Best practices in commercial real estate financing ground rent adjustment formulas: the developer's and the lender's point of view

Abstract

AbstractLong‐term leases, be they ground leases or net leases on improved property, have characteristics distinct from short‐term space leases. From the financial perspective, the most distinctive provisions are those that control the rent resetting.[Sample lease provisions are included in the Appendix.] It is important to remember that each long‐term lease is unique: the parties have the ability to define each transaction in terms of the financial terms of rent determination, the manner in which the rent increases, how any appraisals will be performed for purposes of rent resetting and which method of dispute resolution will be used for rent resetting purposes.This paper examines rent resetting issues: the rent calculations, methods of determining future rent, valuation/arbitration clauses and specific valuation issues, bearing in mind that the developer and the lender often have different goals throughout the lease term. Copyright © 2004 Henry Stewart Publications