Both fill the gap above the senior loan — but a ground lease does it cheaper, with no maturity wall, no intercreditor, and no dilution. And it reaches the land value a mezz lender never touches. We buy the land; you keep the building and 100% of the upside.
| Valor ground lease | Mezzanine financing | |
|---|---|---|
| Annual carry | ~6–6.75%, non-amortizing ground rent. | Low-to-mid teens, often with amortization or an accruing PIK component on top. |
| Maturity | No maturity wall — a long-term, typically 99-year, lease; nothing to refinance. | Short term with a balloon — a second refinancing event you have to underwrite and clear. |
| Intercreditor | None — the land isn’t your collateral, so there’s no second lender to paper an intercreditor with. | An intercreditor agreement with the senior lender — slow, negotiated, and a frequent deal-killer. |
| Dilution / control | Non-dilutive — no warrants, no equity kicker, no board or approval rights. | Often carries warrants, an equity kicker, or springing control on a default. |
| What it reaches | The land value too — monetizes the dirt a mezz loan sized off the building never touches. | Sizes off the leverage gap on the improvements; the land equity stays trapped. |
| Accounting & tax | 100% deductible operating rent — treated as rent, not stacked debt. | Stacked debt with a debt-service line and limited deductibility on PIK accruals. |
| Your upside | 100% kept — you own the building, the cash flow, and the appreciation. | Shared via warrants or kicker, and at risk if the balloon can’t be refinanced. |
And: fixed and non-amortizing — no balloon, no maturity wall · no intercreditor to negotiate with your senior lender · one principal counterparty for the land and the leasehold financing.
Usually, and by a wide margin. A ground lease monetizes the land value at a non-amortizing ground rent of about 6 to 6.75%, while mezzanine debt typically prices in the low-to-mid teens and often amortizes or accrues PIK on top. The carry difference compounds every year, and the ground lease has no balloon to refinance.
No. Mezzanine debt sits behind the senior loan and requires a negotiated intercreditor agreement, which is slow and frequently kills deals. A ground lease isn't a second lien on your collateral, so there's no intercreditor to paper. That alone can be the difference between closing and not.
No. Mezzanine financing often carries warrants, an equity kicker, or springing control rights on a default. A ground lease is non-dilutive: it's rent on the land, with no warrants, no kicker, and no board or approval rights. You keep 100% of the promote and the upside.
Mezzanine debt sizes off the leverage gap on the improvements, so the land equity stays trapped. A ground lease monetizes the land directly, which is typically 30 to 40% of basis. On a land-heavy deal that often means more proceeds, not just a lower carry.
Deals where you’d otherwise reach for mezz — especially land-heavy assets, a tight intercreditor, or a balloon you’d rather not create. Send the address, the as-complete stabilized NOI, and total project cost — we return an indicative land value in 48 hours, as principal or arranged capital.
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