Valuing the Leased Fee Interest Subject to a Ground Lease-How and Why the Details Matter

摘要

Modern ground leases consist of more than just base rent with some escalators. Leases now include a wide variety of complex income streams that need to be understood and measured as part of a leased fee valuation. These include escalation provisions, reappraisal provisions, participation in the tenant's income and net refinancing proceeds, and a transfer fee. In addition, the landowner's right to receive the reversion is affected by complex replacement reserve requirements and demolition obligations imposed on the tenant. This article seeks to inform appraisers of these features and how and why they matter in the valuation of the leased fee interest.