either be inaccurate, or lower than actual cap rates leases trade for. Ranges are typically proprietary and to freely divulge them at no cost would not make business sense for those of us in the industry.

      All the best,

      Nick G. Foster

  2. Brian Skinner on August 12, 2015 at 8:08 pm

    Hi,
    Can you use any help finding acquisitions in Latin America? I live in Costa Rica and spend about half my time in Panama. I left your company a voicemail today. Let me know if I can get you portfolio’s overseas! Thank You

    • Nick Foster on August 12, 2015 at 8:25 pm

      Hi Brian,

      Thank you for your voicemail and your comment. Unfortunately, at this time we are not doing any business in Central America. Should we enter into those markets, we will certainly contact you.

      All the best,
      Nick Foster

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Nick Foster Airwave Advisors

About Nick G. Foster

Since founding Airwave Advisors® in 2014, Mr. Foster has added value to over 400 clients ranging from the State of Nevada, City of Beverly Hills, to Habitat For Humanity. Mr. Foster focuses on cell tower lease renewals, buyouts, new lease negotiation, and cell site lease management. Prior to starting Airwave Advisors® Mr. Foster founded and led the Cell Site Services Group within nationwide commercial real estate services leader Cassidy Turley (now known as Cushman & Wakefield).

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