The Good and Bad of Ground Leases by Kevin Sanz, CCIM, MSIRE

Posted on October 27, 2021

NNN ground leases are long-term agreements between landowners/investors and tenants/leases who lease the land on which their buildings sit or on which they plan to erect a building. For landowners, these arrangements provide a reliable stream of rental income as well as the benefit of long-term property appreciation without the headaches and expenses that come with managing the property. Moreover, in the event a tenant defaults on a lease, the building ownership transfers to the landowner who may then profit from leasing both the land and building to another tenant at a higher rental rate in the future.

One of the main disadvantages of ground leases is that land does not depreciate. Therefore, owners/investors may not claim depreciation deductions to reduce their annual income tax liabilities. Working with experienced real estate investment advisors can help to minimize any downside risk to ground leases.

With offices in Miami, Orlando, New York City and Geneva, the team at Orion works with investors, developers, property owners and brokers through all phases of real estate transactions, from strategic planning and analysis to financing, negotiation, property management and disposition. For more information, call (305) 278-8400 or email info@orionmiami.com.