You keep and operate the building on a long-term (99-year) leasehold; we buy the land beneath it and lease it back. The land — usually 30–40% of your basis — becomes permanent, non-recourse capital. Here's the structure, the math, and the assumptions behind every number.
Today you own the whole asset — building and land — financed with a mortgage and a thick slug of equity. We split it into two estates: you keep the building on a 99-year ground lease; we buy the land. The land becomes capital, and it replaces the most expensive layers of your stack.
| Capital on a $40M hotel (illustrative) | Fee simple today | After the bifurcation |
|---|---|---|
| Your equity | $14M | ~$8M |
| Senior debt | $26M mortgage | ~$19M leasehold loan |
| Ground lease (land — Valor buys) | — | ~$13M |
| Total capitalization | $40M | $40M |
What changed: your equity drops from $14M to ~$8M and your senior debt shrinks — the ground lease replaces them with permanent, interest-only, non-recourse capital. You keep the building, keep operating, and keep 100% of the upside and promote. (Illustrative; splits vary by asset and market.)
The combined property value splits into the ground lease — the safe, senior, bottom slice we own — and the leasehold, which you own and operate and which carries all of the upside.
| Estate | Who owns it | What it is |
|---|---|---|
| Leasehold (~65% of value) | You | The building and the right to use the land under the lease. You operate it, finance it, and keep all the value-add and 100% of the promote. |
| Ground lease (~35% of value) | Valor (or an arranged investor) | Ownership of the land, leased back to you. The senior, bottom slice — paid as ground rent. |
The ground rent is a small, well-covered fraction of income: roughly 25% of stabilized NOI, covered 3–4×, on a 99-year term, with a fixed ~2%/year (or capped-CPI) reset — and it's interest-only, so you never pay to amortize the land.
You sell the land and lease it back — and in return you raise more capital, at a lower cost, with less risk, while keeping everything you actually care about.
Confirm tax specifics with your own advisor — treatment depends on your structure and facts.
A ground lease is interest-only — you never pay to amortize the land — so per dollar raised it costs less than the debt it replaces.
| SBA 7(a) debt service (≈10.9% constant, amortizing) | ≈ $545,000 / yr |
| Same $5M raised as a ground lease (≈6.75–7%, interest-only) | ≈ $340–350,000 / yr |
| Cash flow freed — every year | ≈ $195,000 / yr |
The same engine, calibrated to each asset's cap and coverage — illustrative, on a stabilized-NOI basis.
| Asset (illustrative) | Stabilized NOI | Ground rent (25%) | Ground cap | Ground-lease proceeds |
|---|---|---|---|---|
| Hotel — select-service | $3,400,000 | $850,000 | ~6.5% | ~$13.0M |
| Multifamily — Class A | $6,000,000 | $1,500,000 | ~6.25% | ~$24.0M |
| Net-lease / owner-occupied | $2,000,000 | $500,000 | ~6.75% | ~$7.4M |
Why multifamily monetizes the most land: low caps put a large, stable value in the dirt, and agency leasehold financing sits on the smaller basis. Why hotels are the highest-impact: the spread between hotel yields and the ground cap unlocks the most land relative to value.
It splits your property into two estates — you keep and operate the building (the leasehold); we buy the land (the fee) and lease it back to you on a long-term, typically 99-year, lease — so the land's value becomes capital today instead of trapped equity.
At roughly 25% of your stabilized NOI (a ~30% ceiling), so it's covered about 3–4× by in-place income. It's fixed, escalates at about 2% a year or a capped CPI, and is interest-only — it never amortizes.
Ground rent ÷ a ground cap rate. The ground cap runs about 6.25% for housing and 6.5–6.75% for hotels and other asset types, so the proceeds are usually a premium to the raw land value.
The building, the operations, all of the value-add, and 100% of the upside and promote. There's no JV partner and no dilution — we own only the land, and you lease it back.
No. The institutional ground-lease platforms generally start around $30M+ of total cost in the top markets. We bring the same structure to the deals below that line — secondary and rural markets, owner-occupied, and affordable/LIHTC, where a ground lease works alongside the tax-credit equity and the perm loan.
Send the address, the as-complete stabilized NOI, and total project cost. We return an indicative ground value in 48 hours — the fee proceeds, the leasehold loan, and the cash flow freed — as principal or arranged capital.
Email us the deal