Land Leasing in New York City

The managing principal and lead partner at Allegiance Investment Advisors in New York City, Dean Britton earned a BA in biomedical ethics from Brown University in 1986 and went on to complete graduate work in real estate at the University of Wisconsin-Madison. At his firm, Dean Britton sources and structures new ground leases around the city.

In New York, many commercial and residential properties are built on leased land. A land-leased property is a bifurcated form of real estate on which the land and the building are owned by separate entities. Land-leased residential properties are typically leased at prices that are significantly lower than the market value of their category, sometimes by up to 30 percent. However, tenants of leased properties pay high maintenance fees due to additional interest liability on the land.

Landowners typically lease their lands to continue receiving a return on their investment rather than selling them. Land-lease contracts are long-term agreements lasting for decades. Some land contracts in New York will expire after 100 years or more.

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The Importance of Ground Leases to Real Estate Bifurcation

The principal of New York company AIA since 2008, Dean Britton possesses experience in real estate and finance. In his role at AIA, Dean Britton helps companies enact bifurcation measures, when separate entities own a building and the land it occupies, on their leased buildings.

Although real estate bifurcation has existed for decades, it was not efficient and suffered from a bad reputation in the real estate industry. The old bifurcation model entailed one company performing both tasks and spending money to purchase land, called a ground lease, even if it lacked the expertise. Leases to develop a plot of land lasted for a century, and their value fluctuated wildly as market conditions changed.

Starting in 2017, the New York company Safehold revised the ground lease model to offer greater flexibility. One company, specializing in ground leases, leased the land to real estate-specific companies, which allowed both parties to spend capital more efficiently while the ground lease company earned more stable income. Used most often for office spaces, ground leases present promise in real estate sectors such as family homes, especially when combined with lease terms for small landowners.

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