Generally speaking, (for vacant land) will the appropriate capitalization of the net ground lease payments always be greater than a typical/comparative fee simple transaction?
We have a scenario in my town (I happen to be a council member), where we are evaluating an entitlement change for a vacant piece of land with a signed ground lease. It is important for me to understand the value value being created by our potential up-zone.
Considering we have a copy of the ground lease, triple net with per unit payments, I thought the analysis to be pretty straightforward. Choose a cap rate and present value pretty easy (I thought). Subsequently, we have had appraisers provide market based appraisals.
The differences in value between the two is so vast I couldn't believe it. Not cap rates, not differences in timing. etc.
Can someone provide some guidance on if this? Perhaps just a different return required on land acquisition between "lessee" and "lessor"?