Hello all -- thanks for taking the time to read and in advance for any imput you may provide. Here is the problem in a nustshell. A sandwich leasehold exists in which the leasehold has sublet a portion of the site with a big-box for the entirety of the ground lease payments, and then retained a portion of the site with adjunct retail improvements and gains all of the sublease income from them. Here's the rub. At first glance, it would appear as though the sandwich has a zero net payment responsibility for the use of the ground (as it is being absorbed by the big box sublease), thereby getting the entiry of the adjunct sublease income "for free." But there is risk there; if the big box sublease defaults, the sandwich is stuck with the entiry of the land lease payments, offset only by the much smaller adjunct retail income. Since when everything is operating as it should, the net "rent" for the sandwich is zero, the application of any risk is difficult (10% risk times $0 is $0). So here is the best soluation I have come up with: 1) discount the big box sublease income at a rate commensurate with the tenant's corporate bond ratings (say 7%). 2) discount the lease payments as though using a sinking fund account with a safe rate of say 4.5% compounded daily. Thus, although the sublease income and lease payments are equal in dollars, they are disparate in risk. Over 30 years, the overall risk associated with continuing to receive sublease income for the land is 7%, while the overall "risk" associated with paying the lease payments is 4.5%. The offsetting income then, is essentially subject to a 2.5% lower discount rate than the offsetting income. Since the dollars per period are equal, I see no way to associate the income risk with the much more certain need to pay the lease. Overall, then, the investment would be: Income from the big box land lease discounted at 7% Income from the adjunct retail center discounted at "typical" retail -- say 9% Expense from the master land lease payments discounted at a safe sinking fund rate of 4.5% Using this, the net present value of the sandwic leasehold position should include the risk of all income sources and the discount applicable to the time value of money related to future payment obligations to maintain the sandwich leasehold. Just saying that the income from the big box lease offsets the output for the land lease is not correct, as the investor runs the risk of losing the big box income but still being responsible for paying the land lease. The adjusnct retail income seems pretty much out of the loop and not subject to any atypical discount. Does any of this make any sense out there? If not, then how to best account for the difference in risk for the bog box income offsetting the master land lease payments -- they sure son't equate to zero. Who would incur the obligation to pay $1,000,000 a year in land leases for the benefit of obtaining $200,000 in adjunct retail income just because some company (B rated) agreed to pay the $1,000,000 for the life of the lease and call it a wash? THANKS!!!!! Braindead.