Your land is the cheapest capital in your stack.

Q: Is a ground lease really cheaper than equity?

On cost, yes, by a wide margin. Ground rent prices around 6-6.75% and never amortizes, versus 12-15%+ for preferred or mezzanine and an 18-20%+ target return for common equity. And unlike equity it is non-dilutive: you keep 100% of the upside and the promote.

Q: Don't I lose the land's appreciation?

You trade the land's slow appreciation for a large amount of cheap, non-dilutive capital today, and you keep all of the building's appreciation and operating upside, which is where most of the value-add return lives. Many sponsors also keep an eye on reacquiring the fee over time.

Where it sits

The capital stack, cheapest to most expensive.

Every layer above senior debt costs more and usually takes something — your cash flow, your promote, or your ownership. The ground lease slots in as the cheapest non-dilutive layer, and it's the one that lets you retire the expensive ones.

Capital layer	Rough cost	Dilutive?	Amortizing?	Keeps your upside & promote?
Senior debt	~6–7%	No	Usually	Yes — but limited proceeds, plus covenants / recourse
Ground lease (your land)	~6–6.75%, non-amortizing	No	No	Yes — keep the building and 100%
C-PACE	~9–11% constant	No	Yes	Yes — but a super-priority lien that can block your refinance
Mezzanine / preferred equity	~12–15%+	Partially	Often	No — pref return ahead of you, promote crunch
Common / JV equity	18–20%+ target IRR	Yes	No	No — dilutes your ownership and your promote

The land is commonly 30–40% of total basis — a big slice you're financing with the most expensive capital in the stack. Monetize it with a ground lease and you fund the equity injection, retire the pref or mezzanine, or close the gap, at a cost that sits next to senior debt — without giving up a point of the upside. The honest tradeoff: you're selling the land's slow appreciation, and the ground rent is a senior, fixed obligation your income has to cover — typically by 3–4×. Where the land value and the coverage are there, it's the cheapest money in the room.

Who buys the land

Three parties, one counterparty.

A bifurcation splits the deal into the fee (the land) and the leasehold (the building). Here's who plays which role — and why you only ever deal with us.

You — the sponsor

You keep and operate the building on a long-term (99-year) leasehold. The value-add, the cash flow, and 100% of the upside and promote stay with you.

The land buyer

Buys the fee and becomes your ground lessor. That's Valor as principal, or an institutional ground-lease investor we arrange — a 1031/DST fund, life company, or REIT.

The leasehold lender

Finances your building on the smaller, post-monetization basis — including agency leasehold financing on multifamily. We place it as part of the structure.

We buy the fee and arrange the leasehold financing — one counterparty for the whole stack.

Questions, answered

Ground lease vs. equity — FAQ.

Is a ground lease really cheaper than equity?

On cost, yes — by a wide margin. Ground rent prices around 6–6.75% and never amortizes, versus 12–15%+ for preferred or mezzanine and an 18–20%+ target return for common equity. And unlike equity it's non-dilutive: you keep 100% of the upside and the promote.

Don't I lose the land's appreciation?

You trade the land's slow appreciation for a large slug of cheap, non-dilutive capital today — and you keep all of the building's appreciation and operating upside, which is where most of the value-add return lives. Many sponsors also keep an eye on reacquiring the fee over time.

Does a ground lease add refinance or maturity risk like debt?

No. The ground rent is non-amortizing with no balloon and no maturity wall, and the land isn't your collateral — so it doesn't create the takeout problem that an amortizing loan or a super-priority C-PACE lien can.

Who actually buys the land?

Valor, as principal, or an institutional ground-lease buyer we arrange (a 1031/DST fund, life company, or REIT). Either way you work with one counterparty: we buy the fee and arrange the leasehold financing for the whole stack.

Glossary

The terms, in plain English.

Ground rent: The fixed annual rent you pay to lease the land back. Non-amortizing — it never pays down a balance — and typically set at roughly a quarter of stabilized NOI.
Ground cap: The capitalization rate used to value the land: ground rent ÷ ground cap = land value. Roughly 6.25–6.75%, tighter for housing.
Leasehold: Your estate — the building plus the right to use the land under the lease. What you keep, operate, and finance.
Fee / leased-fee: Ownership of the land itself. The fee is what we buy; once it's leased to you, it's the "leased-fee."
Bifurcation: Splitting one property into two estates — the fee (land) and the leasehold (building) — so each can be owned and financed separately.
Coverage: How many times your income covers the ground rent. On income property it's typically 3–4×.
Promote: The sponsor's outsized share of profits above a return hurdle. A ground lease is non-dilutive, so you keep 100% of it.
Super-priority lien: A claim that sits ahead of your mortgage — what a C-PACE assessment creates, and why it can block a refinance. A ground lease is not a lien.

For 1031 investors

Every ground lease we write creates two things you can buy.

The land, on a 99-year lease: nothing to manage, senior to the building’s lender, low yield because the buyer is buying the right to not pay the tax. The building above it: higher yield, paid monthly, depreciable. Both are replacement property. Both close on a date we control, which is the part that matters on day 140.

1031 Solutions

Working with an intermediary? The standby sheet for line 3 of the identification form.

Send us the deal

We move on real numbers.

If you're filling an equity gap, taking out a pref, or recapitalizing — send the address, the as-complete stabilized NOI, and total project cost. We return an indicative land value fast, as principal or arranged capital, and show you exactly where it sits in your stack.