MHP Land subject to a Ground Lease – Orange County MHP
Description – A ~100 space park in Orange County was subject to 5 years on a 65 year ground lease. The asset was owned by a trust and managed by a trustee who was responsible for divesting of the land. We worked with the owner and provided the highest price and best terms.
The Trust’s goals:
- Execute as smooth of a transaction possible
- Find a buyer willing to wait 5+ years for the ground lease to expire
- Find a buyer willing to accept a <2% return while the ground lease was effective
There were several steps to this ground lease purchase:
- Step 1: Rutherford provided the highest price and best terms for the Trust
- Step 2: Rutherford purchased the land subject to the ground lease
- Step 3: Subsequent to closing the land, Rutherford built a strong relationship with the ground lessee
- Step 4: Over 1 year after closing the land, Rutherford purchased the remaining term of the ground lease from the ground lessee.
| BEFORE | AFTER | |
|---|---|---|
| Ground Lessor and Lessee: | Originally signed a 55 year ground Lease, Lessor and Lessee had strained relationship | Both parties had no ongoing responsibility to each other |
| Remaining Lease Term: | 12.5 Years | – |
| Property Type: | Leased fee and Ground Lease | Fee Simple |
| Ground Lessor Cashflow: | $500,000/Year | $1,400,000/Year |
| Ground Lessee Cashflow: | $600,000/Year expiring in 12.5 years | $740,000/year |
| Access to Equity: | Trapped equity | Expedite access to capital 12.5 years earlier. |