Ground Lease Economics ModelFree Financial Model Download

This project finance model values a ground lease investment by forecasting rent escalation, calculating debt service coverage, and projecting levered and unlevered IRR over a 10-year hold. Answer: does the lessor generate sufficient NOI to support the debt and achieve target returns (8–14% levered IRR), and are refinancing/buyout economics attractive? Model a 99-year ground lease on a $20–50M commercial asset.

The workbook projects annual ground rent (base rent escalating at 2% p.a., typical for institutional ground leases), minimal operating expenses (3% of rent for legal/admin/insurance—triple-net structure shifts costs to lessee), and NOI approaching 97% of rent. Senior debt is sized at 55% LTV (conservative for non-recourse ground lease lending) and subjected to a 1.25× DSCR constraint, whichever binds first. Debt service using standard amortisation (25-year tenor matching the perpetual income stream). Exit valuation at Year 10 using forward NOI (Year 11) capitalised at 5% cap rate (50 bps wider than entry 4.5% reflecting shorter remaining term).

Used by institutional investors (pension funds, infra funds) acquiring fee-simple land under long-term leases, lenders structuring non-recourse mortgages on ground lease cash flows, and landowners evaluating whether to lease vs. develop. Ground leases offer ultra-long-duration income with near-zero operating cost. Reversion value (improvements revert to landowner at lease expiry) is typically not modelled in a 10-year hold (assumption is sale of leasehold interest). Benchmarks: Safehold (SAFE) operates 60–70% LTV; ground lease cap rates 3.5–5.5% depending on credit quality and term length.