How are leases valued by the lease buyout company?

The industry refers to buyouts on the basis of a “multiple of monthly rent” to compare offers. For instance, if the landowner is receiving $1k/month and they receive an offer of $100k to buy the lease, the multiple of monthly rent is 100 or “100X”. To determine what they are willing to pay, each company has a complex return on investment tool. The tool allows them to input various factors and then determine how much they can offer for a given lease. As you might surmise by this statement, not all leases are valued equally. Some are more valuable than others. For example, a Verizon lease is more valuable than a Clearwire lease because the industry believes that the Verizon lease is less likely to be terminated. Some types of sites are more valuable to the lease buyout companies because they have a greater probability of being around in 10 or 20 years. An example of this would be towers with multiple wireless carriers sharing space on the tower. With multiple users on the tower, the chance that the underlying lease would be terminated decreases.
Landowners might be surprised that their own credit-worthiness or lack thereof can impact pricing. Since some leases can be voided if the underlying property is foreclosed upon, buyers of these leases check to see whether there are loans or mortgages that are secured by the property. If there are and the seller has bad credit, the risk is higher to the buyout company that they could lose the purchase rent stream. As a result, if you have lower credit AND the property upon which the cell site sits is mortgaged, the buyers will discount their offers to account for the higher risk. When we assess the value of a lease for a landowner, we take these factors into consideration.
Language in the lease can also impact the valuation. If your lease has a right of first refusal clause in it whereby the tenant of the lease has the right to match any offer to sell the property or the lease, the buyout companies won’t be as aggressive because they know that all their efforts would be in vain if the tenant exercises the right of first refusal. If the lease is set to expire in the near term, the lease buyout company may place a greater value on the lease because they know they can negotiate higher lease rates with the carrier. Lastly, external factors can influence the value of your lease. If your tower or rooftop is in a unique location, the probability of future revenue from additional tenants can impact the purchase price.