If you own the land, it is capital. A construction lender credits it toward loan-to-cost; a land loan typically converts only about 60% of its value into cash. A ground lease sale turns the whole agreed land value into cash at closing, while you build and own the project on a 99-year leasehold financed by a leasehold construction loan.
In a modern development ground lease, an investor buys the land and leases it back to the developer for a long term, commonly 99 years. The developer builds and owns the building on the leasehold. A leasehold construction loan finances vertical costs, and the ground lessor collects ground rent.
The ground lessor pays for the land at closing. Some programs pay a premium to cost and fund the excess into construction.
You develop, own and operate the improvements and keep the cash flow and the building's value for the lease term.
Banks, debt funds and agencies lend on leaseholds that include standard lender protections.
Illustration for a developer who owns land worth $10M and plans $40M of hard and soft costs. Assumes 60% loan-to-cost and 60% land LTV. Figures are illustrative, not a quote.
$10,000,000 land value · $6,000,000 cash out
| Land loan | 60% | $6,000,000 | Cash in hand, but it is debt |
| Equity left in land | 40% | $4,000,000 | Stays trapped in the dirt |
Borrowing against the land turns 60% of its value into cash and adds a loan that the construction lender will need to take out or subordinate.
$50,000,000 total cost ($10M land + $40M building) · 60% LTC
| Construction loan | 60% | $30,000,000 | 60% of total cost |
| Land equity credit | 20% | $10,000,000 | Credited at value or cost (lender's call) |
| New cash equity | 20% | $10,000,000 | Sponsor must raise |
The land counts as equity, but it produces no cash. Effectively $6M of the loan relates to the land (60% of $10M) and the sponsor still writes a $10M check. Lenders may credit land at cost rather than appraised value on long-held land, per REFM.
$10,000,000 land sale · $40,000,000 building on a leasehold · 60% LTC on the building
| Leasehold construction loan | 60% | $24,000,000 | 60% of $40M building cost |
| Land sale proceeds | 25% | $10,000,000 | Cash at closing, reinvested |
| New cash equity | 15% | $6,000,000 | Sponsor must raise |
Selling the land puts the full $10M to work as cash, and the sponsor's new money falls from $10M to $6M. The trade-off: ground rent (about $525K–$550K in year one at the 5.25%–5.50% rate one ground lease REIT described, rising over time), a smaller leasehold permanent loan, and giving up the land's appreciation.
| A · Land loan | B · Land credit in LTC | C · Ground lease sale | |
|---|---|---|---|
| Cash generated from the land | $6,000,000 | $0 (credit only) | $10,000,000 |
| Debt tied to the land | $6,000,000 | Part of $30M loan | None |
| Sponsor new cash for $50M project | Depends on take-out | $10,000,000 | $6,000,000 |
| Ongoing land cost | Interest on land loan | Interest on the whole loan | Ground rent with escalators |
| Land appreciation | Yours | Yours | Lessor's (unless buyback) |
Terms from published sources. Every lessor's program differs.
| Term | Market practice (sourced) | Source |
|---|---|---|
| Lease term | 99 years is standard for modern development ground leases, often renewable | Nareit |
| Ground rent | About 5.25%–5.50% of proceeds in a ground lease REIT's late-2024 development example | Ground lease REIT |
| Escalators | 2.0% fixed annual increases plus CPI resets every 10 years capped at 3.5% per year (published example); lookbacks commonly capped at 3.0%–3.5% | REIT Q1'24 report |
| Size vs. property value | One REIT's new originations underwritten around 35% ground lease-to-value with ~3.0x rent coverage; portfolio about 52% | Q2 2025 earnings call |
| No FMV resets | Modern leases use fixed and CPI-based increases, not fair-market-value or percentage-rent resets | Nareit |
| Subordination | Modern leases are unsubordinated: the leasehold mortgage cannot encumber the landowner's fee | Holland & Knight |
| Lender protections | Default notice and cure rights, no voluntary termination, new lease to the lender, estoppels, consent to modifications | Freddie Mac Ch. 30 |
| Buyback option | Offered by some lessors (e.g. Haven Capital at launch), not by others | Commercial Observer |
| Deal size | Institutional programs commonly from ~$10M to $200M+ in top metros | WealthManagement.com |
Sell the land you own or are buying to the lessor at closing; build on the leasehold with a leasehold construction loan.
