You already sell preferred equity, JV equity and co-GP to fill the gap. All of it carries a coupon, an accrual, a promote and often control. The land does the same job with none of those, and it sits under the first mortgage rather than behind it.
We pay a 1% arranging fee on the capital we place into a deal you bring, earned at closing of that transaction. It is written into our form documents rather than promised on a call. We are a principal buying with our own balance sheet, so there is no syndicate to assemble and no third-party investment committee between your client and a decision.
Ground rent is roughly 25–30% of stabilized NOI — 20–25% for hospitality. Divide that rent by a ground cap in the mid-6s and you have the land price. Two sanity checks: proceeds should not exceed about 35% of appraised stabilized value, and stabilized NOI should cover the rent 3–4× at origination. If your deal clears those, it is a real candidate.
One number worth carrying in your head: a dollar of NOI buys about 16.7× as ground rent at a 6.00% cap, against roughly 11× as amortizing debt at 1.25× coverage on a 7.19% constant. That spread is the entire reason this reaches numbers debt cannot.
1. Ground-up construction. The land leaves the sponsor's equity at closing, and the construction lender's loan-to-cost improves because the land is no longer inside the cost the loan carries.
2. Acquisitions short on equity. The land price is deducted from the check rather than raised.
3. Loan maturities. Proceeds pay the senior down to a level a conventional or agency takeout will actually reach.
4. Preferred equity takeouts. Retire an accruing pref with capital that does not accrue.
5. Covenant and workout situations. Principal that comes from neither the borrower's pocket nor a new lender.
Address or parcel, as-complete stabilized NOI, total project cost, and asset type. That is enough for an indicative land value, the implied ground rent, coverage, and where it sits in the stack. Send a deal that died on the equity gap this year and we will tell you inside a day whether the land would have closed it — that is usually the fastest way to find out whether this is useful to your book.
We do not lend on the leasehold. We arrange it and introduce lenders, but we never hold that paper. We do not subordinate the fee — not to a construction loan, not for a better price. And we do not pair with C-PACE, because PACE will not subordinate to a ground lease; if PACE is on the deal, this generally cannot proceed until it is resolved. HUD-insured debt and a ground lease are likewise effectively mutually exclusive.
Land checks of roughly $5-40 million, sitting under total capitalizations of about $20-150 million. The sweet spot is $25-80 million of total capitalization, which is the band most institutional ground lease providers will not go below.
Mainly size and speed. The institutional platforms have floors that exclude most mid-market deals, and they move at committee pace. We are a principal writing smaller checks with no outside committee, which is why we can price in a week and close in weeks.
Our engagement terms carry a tail so an introduction you make is protected for a defined period after the conversation. Ask and we will send the language.
That the reversion is real and its present value is close to zero. Discount anything back 99 years at a commercial required return and it rounds to a fraction of a percent, which is precisely why the capital is cheap. Leasehold lenders underwrite a long lease like ownership.
Yes, and taking out an accruing pref with non-accruing land capital is one of the most common reasons we get called. The pref's documents govern how and when it can be retired, so send those with the rest.
Send a deal from this year that fell apart on the equity gap: address, stabilized NOI, total cost, asset type. We will tell you inside a day whether the land would have closed it.
Email us the property