Today I learned about the "ground lease" at an Urban Land Institute seminar in San Francisco. The speaker from Grosvenor Americas mentioned that these are common in the UK but not popular in the US. I'll hazard a guess that it's a cultural preference. Many American investors like healthy cash flows from commercial real estate investments. Ground leases, according to our speaker, tend to raise a property's value over time but the cash flows from the property remain constant.
I don't know about you, but I would consider leasing a ground lease if I owned some vacant urban parcel and a big shot developer came along with deep pockets. I would hire a decent real estate attorney to write covenants into the lease that assign all liabilities to the tenant so I don't get sued or assessed fines. I would ensure that I am able to raise the lease amount annually if local authorities reassess the property's value after improvements and increase my property taxes. If the lessee doesn't want to business on my terms, that's too freaking bad. They can buzz off. I make the rules once I own some property free and clear.
There must be a bunch of other things involved with ground leases that I can't address from ignorance. These things are useful in developing property that would otherwise have limited economic use.
I don't know about you, but I would consider leasing a ground lease if I owned some vacant urban parcel and a big shot developer came along with deep pockets. I would hire a decent real estate attorney to write covenants into the lease that assign all liabilities to the tenant so I don't get sued or assessed fines. I would ensure that I am able to raise the lease amount annually if local authorities reassess the property's value after improvements and increase my property taxes. If the lessee doesn't want to business on my terms, that's too freaking bad. They can buzz off. I make the rules once I own some property free and clear.
There must be a bunch of other things involved with ground leases that I can't address from ignorance. These things are useful in developing property that would otherwise have limited economic use.
