| It's not news that one of the hottest | | | | - Frees capital that would be paid for |
| commodities on the market today is | | | | land acquisition |
| commercial property. Developers and | | | | Since there's no need to finance the |
| investors in Houston are scrambling to | | | | acquisition of the land, the developer |
| acquire land that is almost guaranteed | | | | lessee has more capital available for |
| to increase in value, many retailers and | | | | building and construction. |
| commercial developers are overlooking | | | | - Ground lease payments offer a tax |
| the advantages of developing and | | | | advantage |
| building on property that they don't | | | | Lease fees can be deducted as a business |
| own. | | | | operating expense on taxes, reducing the |
| Municipal ground leases have a long | | | | tax burden on the lessee. The lease fees |
| history. It's not unusual for a city or | | | | will nearly always be a greater |
| town to lease land to educational | | | | deduction than interest paid on a |
| institutions, for instance, retaining | | | | commercial mortgage, and the lessee will |
| ownership of the land while giving the | | | | not be responsible for tax payments on |
| lessee the control needed to make | | | | the land. |
| improvements to the property. Those | | | | - Lessee is protected from downturns in |
| leases generally run for terms of 99 | | | | the real estate market |
| years, and often carry nominal lease | | | | The real estate market is volatile. A |
| fees. The advantage to the city is clear | | | | lessee's investment in a ground lease |
| - they are home to an institution that | | | | commercial property is not dependent on |
| adds value to the community, increasing | | | | the increasing value of the land. |
| the value of other real estate and | | | | Rather, their retail or commercial |
| making the community a more desirable | | | | activities provide added value. |
| place to live. The lessee also gains an | | | | As with any real estate transaction, |
| advantage - they don't need to purchase | | | | there are both pros and cons to taking |
| the land on which they sit. | | | | on a ground lease for sale. Houston |
| Terms tend to run for much shorter | | | | residents, a great deal depends on the |
| lengths of time - as short as 5 years, | | | | terms of the lease and its flexibility. |
| though 30 year terms are common for a | | | | It is definitely an option worth |
| ground lease for sale. The advantages of | | | | considering, however, particularly in an |
| these leases is for the landowner - the | | | | area where outright purchase - as in |
| landowner retains ownership of the land | | | | master planned communities - may not be |
| and ensures a steady income from the | | | | an option. The opportunity to enter into |
| rent paid on the property. In addition, | | | | a long-term ground lease with the owners |
| ground lease terms often specify that | | | | developers of a major master planned |
| improvements to the property revert to | | | | community can offer the flexibility and |
| the owner at the end of the lease term. | | | | benefits needed for a successful retail |
| But what advantages are there for the | | | | operation with a ready market of both |
| tenant in a ground lease arrangement? | | | | consumers and employees. |