The lessor commits before construction to buy the land and fund a ground lease, sometimes with pre-development funding.
Some lessors provide both the ground lease and the leasehold loan for a one-stop capital stack.
A buyer acquires a building while the lessor buys the land, reducing the buyer's equity check.
An owner sells the land under its building to pay down debt or fund capex without a full refinance.
Ground lease proceeds fill gaps in tax-credit capital stacks and reduce the developer's equity need.
Illustrations of how ground leases are commonly used. Figures are examples, not quotes or past Win-Win transactions.
$85,000,000 building cost · land worth $15M owned free and clear
| Leasehold construction loan | 65% | $55,000,000 | About 65% of building cost |
| Ground lease proceeds | 21% | $18,000,000 | Lessor pays $15M land + $3M premium |
| Sponsor & LP equity | 14% | $12,000,000 | New cash required |
Keeping the land with a 65% loan-to-cost loan on the full $100M would require about $20M of new cash on top of the land. Selling the land at a $3M premium funds construction and cuts new cash to about $12M, with ground rent added to operating expenses.
$80,000,000 total development cost
| Construction loan | 50% | $40,000,000 | Converts to perm |
| Tax credit equity | 30% | $24,000,000 | LIHTC investor |
| Ground lease | 20% | $16,000,000 | Fills the gap |
Ground lease proceeds replace deferred developer fee and soft financing gaps, a structure ground lease REITs have used repeatedly in California and Texas.
$120,000,000 building value · $85,000,000 maturing loan
| New leasehold loan | 45% | $54,000,000 | Sized after ground rent |
| Ground lease (land sale) | 35% | $42,000,000 | ≈35% of property value |
| Owner equity | 20% | $24,000,000 | Retained |
Selling the land and taking a smaller leasehold loan repays the $85M maturity with $11M to spare, avoiding a cash-in refinance.
Published transactions from press releases and news. Win-Win was not involved in these transactions.
| Project | Year | Ground lessor | Amount | Asset | Leasehold lender | Source |
|---|---|---|---|---|---|---|
| Prima (Paseo South Gulch) Nashville, TN | — | Ground lease REIT | $11M land purchase by the ground lessor; $71M construction loan | Ground-up mixed-use; 16 stories, 278 apartments plus office | S3 Capital | source |
| Wilder Denver, CO | 2022 | Ground lease REIT | $31.0M ground lease | Ground-up multifamily, 196 units, Opportunity Zone | — | source |
| One Burton South Salt Lake, UT | 2022 | Ground lease REIT | $26.5M ground lease | Ground-up multifamily, 180 units, Opportunity Zone | — | source |
| Soquel-area LIHTC project Santa Cruz (Soquel), CA | 2026 | Ground lease REIT | $45M ground lease | Ground-up LIHTC affordable housing, 256 units, delivery 2028 | Wells Fargo and Citi Community Capital | source |
| 80 Saratoga Santa Clara, CA | 2023 | Ground lease REIT | $21.5M ground lease | Ground-up 4% LIHTC affordable housing, 200 units | Bank of America | source |
| 425 Park Avenue New York, NY | 2019 | Ground lease REIT | ~$620M | Office development (Norman Foster-designed tower) | — | source |
| Pennsylvania Avenue trophy office Washington, DC | 2018 | Institutional ground lessor | $150M ground lease | Existing Class A office (acquisition financing, not ground-up) | Unnamed third-party global institutional lender | source |
| 202 Tillary Street Brooklyn, NY | 2021 | Ground lease REIT | $33.2M | Rental development | — | source |
| Southwest Waterfront multifamily Washington, DC | 2018 | Institutional ground lessor | Part of $105M across 5 ground leases | Ground-up mid-rise multifamily, 300+ units | — | source |
| East Village multifamily San Diego, CA | 2025 | Ground lease REIT | Not disclosed | Ground-up multifamily, 259 units, 8 stories, Opportunity Zone | Ground lessor (also made the leasehold loan) | source |
| 299 Broadway Somerville, MA | 2025 | Ground lease REIT | Not disclosed | Ground-up multifamily, 204 units | Ground lessor (also made the leasehold loan) | source |
| The Benjamin Boston MSA, MA | 2025 | Ground lease REIT | Not disclosed | Ground-up multifamily, 364 units | — | source |
| The Crawford Roseville / Sacramento area, CA | 2025 | Ground lease REIT | Not disclosed | Ground-up LIHTC affordable housing, 265 units | — | source |
| Mission Valley LIHTC project San Diego, CA | 2025 | Ground lease REIT | Not disclosed | Ground-up LIHTC affordable housing, 227 units, delivery 2028 | — | source |
Older ground leases with fair-market resets have wiped out leasehold value. Lever House in New York faced a projected reset from $6.2M to more than $20M (source). Insist on fixed and capped increases.
