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Pad Site Ground Rent Calculator
Pad sites typically ground lease — tenant builds and maintains the building, pays land rent to the landlord. Rent escalates periodically (often 10% every 5 years). This calculator sizes year-1 rent, future-year rent after escalation, and implied pad site value at a ground lease cap rate.
Year 1 ground rent
$70,000
After first escalation
$77,000
After second escalation
$84,700
Implied pad site value
$1,272,727
Rent per acre / year
$0
How the math works
Pad sites (Starbucks, Chick-fil-A, banks) are typically ground leased — tenant builds their own shell, pays ground rent. Rent escalates periodically (often 10% every 5 years). Landlord retains land ownership and reversion at lease end — usually 20+ years.
Ground-leased pad sites trade at cap rates 50-150 bps above the anchor building — lower risk (no building maintenance) but also lower yield. Cap rates 4-6% on credit-tenant pad leases are common.
How to Use
- Enter pad SF (land area).
- Enter ground rent per SF of land per year.
- Enter escalation percent and period in years.
- Enter the ground lease cap rate.
- Read year 1, escalated rents, and implied value.
Frequently Asked Questions
Why ground lease vs sell?
Landlord keeps the land appreciation and reversion; tenant avoids land acquisition capital. On credit-tenant deals (Chick-fil-A 20-year NNN ground lease), ground leasing is a near-bond-like income stream with land backing.
Escalation structures?
10% every 5 years is the most common. Some use CPI-indexed (more volatile). Long leases often include a mark-to-market reset at year 15 or 20 based on appraisal.
Reversion value?
At lease end, building usually reverts to landlord (or is removed at tenant's cost). Factor 20-30 year reversion at discount rate — typically adds 5-15% to the value above the ground rent capitalized value.
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