Land Lease Hold Purchases from under Real Estate/ Great Opportunty

[Sandra Brown]

Land Lease Hold Purchases from under Real Estate

  I’m currently working directly with a lending  group that has a new program that might be of interest to many of you cash strapped investors.  This year the group is looking to buy $1 Billion in ground leased fee positions and they are well capitalized to do so.

The group just bought the ground under the NE regional headquarters of a major insurance company in the Hartford, CT sub-market.  On that transaction we bought the ground for $22.8 million, got the seller leasehold financing for $25.6 million, and are now doing a $3.2 million mezzanine loan on the property. The result: at $51.6 million in total capitalization the seller got 99% of the price he would have received in a sale while continuing to get an average of $687,000 in net cash flow over the next 10 years, boosting his cash-on-cash return almost 3X from an average of 12.82% to 34.26%, and he can keep the leasehold in his estate for the next 99 years and depreciate the asset 100% as the result of no longer owning the land.

So you can see how this would be an attractive structure for sellers as opposed to a traditional recapitalization or sale!

This is how it works

•         The lender will buy the ground under any high quality commercial real estate asset with a value of $50 million + (or possibly a portfolio of them) for typically 40%-50% of the overall value of the asset at a cap rate well below the cap rate for the overall asset,

•             We will lease it back to the seller over a 99-year term,

•             Assist the seller in obtaining leasehold debt,

•             Perhaps even provide a mezzanine on top of the capital stack.

The result of which will be the seller/leaseholder:

 •             Receiving 90-99% of the proceeds at closing that they would have received in a sale,

•             Retaining and continuing to operate the real estate,

•             Doubling to tripling their cash-on-cash return over more traditional financing.

 We may be interested in major international markets as well, depending on the quality of the real estate, size, location, ect. 

 

For more information please contact Sandra Brown @ [e-mail] or Skype: Deebrown59