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8.A. - Page 9 Bill Ekern and Dan Zack February 21, 2012 <br /> Subject: Ground Leases Page 2 <br /> The RFP requires the proposers to respond to the option of a lease. Upon submission, <br /> the Council can decide on the preferred approach for disposition. <br /> As is typical for major private development projects on ground leases, long term ground <br /> leases are the norm. The specific terms of the ground lease for any particular project are <br /> subject to negotiation that ultimately reflects a tradeoff between public and private goals. <br /> Nonetheless, KMA has included below some general parameters around which certain <br /> key terms can be discussed. <br /> ■ Term of Lease 55 years; maximum allowed <br /> ■ Base Ground Rent Base ground rent is paid monthly and is <br /> based on fair market value at a fair rate of <br /> return. <br /> ■ Ground Rent Adjustments Fixed rate increases or floating rate based on <br /> an agreed to index; periodic adjustments to <br /> appraised market value <br /> ■ Percentage Rent For some land uses, such as hotel, the <br /> ground rent can include a percentage of <br /> gross revenues and/or rents. <br /> ■ Operating Standards Property to be operated to a first class <br /> standard; require minimum replacement <br /> reserves. <br /> ■ Capital Reinvestment Requirement to reinvest capital in <br /> improvements that will maintain the property <br /> as a class A asset over the term of the lease. <br /> ■ Subordination All project financing is subordinate to ground <br /> lease. <br /> ■ Lender Protections Project's lender will require protections to <br /> their interest including cure rights and the <br /> ability to replace the ground lessee in the <br /> event the lessee is in default of the ground <br /> lease. <br /> 007-001.doc, jf <br /> 18610.005 <br />