[RPPTL LandTen] Sale of Ground Lessor's Position, but not the fee - structure and tax implications

Wed Jun 15 05:54:32 PDT 2011

Why couldn’t you do it as a new lease from the fee owner subject to the existing ground lease?

Tax consequences are not my area, but term and intent may control treatment. 

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From: landten-bounces at lists.flabarrpptl.org [mailto:landten-bounces at lists.flabarrpptl.org] On Behalf Of Haney, Gregory
Sent: Tuesday, June 14, 2011 10:44 AM
To: lesstevens at earthlink.net; RPPTL Landlord Tenant Committee
Subject: Re: [RPPTL LandTen] Sale of Ground Lessor's Position,but not the fee - structure and tax implications

Right, it smells more like a secured loan (via a pledge/assignment of rents) than a conveyance (via deed or lease assignment) of any sort.  I don't see how the "purchaser" can step into the ground lessor's shoes without taking title to the property since the ground lessee's rights have to flow from the ground lessor.  

To state the obvious, I suppose, you'd want to review any (landlord) assignability, anti-encumbrance, subordination language and the like in the ground lease. 

Gregory R. Haney
Attorney at Law
Shumaker, Loop & Kendrick, LLP
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From: landten-bounces at lists.flabarrpptl.org [mailto:landten-bounces at lists.flabarrpptl.org] On Behalf Of lesstevens
Sent: Tuesday, June 14, 2011 10:25 AM
To: 'RPPTL Landlord Tenant Committee'
Subject: Re: [RPPTL LandTen] Sale of Ground Lessor's Position,but not the fee - structure and tax implications

Hey George:

Sounds like an assignment of rents in exchange for the present value payment of the rents….I think the issue would be what if the tenant under the ground lease defaults and the assignee cannot recover any funds, what is the liability to the original ground lessor…..may be adding more issues, but I think the assignment/pledge is the form of documentation you may be looking for.

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From: landten-bounces at lists.flabarrpptl.org [mailto:landten-bounces at lists.flabarrpptl.org] On Behalf Of George Pincus
Sent: Tuesday, June 14, 2011 10:17 AM
To: 'landten at lists.flabarrpptl.org'
Subject: [RPPTL LandTen] Sale of Ground Lessor's Position, but not the fee - structure and tax implications

Has anyone done this deal:

·         Long term ground lease for a commercial property between Ground Lessor and Ground Lessee

·         A purchaser comes along and want to buy the Ground Lessor’s position under the Ground Lease, but not the fee.  

·         Essentially, the purchaser wants to buy the cash flow under the Ground Lease for the term of the Ground Lease for a present value (let the business people figure that calculation out) and, at the end of the term, the original Ground Lessor still has the reversionary interest and ends up owning the property and the leasehold improvements (large commercial building), free and clear of the ground lease and any subleases that the Ground Lessee entered into during the term of the Ground Lease. 

I would be interested in talking with you about structure and tax implications, if any (for some reason I think there are as this looks a lot like some tax shelter structures I saw the aftermath of in the 80’s and 90’s).  

If you have any relevant experience, please shoot me an e-mail or give me a call to discuss. 

Thanks very much. 

George A. Pincus, Esq.

Stearns Weaver Miller Weissler

  Alhadeff & Sitterson, P.A.

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