Can Ground Leases Provide Equity Relief for Operators Navigating the COVID-19 Pandemic?
In a Q&A with NREI, Dan Amer, of Kawa Capital Management, talks about the pros and cons of ground lease transactions.
November 18, 2020 | Liz Wolf | National Real Estate Investor
As commercial real estate owners continue grappling with vacancies, decreased demand and uncertainty during the COVID-19 crisis, Miami-based investment manager Kawa Capital Management provides ground leases that the firm claims is an alternative financing vehicle that can help prevent further distress.
According to Kawa executives, ground leases are a reliable vehicle for property owners looking to free up liquidity and investors seeking to fund capital requirements. In ground lease transactions, real estate is seen as two separate assets: the land and the buildings. Investors with access to capital acquire the ground underlying a built asset or planned development, and then re-lease the land back to the owner/operator, offering an immediate cash infusion and some long-term predictability.
While ground leases can be used to acquire land underneath different asset classes, Kawa has seen the highest increase in requests this year in the hardest-hit sectors of retail and hospitality. The office sector has also seen activity as Kawa completed a $237 million ground lease transaction with Brandywine Realty Trust in July. To date, the firm has completed 20 ground lease transactions totaling nearly $1 billion.
