All Forum Posts by: Ben C.

Hi,

If someone trades from a ground lease into a fee simple property how is the new basis calculated?

Example:

Ground Lease Purchase Price: $1,000,000

Sell Price: $1,300,000

Transaction and Exchange Fees: $75,000

Realized Gain: $225,000 ($1,300,000-(1,000,000+75,000))

Assume a fee simple property is purchased for $2,000,000

Would the new basis be $1,775,000?

Or will the new basis be calculated differently?

Thanks

Under a typical ground lease the building will become the property of the ground lease owner at completion of the lease. However, the situation you describe seems odd.

Many ground leases are 15 or 20 year base terms with a minimum of two 5-year options. If the tenant doesn't exercise their options then the building becomes the property of the ground lease owner. Or, as mentioned earlier, the building will become the property of the ground lease owner at the conclusion of the tenant's options. At this point the owner can either negotiate a new lease with the tenant or re-tenant the building.

A lease with 10 years remaining with no options doesn't seem right. Have you actually seen the lease?

Based on the part about negotiating with the tenant it almost sounds like there is an option period at "Fair Market Value." If this is the case, there will often be language in the lease that specifies how "Fair Market Value" is determined.

Thank you, I will look into it. My main purpose is to find leases that are most likely to fit a certain criteria.

Finding the owner's contact information can be time consuming and difficult. If I find the lease information, I will be able to determine which buildings are desirable. Once I narrow it down, I will be able to contact the owners of those buildings.

I just got started as a commercial real estate broker. I need help finding the most efficient way to find the owners contact information. For publicly traded companies is there any way to see which buildings they have signed leases on and how much time remains on their current lease.

Hello everyone,

My name is Ben. I'm from the Sacramento area, and I'm looking to get started in real estate investing. Right now, wholesaling seems to be the most feasible option. I'm also interested in helping experienced investors by bird dogging and/or labor (marketing, clean up, etc).

I noticed NorCal REIA has a meeting on Wed. and Sac REIA has a meeting on Thurs. If anyone is attending, I would like to introduce myself and see if there is anyway I can help out.