A modern ground lease typically runs 99 years with CPI-capped escalations (often 3.0% cap ), no near-term FMV resets, standardized recognition / non-disturbance, broad leasehold-mortgagee protections, and a publicly disclosed legal structure. The standardization has materially expanded the financeable universe versus legacy bespoke ground leases.
Modern ground lease structure and why it expanded financeable supply
Modern ground leases were popularized at scale by ground-lease-focused REITs starting in 2017, layering a fresh ground lease onto existing fee-simple assets to free trapped land equity for the operator while the fee owner retains a long-dated, inflation-linked income stream.
Standard structural elements: 99-year initial term, initial annual ground rent set at a low-single-digit yield on land value, often about 3% to 5%, CPI escalation capped at 3.0% annually, no early FMV reset, standardized recognition / non-disturbance language, broad leasehold-mortgagee notice-and-cure rights, and standardized lender consent processes.
Sponsor economics: Cash at inception is the ground lessor's purchase price for the fee. The operator then pays the ground rent, continues to operate and finance the leasehold improvements, and has a predictable forward rent profile. The downside is a permanent ground rent obligation on the operating financials.
Cross-asset applicability: the modern structure has been used on hospitality, BTR / multifamily, data center, adaptive reuse / office-to-residential conversion, and sale-leaseback transactions. The standardized leasehold-mortgage protections allow each of these specialty lender optionses to underwrite the leasehold without a bespoke negotiation.
Sources
- EDGAR: REIT and Real Estate Limited Partnership Filings · U.S. Securities and Exchange Commission · current
- Net Lease REIT Sector Data and Industry Reports · Nareit · 2026-Q1