Ground Lease vs JV Equity: Shrink the Raise Instead of Filling It

A land sale is not equity. There is no coupon, no promote, no maturity and no lien on the leasehold.

JV and preferred equity are priced capital with governance attached. A land sale is a conveyance. The sponsor pays rent instead of surrendering economics, and there is nothing to refinance or buy out later.

The comparison

What each one actually costs.

	JV / preferred equity	Land sale and leaseback
Cost	Low-to-mid teens all-in once promote is counted	Rent at 25–30% of stabilized NOI, capitalized mid 6s
Upside	Shares it, usually permanently	Sponsor keeps all of it
Control	Consent rights, often control on default	None. Landlord, not partner
Maturity	Yes, plus a required exit	None. 99 years
On the leasehold	Pledge or intercreditor	No lien

The co-invest requirement is often the part that actually kills the deal. When an equity partner wants 90/10 with the sponsor funding the 10, a smaller total raise means a smaller co-invest in absolute dollars — which is frequently the difference between a sponsor who can close and one who cannot.

For the advisor

This shrinks your mandate. That is the point.

A placement shop reading this sees a threat: less equity to place means a smaller fee. Worth being direct about it. A smaller raise fills faster, needs less co-invest, closes more often, and leaves the sponsor owning more of their own deal — which is the relationship that produces the next mandate.

A raise that does not close pays nothing. And on the leasehold debt we introduce, we pay a 1% arranging fee at closing.

Questions, answered

FAQ.

Is this competitive with the equity I place?

It reduces the amount you place rather than replacing you. On most deals a sponsor still needs equity after the land comes out, just less of it.

What does the sponsor give up?

Rent, and ownership of the dirt. They keep the building, the depreciation, control and all the upside.

Can it sit alongside existing preferred equity?

Often yes, and retiring an accruing pref with non-accruing land proceeds is a common reason we get called. The pref documents govern how and when it can be retired, so send those.

What cannot it sit alongside?

PACE and HUD-insured debt. Neither will subordinate to an unsubordinated ground lease, at any point including the takeout.

What do you need to run the comparison?

Market, stabilized NOI, total project cost and asset type. No client name required.

Get your number

Run the number before you go find a partner.

Four inputs, no client name: market, stabilized NOI, total cost, asset type. A day on whether the land closes the gap.

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