Ground rent is sized off your stabilized, as-complete NOI — about a quarter of it — so the building's income covers the rent three to four times over. The land value we pay you is simply that rent divided by a ground cap. The escalations are fixed and capped, so you see the entire rent curve the day you sign.
| Step | Illustrative figure | How it is derived |
|---|---|---|
| Stabilized NOI | $4.0M as-complete | The anchor line — the property's stabilized, as-complete income from real comps. We always size off as-complete, never as-is. |
| Ground rent | ~$1.0M / yr (~25% of NOI) | About a quarter of stabilized NOI, with a hard ceiling near 30%. The remaining ~75% covers the rent 3–4x and stays with the building. |
| Ground cap | ~6.5% (tighter for housing) | The rate at which the rent is capitalized into land value. Housing prices tighter; other asset types a touch wider. |
| Land value (proceeds) | ~$15.4M | Ground rent ÷ ground cap. This is the cash you receive — and it should land near the appraised land value. |
| Escalations | Fixed & capped | Modest, defined annual bumps written into the lease — not a market reset to fair land value. You see the whole rent curve at signing. |
| Amortization | None | The rent is non-amortizing — pure carry, no principal, no balloon and no maturity wall to refinance around. |
The logic: the ground lease monetizes the land's value — the capitalized rent — while the building keeps the other three-quarters of income to cover that rent comfortably · because escalations are fixed and capped, there is no reset risk and no surprise · one principal counterparty for the land and the leasehold financing.
Ground rent is sized off stabilized, as-complete NOI — typically about 25 percent of it, with a ceiling near 30 percent — so the building's income covers the rent three to four times over. The land value you receive is that rent divided by a ground cap of roughly 6.25 to 6.75 percent, tighter for housing.
Because the ground lease monetizes the stabilized, as-complete value of the land, which is what a long-term lease is worth. Sizing off current or interim income would under-monetize the dirt. We anchor every figure on as-complete stabilized NOI from real comps and show interim coverage only as a check.
Escalations are fixed, defined, and capped — modest annual bumps written into the lease, not a market reset to fair land value. That means you see the entire rent curve the day you sign, with no reset risk and no surprise revaluation later in the term.
No. Ground rent is non-amortizing — it is pure carry with no principal component, no balloon, and no maturity wall. That is a core difference from a loan, where the constant climbs as the amortization term shortens.
Want the rent and land value run on your deal? Send the address, the as-complete stabilized NOI, and total project cost — we return an indicative land value, the implied ground rent, and the coverage in 48 hours, as principal or arranged capital.
Email us the deal