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Ground Lease

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Carlos Cardenas

Freshman Member
Joined
Apr 12, 2017
Professional Status
Real Estate Agent or Broker
State
Florida
good evening everyone. How do you go about pricing a ground lease? I have an owner of 3 folios that are equivalent to 20,000 sq ft in Liberty City Miami Dade Florida. He wants to do a land lease and I'm not sure how to price the price it. Can any of you guide me in the right direction?
 

Amy Perkins

Senior Member
Joined
Jul 20, 2003
Professional Status
Certified Residential Appraiser
State
Tennessee
Well I guess I will take a stab at it... My guess is that you need other ground lease comps. It may be that there is someone in your market that does these and has the data. Maybe they don't want to share it with you. However, it may help you to find out what appraiser they use for something like this and go to that guy for an appraisal. You could always team up with the go to guy(broker/agent) and get the information that way. If it's anything like other places people get territorial over their data for commercial property; they all want to double end the deal. While I find it personally unethical and all offers should be submitted; I know they operate in a different way. Let's just face the reality of the situation, brokers are not necessarily ethical. Sometimes, I feel like the last honest person in the world; but I will never change. It is just the way I was raised. My advice is to break it down per sf and rank it according to size and you should see some sort of meaningful data.

Say you get $4 per SF for 10,000
Say you get $6 per SF for 30,000
Now you have 20,000 I might assume you can get $5 per sf

These are just examples, but this is the way you bracket the values and use ranking. Get as much data as you can and verify it, make sure people aren't getting special deals. Call the agents, buyers, sellers and find out the terms. Good luck.
 

Howard Klahr

Senior Member
Joined
Oct 4, 2004
Professional Status
Certified General Appraiser
State
Florida
What is the intended use of the property?
 

Carlos Cardenas

Freshman Member
Joined
Apr 12, 2017
Professional Status
Real Estate Agent or Broker
State
Florida
What is the intended use of the property?
It's an asphalt 20k sq ft lot. The landlord would like to do a long term land lease. It's zoned for fast food, high rise buildings and much more.
 

Carlos Cardenas

Freshman Member
Joined
Apr 12, 2017
Professional Status
Real Estate Agent or Broker
State
Florida
Well I guess I will take a stab at it... My guess is that you need other ground lease comps. It may be that there is someone in your market that does these and has the data. Maybe they don't want to share it with you. However, it may help you to find out what appraiser they use for something like this and go to that guy for an appraisal. You could always team up with the go to guy(broker/agent) and get the information that way. If it's anything like other places people get territorial over their data for commercial property; they all want to double end the deal. While I find it personally unethical and all offers should be submitted; I know they operate in a different way. Let's just face the reality of the situation, brokers are not necessarily ethical. Sometimes, I feel like the last honest person in the world; but I will never change. It is just the way I was raised. My advice is to break it down per sf and rank it according to size and you should see some sort of meaningful data.

Say you get $4 per SF for 10,000
Say you get $6 per SF for 30,000
Now you have 20,000 I might assume you can get $5 per sf

These are just examples, but this is the way you bracket the values and use ranking. Get as much data as you can and verify it, make sure people aren't getting special deals. Call the agents, buyers, sellers and find out the terms. Good luck.
I appreciate
Well I guess I will take a stab at it... My guess is that you need other ground lease comps. It may be that there is someone in your market that does these and has the data. Maybe they don't want to share it with you. However, it may help you to find out what appraiser they use for something like this and go to that guy for an appraisal. You could always team up with the go to guy(broker/agent) and get the information that way. If it's anything like other places people get territorial over their data for commercial property; they all want to double end the deal. While I find it personally unethical and all offers should be submitted; I know they operate in a different way. Let's just face the reality of the situation, brokers are not necessarily ethical. Sometimes, I feel like the last honest person in the world; but I will never change. It is just the way I was raised. My advice is to break it down per sf and rank it according to size and you should see some sort of meaningful data.

Say you get $4 per SF for 10,000
Say you get $6 per SF for 30,000
Now you have 20,000 I might assume you can get $5 per sf

These are just examples, but this is the way you bracket the values and use ranking. Get as much data as you can and verify it, make sure people aren't getting special deals. Call the agents, buyers, sellers and find out the terms. Good luck.
I appreciate your feed. It's very helpful.
 

Carlos Cardenas

Freshman Member
Joined
Apr 12, 2017
Professional Status
Real Estate Agent or Broker
State
Florida
I appreciate your feedback and thank you for your time. It's truly appreciated.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
For what specific use of the property? Or are they just looking to market it to who ever comes along?

To tag onto Howard's question, the likely use (highest and best use) is going to a significant factor in answering your question.
A land lease involving a parking lot has a different dynamic than a retail bank which has a different dynamic than a fast food restaurant which has a different dynamic than a mixed-use property.
The differences in the uses, the demand for those uses, and the subject property's ability to maximize those uses is going to point you to the right direction.

Once you figure out the right "use" you will then be able to figure out the probable tenant-type. With those pieces, the puzzle can be solved to a greater degree of reliability.

Good luck!
 

leasedfee

Member
Joined
Oct 14, 2007
Professional Status
Certified General Appraiser
State
Colorado
Mr. Cardenas,
Ground leases aren't quite as simple as one might think -- though they may at a glance appear to be simple. There are complicated economic technical considerations that affect pricing and yields. Many a bad ground lease has been executed that comes back to bite the leasor's heirs, or the leasee, in the butt down the road. While a good attorney is obviously necessary, attorneys lack the understanding of the economic implications of their language and terms. Expertise though requires compensation for the hours of knowledge accumulated about the subject.
 

RebelNYC

Junior Member
Joined
Aug 6, 2009
Professional Status
Certified General Appraiser
State
District of Columbia
Mr. Cardenas,
Ground leases aren't quite as simple as one might think -- though they may at a glance appear to be simple. There are complicated economic technical considerations that affect pricing and yields. Many a bad ground lease has been executed that comes back to bite the leasor's heirs, or the leasee, in the butt down the road. While a good attorney is obviously necessary, attorneys lack the understanding of the economic implications of their language and terms. Expertise though requires compensation for the hours of knowledge accumulated about the subject.

Any suggested reading material?
 
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