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, May 9, 2023)
“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.”
Ground Lease in Commercial Real Estate (Janover, Feb. 19, 2023)
Ground leases aren’t for everyone; they’re especially ill-suited for small businesses, start-ups, and commercial property investors who wish to flip their property within in a reasonable time-frame.
Rethinking the Ground Lease (Real Deal, Jun. 1, 2022) E
Ground leases, in which a party agrees to develop a vacant property that will eventually be returned to the owner, often after several decades, are ubiquitous in New York City. But so are the legal battles
Ground Lease News & Trends
Corona Industrial Complex Trades in Inland Empire’s Largest Ground-Lease Transfer (Connect CRE, May 1, 2023)
The five-building industrial logistics center sold for nearly $325,000,000 in what is believed to be the largest ground-lease ownership transfer in the history of the Inland Empire and one of the largest ever in Southern California.
Baltimore Developer Gets Ground Lease, Takes Big Step to Revitalize Harborplace (WBAL, Apr. 19, 2023)
The Baltimore City Board of Estimates on Wednesday approved a move that involved no money for the city to enter into a new ground lease with a west Baltimore development group led by David Bramble, who said he plans to revitalize and redevelop Harborplace.
Expiring Ground Leases Are the Ticking Time Bombs Beneath the Skyline of Any Major U.S. City (Fortune, Feb. 22, 2023)
Most importantly, building owners need to avoid sleepwalking into a scenario where there’s only a decade or two left on the ground lease. Whenever I see disputes over ground leases that are entering their last few years of the lease term, I shake my head and wonder how the tenants could have let things go unaddressed so long, allowing the power to shift strongly in favor of the landlord. With ground leases typically lasting 50 to 99 years, building owner tenants should be getting clear on their goals and negotiating with landlords no later than 20 or 30 years before the expiration date.
Valuing & Financing Ground Leases
Pros and Cons of Investing in Ground Lease in 2023 (Summerfield Property Management, Feb. 27, 2023)
- Building in a Desirable Location: Tenants can develop a building in a desirable area they otherwise might not be able to buy. Large chain retailers frequently use a ground lease in corporate expansion plans.
- Zero Down Payment: Less equity is needed since the tenant does not need to make a down payment to secure a plot of land (as they would if they were buying). This frees up money for other purposes.
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
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)
The Complete Guide to Real Estate Finance for Investment Properties: How to Analyze Any Single-Family, Multifamily, or Commercial Property (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
Have an idea for a real estate topic? Send us your suggestions.
The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.