commit 9b13b0b688461121342cb9c44c0697ec8dca6cb2 Author: coysaranealis7 Date: Fri Jun 20 16:21:53 2025 +0000 Add Why Ground Lease REITs are Building In Popularity diff --git a/Why-Ground-Lease-REITs-are-Building-In-Popularity.md b/Why-Ground-Lease-REITs-are-Building-In-Popularity.md new file mode 100644 index 0000000..84d86ba --- /dev/null +++ b/Why-Ground-Lease-REITs-are-Building-In-Popularity.md @@ -0,0 +1,53 @@ +
As more residential or commercial property owners in requirement of liquidity use ground rents to open capital, investor might gain the rewards.
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Numerous openly traded real estate trusts (REITs) have faced difficulties in the previous year, with returns mostly routing stock market indexes. But REITs that are concentrated on ground leases - owning the land without owning the buildings that sit on it - have actually been an exception.
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Splitting the ownership of business land from the [buildings](https://seasiderealestate.al) that rest on it isn't an originality. In some ways, it's the very same monetary structure that medieval royalty used with its subjects. But the democratization of ground leases and their growing popularity is reflective of other kinds of securitization throughout the economy - producing narrower and more focused return characteristics to match the needs of various classes of investors.
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And with industrial office realty, in specific, in a prominent state of post-lockdown turmoil, the capability to produce a de-risked genuine estate possession has actually been warmly embraced by financiers.
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At present, Safehold (SAFE) is the [sole openly](https://www.phoenixpropertymanagement.co.nz) traded ground lease REIT pure play. It will likely be one of several on the marketplace in the coming years, triggering other more traditional REITs to diversify their holdings with land leases.
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We have actually already seen this with a mega-deal including Real estate Income and Wynn Resorts. In a transaction valued at $1.7 billion, Wynn Resorts sealed a sale/leaseback plan with Real estate Income, a conventional REIT, for its Encore Boston Harbor advancement, a hotel, casino and theater job 6 miles south of Boston.
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Unlocking capital when in need of liquidity
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Residential or commercial property owners are utilizing ground leases to unlock capital in areas where liquidity is doing not have. With local banking tightening up loaning - even with the specter of lower rates of interest - we are now seeing land lease [queries](https://michiganhorseproperty.com) soar. In my own land lease [specialty](http://tv.houseslands.com) practice, we are fielding more queries from owners and developers in all genuine estate sectors.
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One requires to just look at numbers touted by Safehold. Tim Doherty, Safehold's head of financial investments, stated in a news release that the business has broadened land lease offers from 12 in 2017 to 130 in 2022, with the value of the portfolio at more than $6 billion. He attributed the growth to a [brand-new level](https://sikkimclassified.com) of sophistication in the land lease market, adopting techniques such as predictability of lease payments, a move that leads to more effective rates. Over the last three months of 2023, Safehold stock was up nearly 40%.
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Growing popularity of ground leases has actually not gone undetected. Three years ago, Dallas-based Montgomery Street Partners started a $1 billion REIT targeted on in the country's leading 50 markets. High interest from institutional investors triggered Montgomery Street to broaden the swimming pool to $1.5 billion in 2022.
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Murray McCabe, a handling partner of Montgomery Street Partners, said in a press release, "The strong need we've seen for GLR's (ground lease REIT) follow-on equity offering validates our strategy and verifies that ground leases have developed to end up being an appropriate and mainstream funding tool."
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Clearly, ground lease mutual fund are one of the emerging patterns in property. Ares Management and genuine estate personal equity firm The Regis Group formed Haven Capital in 2020 to record growing land lease demand to, in their words, provide "a more effective kind of financing" that helps unlock possession value.
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These current developments, in addition to general funding trends within the realty industry, establish a pattern that's hard to ignore: Land lease activity, which has actually grown to a more than $18 billion market in 2022, will just see more offers announced over the next 10 years. By one estimate, the market might be near $2.5 trillion in the United States alone, offering a significant runway for growth.
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How does a land lease work?
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Long a staple of household offices trying to find a stable income and foreseeable stream from long-held vacant parcels in preferable areas, the land lease has become extensively embraced due to the fact that the vehicle presents a win-win circumstance for both the building owner and the landowner.
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How does a land lease operate? Typically spanning a term of 50 to 99 years with renewal options, a land lease REIT or sponsor gets the land from the structure owner. This plan enables the developer to release crucial capital, directing it toward areas with greater return potential. Simultaneously, the building owner maintains complete control of the asset while divesting the land below it, which, though helpful in the advancement procedure, supplies little go back to the overall job. The lease is [tailored](https://property-d.com) to fit the job.
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The Boston Harbor Development works as an illustration of the enduring usage of land leases in the hospitality market. Additionally, this approach has found appeal in retail, fitness centers and fast-food outlets. Now, various markets are recognizing the value of this principle. Ground rent payments consist of fixed annual lease increases.
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" Proof of idea continues to spread," Safehold's Doherty said.
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As the advantages to a project's capital stack ended up being easily evident, ground leases will get broader approval and be regularly employed as an essential aspect in the property market. Predictions recommend that ground leases will become mainstream within the next 5 to 10 years, using a spectrum of investment opportunities for astute players.
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