Property Sale Ground Lease Leasehold

[Kirby Davis]

I have no experience with ground leases, so I’m seeing if anyone can tell me the issues with this opportunity. 

Apartment building for sale, 12% CAP, triple net, leased (leasehold) to an educational institution and used as dorms. 20 year lease, 4 5-year renewal options with 2% annual increases built in. Sounds great. But... it's on a ground lease from the city it's in. 45 years left on the ground rental. The tenant pays the ground rent.

What are the issues? What questions should be asked? Is the ground lease a deal killer? It’s been for sale for 2 years, so there’s got to be issues, right?