If you’re a landowner with a ground lease agreement for a cell tower, billboard, wind turbine or solar farm, there is an important question to consider: Are you getting the most value from your ground lease agreement?
For many property owners, getting maximum value from a ground lease means monetizing the lease and using the proceeds to pursue greater economic value through a real estate, business, land or equities investment. Such investments over the long term often create far more value than accumulated rent over the same time period.
To help our readers understand the details of a ground lease buyout, this article will discuss how a transaction is carried out, and the options that Landmark Dividend offers for receiving the proceeds, including a lump sum payout.
Selling a Ground Lease: How it Works
Initial review. Our team works closely with you to complete a risk assessment of your site. We conduct a comprehensive analysis and review of factors such as site location, tenant, site type, rental rate, lease structure, comparable rent market analysis, and much more. There is no charge for our consultation, and no obligation on your part.
Detailed proposal. We map out the details of buying your lease for a lump sum payment, and provide you with a comprehensive, tailored proposal that includes the terms that will address your specialized needs. We provide guidance every step of the way, answering your questions and ensuring that the process is as transparent, easy and efficient as possible.
Closing and funding. A dedicated, experienced team will be assigned to your deal and will use standardized documentation to conduct due diligence through a series of checklists, and then process, document, and finalize your transaction. At every point in time, you will know exactly where your transaction stands and what we are doing to complete it. At Landmark, we close transactions quickly and efficiently – typically within 45 days.
Lump Sum Benefits
Monetizing a ground lease provides you with a significant cash payment the creates investment opportunities. Many of our customers use their proceeds to buy a new business that they couldn’t otherwise afford with just the piecemeal income from lease rent. Others improve or expand the business that they currently own in order to increase their revenue.
Generally, ground lease transactions are eligible for a 1031 exchange. Since taxes are deferred, a 1031 Exchange keeps more money in your pocket, which often allows you to buy a bigger or more valuable property.*
Sometimes the smartest financial move to make is eliminating debt to free up cash flow, pay off a tax bill or other obligation, or pay off your mortgage and own your home outright.
Debt can be an incredible burden, and the incremental payments received from a ground lease may prove to be insufficient at offsetting the accumulation of interest fees and late payment charges. A lump sum cash payment from the sale of your ground lease gives you the ability to pay down or pay off existing debt.
Cover an Urgent Need
Financial emergencies are something that we all need to be prepared for. Unfortunately, it’s often the case that such emergencies happen when we least expect them to. When a financial emergency strikes, such as an unexpected medical bill, a lump sum payment for your ground lease could end up being the saving grace you need.
In addition to providing our clients with a fair value for their ground lease, Landmark Dividend is also highly efficient at completing transactions, making the lease buyout transaction quick, easy, and hassle free so that you can receive your cash payment quickly.
If you choose not to sell your ground lease, there are still financial risks that you should know. With a typical cell tower or billboard lease, it is possible for your monthly rent to be reduced by the site owner or even for the site to be decommissioned entirely following an industry consolidation, resulting in your monthly rent disappearing altogether.
While the decommissioning of a ground lease site is a rare occurrence, it’s still a possibility. The sudden loss of income from a ground lease can be difficult to deal with for landowners who’ve come to depend on it. Monetizing the value of your ground lease and converting it into another investment not only offers significant upside potential, but can also help you reduce risk.
Lease Monetization: Your Options
Landmark offers several options that allow you to receive the proceeds from the sale of your lease in a way that’s best suited for your personal needs. Here are the top four financial needs we see from ground lease landlords, and our solution for each one:
Lump Sum Cash Now. Landlords who need all the cash value in their lease right now to make a real estate, land, business or equities investment, or need cash for an urgent financial need such as paying down debt or taxes, choose a Traditional Lease Buyout. Proceeds are usually taxed as capital gains, which is a lower rate than regular income.*
Maximum Cash Over Time. If you need the absolute maximum cash value from your lease but don’t need it right away, our Maximum Value Program (MVP) is a good choice. By paying you in installments over a period of up to ten years, we can offer you the highest possible cash payment for your ground lease.
Cash Up Front and Get Your Lease Back. Property owners who have a need for cash right now but don’t want to permanently give up their lease choose a Short-Term Purchase Agreement for 15, 20 or 25 years. Once your term is complete, your lease and 100% of its income returns to you.
Tax Savings. Do you want to invest in an income property or business? A 1031 Exchange is a great choice. Keep all the proceeds from the sale of your cellular lease if you invest them in a property used for investment or business. Since taxes are deferred, a 1031 Exchange keeps more money in your pocket.*
Contact Landmark Dividend Today
Whether it’s a billboard, cell tower or rooftop antenna, solar, wind or even a fiber optic lease, we can offer you a fair value for your ground lease so that you have the financial flexibility to invest in your future.
For more information on lump sum vs payments, call us today at 1-844-722-0133 or click here to submit your information, and if you qualify, we can provide you with a no obligation lease evaluation.
*The information above is provided as a general information on capital gains tax and the 1031 exchange process. Use of any information obtained from Landmark or its affiliates is for general information only and does not represent tax advice, either express or implied. You are encouraged to seek professional tax advice for tax questions and assistance.