Ground rent is a senior operating expense, so leasehold loans are sized on lower NOI (source).
Agency lenders require the lease to run well past loan maturity, e.g. 10 to 30 years for Freddie Mac depending on structure (source).
Fixed bumps plus CPI resets can outgrow rents in slow markets (source).
The landowner keeps the land and, at the end of the term, the building. Negotiate renewals or a buyback if reversion matters.
Some agency lenders reject rent increases tied to reappraisal. Confirm escalator design works for your take-out (source).
We compare land loan, land credit and ground lease options on your project: cash, equity required, blended cost and exit value.
We approach institutional ground lessors, private ground lease investors and leasehold construction lenders together.
Rent, escalators and caps, term, renewals, buyback, leasehold mortgagee protections and subordination.
Coordinate the land sale, ground lease and leasehold loan to close simultaneously.
Tell us about the land and the project. We'll compare a land loan, land credit and a ground lease sale side by side.
A ground lease separates ownership of the land from ownership of the building. A ground lessor buys the land (often from the developer) and leases it back for a long term, commonly 99 years, while the developer builds and owns the improvements on a leasehold financed by a leasehold construction loan.
Selling converts 100% of the agreed land price into cash for the project, while a land loan or the land credit in a construction loan typically turns only a portion of the land's value into financing. In exchange you pay ground rent and give up ownership of the land and its future appreciation unless the lease includes a purchase option.
It is set as a percentage of the price the lessor pays for the land. In a November 2024 industry presentation, a leading ground lease REIT described development ground rent of roughly 5.25% to 5.50% of proceeds with 2% annual increases and CPI resets every 10 years capped at 3.5% per year. Terms vary by lessor, market and deal.
In an unsubordinated ground lease (the modern standard), the leasehold lender's mortgage covers only the leasehold, not the landowner's fee interest. In a subordinated ground lease, the landowner allows its fee interest to be mortgaged behind the construction loan, which increases lender proceeds but puts the land at risk, so it is rarer and priced accordingly.
Yes, if the lease includes standard leasehold mortgagee protections: notice and cure rights, no termination without lender consent, a new lease to the lender if the lease is terminated, and enough remaining term beyond loan maturity. Freddie Mac, for example, requires the lease to run 10 to 30 years beyond loan maturity, depending on the loan and lease type.
Some programs buy the land at a premium to cost or value and fund the excess into the project. In one ground lessor's published example it paid $10M for land the sponsor had bought for $4M, and the $6M difference funded construction as an improvement allowance.
Usually the leasehold permanent loan is smaller, because it is sized on income after ground rent. The question is whether ground lease proceeds plus the smaller loan exceed what a fee-simple loan alone would provide, at a lower blended cost. We model both.
Some ground lessors offer purchase or buyback options and others prefer long-term ownership with renewals. Negotiate this before signing if it matters to you.
Ground-up multifamily, affordable LIHTC housing, mixed-use, office, hotel, industrial, student and senior housing, and recapitalizations of existing buildings in strong locations.
Institutional ground lessors generally target land values from about $10 million upward in major markets; Montgomery Street Partners' ground lease REIT, for example, was reported to target $10M to over $200M deals in the top 30 metros. Smaller deals may suit private ground lease investors or a land sale-leaseback.
Win-Win Capital Funding, LLC arranges financing and introduces developers to ground lessors and lenders and may be compensated. Third-party program terms are summarized from the cited public sources as of their dates and may change; they are not offers. Examples are illustrations, not quotes, appraisals or past Win-Win transactions. Consult your legal, tax and accounting advisers.
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