5/15/2023 0 Comments Rent noi calculation form![]() ![]() The Ground Lease worksheet is broken up into seven sections as outlined and explained below: Section 1 – Property Description A ‘Version’ tab is also included where you can view a change log for the model, as well as find important links related to the model. This is intentional to allow you to insert this model into your own property-level model to make it easier to add a ground lease component to your analysis.Īll analysis is performed on the tab entitled ‘Ground Lease’. How to Use the Ground Lease Valuation ModelĪll sections of the Ground Lease Valuation Model are contained on one worksheet. Banks, national restaurants in outparcels, and large department stores are examples of tenants that often agree to this structure. So, the retail tenant will agree to lease the ground for 40+ years and build their own building on the leased land. Oftentimes, prominent retail tenants prefer to build and own their space but the developer doesn’t necessarily want to sell the land. You see this quite often with office buildings in the downtown core of major cities.Īnother case where you’ll run into ground leases are in retail shopping centers. Thus, they lease the land to someone who owns and operates the improvements on the land, and receive a ground lease payment in return. Ground leases are common to prime locations, where landowners don’t necessarily want to sell but where they may not have the expertise (or desire) to operate. At the end of the ground lease term, the lessee must return use of the land, and any improvements thereon, to the land owner. During the term of the ground lease, the lessee will pay rent to the lessor for use of the land. The lessee of a leasehold estate will generally own the improvements on the land and use the land and improvements as if the lessee were the owner of the land. ground lease) from the fee simple owner ( lessor) of the land for an extended period of time. Leasehold Interest – “In real estate, a leasehold interest refers to a structure where an individual or entity ( lessee) leases the land (i.e. In most cases, the owner of the land leases the land to the owner of the improvements for an extended period of time (20 – 100 years).” fee simple interest) while a separate party owns the improvements (i.e. In the case of a ground lease, generally one party owns the land (i.e. Ground lease – “A lease structure where a real estate investor rents the land (i.e. If you unfamiliar with the concepts of Ground Lease and Leasehold Interest, I’ll refer you to the definitions in our Glossary of CRE Terms: Excel model for evaluating a ground lease What is a Ground Lease and Leasehold Interest? ![]()
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