Cell Tower Valuation Models

We’re often called on to determine the contribution cell tower leases have on property value. In most cases, the Discounted Cash Flow Approach (DCF) is an appropriate and reliable method in determining the market value contribution of a property’s leased fee interest, encumbered by a cell tower lease. The concept holds that future income or benefits are worth less than the same income or benefits now and that they decrease in value systematically as the time for their receipt is further deferred into the future. The process of discounting is the arithmetic procedure of applying a specific rate of return, usually derived from the market, to the anticipated future income stream in order to develop a net present value. This approach is predicated on the principle of anticipated economic benefits and, therefore best reflects the investment characteristics of the cell tower interest (leased fee) being appraised. This approach also closely parallels the anticipated analysis that is be employed by the most probable purchaser of these rights.