In Ground Lease for NNN kind of NNN lease property, generally, land is rented to a tenant for a long term (50 to 99 years), during which the tenant has the right to improve the property, make necessary changes, as well as make improvements, construction, etc(Advantages of Ground lease properties, NNN experts).Contrast this with a Fee Simple transaction, where the land, with or without improvements, is transferred entirely, with all rights of full ownership.
Under a NNN Ground Lease, the tenant bears all the costs of maintenance and repair, taxes, and insurance. However, when the lease term ends, then the property along with any improvements, reverts to the landlord. This indicates that even after a long and substantial lease of the land, the landlord retains ownership.
If the tenant wants to enhance his business without really paying for the acquisition of property, then a NNN Ground Lease (Advantages of Ground lease properties) offers that freedom. The improvements on the net lease property made by the tenant are the tenant’s responsibility, but since they will revert to the landlord ultimately, comprise a collateral benefit to the landlord’s rate of return(acquisition of property).
Note that NNN Ground Lease properties can structured in two basic forms – the Unsubordinated ground lease and the Subordinated ground lease( Fee Simple transaction). The latter is risky for the property owner, as tenant default could lead to the seizure of both the property and improvements by the lien-holder of the land i.e. bank etc. However, in the case of a Subordinated Ground Lease, the property and improvements are not subject to lien covenants.
Call our national Ground Lease NNN experts at the Triple Net Investment Group to discuss your current or next Ground Lease transaction.
