When land and building are split, one property becomes two appraisals: the leased fee (the land and its rent stream) and the leasehold (everything above it). Both are only as good as the income assumptions underneath — and that is where deals go wrong.
A healthy structure shows a leased fee worth 20–35% of total value with rent covered 3× or better, and a leasehold whose value survives even at in-place income. Warning signs: rent above a third of NOI without reserves behind it, leasehold value that only exists in the stabilized scenario, or a ground cap rate borrowed from a different asset class. The split does not create value from nothing — it prices two different risks correctly, and correct pricing is where the capital efficiency comes from.
It moves with asset class, market, coverage, and lease terms — student housing, hotels, and multifamily each price differently. The honest answer is a range until the lease terms are set, which is why we quote rent and price together.
Usually because the appraiser used in-place income against a rent sized off stabilized projections. Reserves and milestone structures close exactly that gap — it is a structuring problem, not a value problem.
Formally yes; practically it is a rounding error at 99 years. Anyone paying materially for the reversion is mispricing the paper.
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 SolutionsWorking with an intermediary? The standby sheet for line 3 of the identification form.
Send both appraisals, or just the operating statements. We will show you what the income actually supports, on both sides of the split.