Transform underutilized land into income
Six considerations for ground leasing legacy real estate assets
Many public and private institutions, including government agencies, public/private universities and colleges, have one or more legacy properties in their portfolios that are not being used to support their missions. Whether it’s a vacant piece of land, an older building with significant repair expenses or a site better suited to serve the community with other uses, a legacy real estate asset can become a strain for your organization—or it can be turned into a revenue-generating opportunity that also serves the community.
If a legacy property is not reaching its potential for advancing the mission, your organization could consider various development options that would spark new activity on the site and also generate funds to direct toward other priorities. While an outright sale of the property or self-financed redevelopment may be the first option that comes to mind, a ground lease of the land can potentially provide longer-term value to your organization.
Six considerations for ground-leasing legacy real estate assets:
- Is a ground lease the right strategy for your legacy asset?
- What purpose do you envision for the property?
- How much control do you want to have over the development?
- How do you structure payment terms to meet your near-, mid-, and long-term needs, while balancing a project’s potential risk and return?
- How much administration, audit and oversight over the life of a ground lease is your organization comfortable and capable of assuming?
- How can you ensure that the tenant properly operates and maintains the property throughout the lease term?
