Retail Ground Leasing 101

• Retail ground leasing is popular along the Wasatch Front due to high investor interest and limited commercial land.
• Tenants benefit from more control over development and improvements, and lower upfront costs compared to buying land.
• Rent payments for ground leases are tax-deductible for tenants, who can also depreciate building improvements.
• Landlords benefit from no development costs, minimal maintenance responsibilities, and long lease terms (15-40 years) with stickier tenants.
• Revisionary clauses ensure landlords gain building improvements at the end of the lease term or in the case of tenant default.
• Tenants are responsible for all expenses, including maintenance, which can be a drawback, and rental payments might eventually exceed the cost of outright land purchase.
• Landlords face lower rental income compared to building leases and cannot depreciate the land, limiting tax deductions.
• Subordinated ground leases offer tenants favorable loan terms but pose higher risks for landlords, while unsubordinated ground leases are safer for landlords but tend to yield lower rents.

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