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What is a ground lease? 

Summary:
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A ground lease represents the contractual relationship between an owner of land and the entity entitled to the use of that land.

Typically, the land is leased on a long-term basis by the landlord to a tenant that operates the property. Ground leases are usually triple net (NNN), whereby the tenant is responsible for all expenses related to the premises (for example, property taxes, maintenance costs, and insurance premiums).

Bifurcation — the process of selling the underlying land, and leasing said land back under a ground lease — provides investors or developers access to low-cost capital, while reducing their reliance on other, more expensive financing sources. Whether investors are buying, selling, recapitalizing assets, or in need of liquidity, bifurcation can be an accretive capital solution.

​Brief history of ground leases:

The concept of a ground lease can be traced back to feudal times when land was held by the ruling class. During this period, nobles would grant land to villagers in exchange for various obligations such as military service or livestock. These arrangements established the basis for the tenant-landlord relationship and laid the foundation for the notion of a ground lease.


The Industrial Revolution brought about significant changes in property usage and ownership. As urban areas expanded, the demand for land grew exponentially. Ground leases gained further popularity in the 20th century in cities like New York where rapid growth coincided with limited land availability. Ground leases provided landowners a way to retain ownership of their land while granting developers access to prime markets at a reduced upfront cost, facilitating the development of key infrastructure and skyscrapers.

Capital efficiency Like debt and equity, land and buildings are fundamentally different investments and should be capitalized accordingly. A bifurcated financing structure allows all parties to invest in assets that better match their preferred risk, maturity, and return targets, potentially resulting in lower funding costs and higher risk-adjusted returns.