References
NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.
Ground Lease Definition
A long-term lease of land in which the tenant will erect improvements at its own expense. Not a desirable arrangement from the tenant's point of view, but sometimes the only way to gain access to extremely valuable real estate in an excellent location. The owner may be willing to sell, or the owner may have received the property by gift or deed (such as a church or university) and be prohibited from selling for some period of time. At the end of the lease term, the improvements become the property of the landowner.
Source: The Complete Real Estate Encyclopedia (New York, NY: McGraw-Hill, 2007)
Ground Lease Basics
What Is a Ground Lease? (The Motley Fool, Feb. 18, 2022)
“As the name implies, a ground lease only involves leasing the ground -- not any buildings. A ground lease involves undeveloped commercial land that is leased to tenants, who then have the rights to develop and use the property for the duration of the lease.”
What are the Pros and Cons of Investing in a Ground Lease? (First National Realty Partners, Feb. 11, 2022)
“There are benefits to the ground lease structure for both landowner and the investor developer. For the landowner, they are able to develop a long term stream of income from a vacant property. For the investor/developer, they get access to a prime piece of real estate without the upfront cost of having to purchase it.”
The Basics of Investing in Ground Leases (LoopNet, Jan. 18, 2022)
“McNellis cautioned that investors should carefully assess ground leases where the ground rent adjusts upward without consideration for what's happened with the tenants in occupancy.”
Ground Lease News & Trends
Cordish to Sell Three East Coast Casinos in $1.8B Deal with Gaming and Leisure Properties (REBusiness Online, Dec. 7, 2021)
“The total price was approximately $1.8 billion, including applicable long-term ground leases. Consideration for the three-property real estate transactions will comprise a mix of qualified debt assumption (to be satisfied by GLPI), cash and $323 million of newly issued operating partnership units.”
Transit Agencies Lease Real Estate to Generate Much-Needed Cash (Pew Charitable Trusts, Sep. 30, 2021)
“MARTA has 17 existing ground leases, with a total of nearly 2,000 housing units, 2.6 million square feet of office space, 371,000 square feet of retail and nearly 2,400 parking spaces, according to Vallo. Eighteen new transit-oriented developments are either under construction, in negotiation or being planned. MARTA receives about $6 million a year from its ground lease revenue, and it costs about $2 million a year to run the real estate group, so it’s a good deal, Vallo added.“
Real Estate Firm Expands Portfolio with Massive Ground Lease Purchase (Business Observer, Aug. 31, 2021)
“The real estate company, based in University Park, east Manatee County, recently acquired the ground lease of Plaza Santa Fe located in Santa Fe, New Mexico. The plaza is a 450,000 square foot market sitting on about 33 acres, according to a statement. “
Valuing & Financing Ground Leases
Ground Lease Valuation Model (A.CRE, Jan. 2022)
“This model can be used standalone, or added to your existing property-level model. Either way, it is helpful for both landowners looking to size a ground lease payment or leasehold owners looking to understand the value of the leasehold (i.e. improvements) relative to the fee simple interest (i.e. land).”
Understanding Real Estate Finance: Digging the Dirt on Ground Leases (KVCF, Sep. 1, 2021)
“Negotiating and executing a ground lease requires a keen understanding of real estate finance, and leases should be carefully reviewed by a lawyer. Among other issues, legal counsel will consider the lease terms, any use provisions, insurance requirements, default provisions, casualty and condemnation language, other rights of the landlords and tenants, and conditions on financing.”
Ground Leases as a Financing Tool (CIRE Partners, Oct. 20, 2021)
“Michael Corridan, managing director at Aventura, Fla.-based Kawa Capital, said he considered ground leases a particularly useful form of financing for “out-of-favor asset classes where regular capital markets aren’t really addressing financing needs.”
He cited “well-located malls” as a property type where ground leasing might make sense.”
Jay Sugarman on Reinventing the Ground-Lease Business (Commercial Property Executive, Feb. 3, 2021)
“The key to the modern ground lease is that it is properly sized and properly structured to optimize the benefits to the building owner. Traditional ground leases often ignored the building owner’s and leasehold lender’s needs and had provisions that simply destroyed rather than enhanced the building’s value.”
eBooks & Other Resources
eBooks.realtor.org
The following eBooks and digital audiobooks are available to NAR members:
The Art of Commercial Real Estate Leasing: How to Lease a Commercial Building and Keep It Leased (eBook)
Commercial Mortgages 101: Everything You Need to Know to Create a Winning Loan Request Package (eBook)
Commercial Real Estate Investing: 12 Easy Steps to Getting Started (eBook)
Commercial Real Estate Investing: A Creative Guide to Successfully Making Money (eBook)
Commercial Real Estate Investment (eBook)
Complete Book of Real Estate Leases (eBook)
Getting Started as a Commercial Mortgage Broker: How to Get to a Six-Figure Salary in 12 Months (eBook)
Good Commercial Sense (eBook)
Negotiating Commercial Leases & Renewals for Dummies (eBook)
Wealth Opportunities in Commercial Real Estate (eBook)
Books, Videos, Research Reports
As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.
Commercial Lease Law Answer Book (New York, NY: Vendome Group, 2008) KF 593 C6
Lease Guide: Guide to Writing a Commercial Real Estate Lease Including Green Lease Language (Washington, D.C.: BOMA International, 2008) HD 1384 T23
The Leasing Process: Landlord and Tenant Perspectives (Chicago, IL: Institute of Real Estate Management, 2008) HD 1394 M89
Managing and Leasing Commercial Properties (New York, NY: Wiley, 2007) HD 1394 AL2ma
Negotiating Commercial Real Estate Leases (Chicago, IL: Dearborn, 2001) HD 1384 R22
Negotiate Your Commercial Lease (Bellingham, WA: Self-Counsel Press, 1998) HD 1384 W66
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