Ground Leases
Unlock Embedded Value
R3 Investors’ ground lease enables building owners to generate a stronger return profile and lower cost of capital with less risk, while reducing upfront equity requirements.
Maximizing Returns
With a R3 Investors ground lease, leasehold owners benefit from increased cash-on-cash returns and substantial tax advantages.
How R3 Investors Ground Lease Works
R3 Investors ground lease offers a stable, long-term capital solution. It requires less equity than fee simple ownership, minimizes refinancing risk, and delivers accretive returns.
- Versatile Structure: Provides a better capital solution for all property types at all points of an asset’s life cycle: construction, recapitalization, refinancing, sale, and purchase.
- Lender Approved: R3 Investors ground lease solution has been executed alongside numerous leading lenders, including banks, CMBS, life companies and agencies. Combine R3 Investors ground lease with leasehold financing to drive a blended cost of capital below traditional financing, with reduced debt and equity required.
- No Friction Costs: Eliminates sizable financing fees, transfer fees, and mortgage recording fees over the ground lease term.
Better Capital to Unlock Embedded Value
For Owners, Operators and Developers
Fee Simple
$35.0 M
35% of Property Value
$65.0 M
SOFR +350, 10yr Term
65% of Property Value
Illustrative Example:
R3 Investors ground lease creates value and liquidity.
Same $100 M Asset
Pricing as of Nov ’23
With R3 Investors Ground Lease
$22.7 M
Equity
23% of Property Value
$42.3 M
SOFR +350, 10yr Term
65% of Leashold Cost
$35.0 M
5.25% Initial Yield
Enhanced Returns
$100 M
Same Fee Sample Purchase Price at 6.25%
$100 M
$35.0 M
35% Less Equity Required
$22.7 M
6.25%
9% Increase in Unlevered Yield
6.79%
8.83%
18% Reduced Cost of Capital
7.21%
14.4%
39% Higher IRRs (10 Year Hold)
19.9%
1.93x
24% Higher Multiples (10 Year Hold)
2.39x