What is a Ground Lease?

Posted on March 03, 2020

A ground lease is a long-term agreement between a landowner and a tenant/lessee who pays to rent the land on which a tenant/lessee intends to construct a building. Essentially, a ground lease separates a physical building from the land on which it sits. In doing so, it helps prospective tenants, including banks, restaurant chains and similar franchises, develop stores in prime locations without significant up-front costs or carrying real estate debt on their balance sheets.

Because these arrangements involve very long lease terms of more than 50 years, often with built-in escalation clauses, property owners retaining title to the land receive the benefits of reliable cash flow and rent increases from typically creditworthy tenants. Landowners also receive the value of long-term property appreciation without exposure to income taxes that would be imposed on a property sale. As added savings to property owners/lessors, tenants/lessees bear the responsibility of paying all the expenses for managing, leasing, maintaining and repairing the buildings they construct, including real estate taxes and utilities.

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.