Credit tenant lease financing and ground leases get confused constantly because both involve a long lease and both feel bond-like. They are opposites in one important way: CTL proceeds rise and fall with your tenant’s credit rating, and ground lease proceeds do not depend on it at all.
CTL financing treats a long-term lease from an investment-grade or near-investment-grade tenant as the credit. The loan amortizes to match the lease term, leverage can run very high because the underwriting is the tenant’s rating rather than the real estate, and pricing follows corporate spreads. It is excellent capital when you have it. Its limits are exactly its strengths inverted: it requires a strong single credit, a long lease with the right structure, and it disappears when the tenant is a private operator, a regional business, or a multi-tenant rent roll.
A ground lease prices the land beneath the improvements. We buy the fee and lease it back for 99 years, unsubordinated, at rent of roughly 25–30% of stabilized NOI capitalized in the mid-6s. What sets the price is the land, the income covering the rent 3–4×, and the market — not whether the operator is rated. That is why it reaches sponsors that CTL cannot: private developers, family operators, syndicators, multi-tenant assets, and hospitality, where there is no tenant credit to lend against at all.
Underwritten to: CTL, the tenant’s credit rating. Ground lease, the land and the coverage.
What you give up: CTL, the building is encumbered by amortizing debt to lease end. Ground lease, the land, and the improvements at year 99.
Amortization: CTL, fully amortizing by design. Ground lease, none — rent is not principal.
Maturity risk: CTL, self-liquidating. Ground lease, none; there is no balloon because it is not debt.
If the tenant leaves: CTL, the entire structure is stressed. Ground lease, unaffected — the rent was never priced on that tenant.
Dilution: Neither. That is the shared virtue, and it is why sponsors who like one usually like the other.
Consider a build-to-suit for a strong credit on expensive dirt. CTL financing sized on the tenant’s rating finances the improvements efficiently. A ground lease takes the land out of the sponsor’s basis at closing. The sponsor’s equity requirement falls by the land price, the CTL still works because it was never underwriting the land, and the two pieces do not compete for the same collateral — one sits on the leasehold, one owns the fee beneath it. The lease has to be drafted so the CTL lender holds a proper leasehold mortgage with full protections, which is standard and well-precedented.
This is also why credit tenant lease bankers tend to understand a leased fee within about ninety seconds. They already value long-dated lease payments as bond cash flows. A ground lease is the same arithmetic applied to the dirt.
Yes, provided the ground lease is long relative to the CTL term and carries the leasehold mortgagee protections lenders require: notice and cure, a new lease on rejection, no amendment without consent, and clean foreclosure mechanics. Our form carries all of them, and the 99-year term leaves ample runway beyond any CTL amortization schedule.
No. Tenant credit is not what prices a ground lease. Coverage matters, the land matters, and the market matters. A property with a private operator and no rating can support a ground lease when it cannot support CTL financing at all.
It depends entirely on the split between land value and improvement value, and on the tenant. Credit-heavy improvements on cheap land favor CTL. Expensive land under modest improvements favors a ground lease. On land-heavy assets with a strong credit, using both usually raises more than either alone.
No. A sale-leaseback sells the whole asset and prices the rent on the seller's credit, which for a private owner often means a 7.5-9% cap on 100% of value and surrendering the building. A ground lease sells only the land, prices on the land, and you keep the building and all of its upside.
Send the lease, the tenant, the land basis and the total project cost. We will show you what the land is worth on its own and how it fits alongside CTL or conventional debt.
Email us the property