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ProCash, an Economic Model for Income Properties

Land Financing

A ground rent deal can be input as simply as giving a rate via AVI[90] which the system will multiply times the original land cost to determine the annual ground rent. When a ground rent deal is modeled, it is best to include the land in the original cost of the project so that the true economic cost of the project is reflected. If ownership of the land is separate, the cost (or value) of the land can be shown as financed by the partner who owns it. The value of the land will be given to that participant in the simulation of the ending sale. It is important to include land in the deal even if it is not owned by the principal partners because capitalization rates are generally developed on a basis that reflects land. Conceptual errors may result from attempting to calculate the ending value of the improvements without land.

The normal ground rent deal is assumed by the model to be subordinated, so that ground rent does not reduce income in the determination of the mortgage to be extended. If ground rent is not subordinated, AVI[123] should be set to 1 with the result that ground rent will reduce income in the calculation of the mortgage amount.

The number of acres in the ground rent deal may differ from the number of acres acquired for the project, and the price used in determining the ground rent deal may differ from the actual land acquistion price. Inputs are provided for these possibilities.

An annual rate of increase in ground rent can be input with MV[17].

inputdescriptionhelp#importancefrequency
AVI[90]Land lease rate (% of AVI[92] Price or $/Year) 623  3
AVI[93]Who will own land (if land lease exists) 623  2
AVI[123]Ground Rent Unsubordinated (default=subordinated) 623  2
AVI[91]No. acres in land lease Deal (if diff.from AVI[1]) 623  
AVI[92]Price/acre if sale-leaseback (if diff.from AVI[2]) 623  
AVI[94]When land lease payments start 623  
AVI[146]Annual Rate of Increase for Ground Rent (e.g.CPI) 623  

viewtypecase studyviewfile sizecomplexityhelp#comment
OutputsTax Credits for Low Income Housing, 11th Edition(present value by participant by line item) 3907 70 623 
St. Lucie Warehouse(present value by participant by line item) 4163 95 623 
601 Liberty St., Hotel Joint Venture(present value by participant by line item) 5438 134 623 
ABCO Joint Venture (office)(present value by participant by line item) 6351 156 623 
Mixed Use Development (Scenario 2-A)(present value by participant by line item) 5006 158 623 
Belle Glade 72 Units Deal A(present value by participant by line item) 5647 181 623 
601 Liberty St. (office)(present value by participant by line item) 6445 193 623 
Tower Point Apartments (demo)(present value by participant by line item) 6034 217 623 
Executive Plaza (Under Const., office)(present value by participant by line item) 6368 223 623 
Tower Point Apartments (detail)(present value by participant by line item) 6149 226 623 
Executive Plaza (Pre-Const., office)(present value by participant by line item) 6485 231 623 
Shopping Center Illustration(present value by participant by line item) 6005 233 623 
Shelter School Renovation (L&H)(present value by participant by line item) 6330 243 623 
Brandon Villas of Tampa (market housing)(present value by participant by line item) 7355 280 623 
Spring Valley Hotel(present value by participant by line item) 6543 289 623 
Conv. 9% FAHP 3% 25 Years: 13 Areas (housing)(present value by participant by line item) 7617 300 623 
Demo Mixed Use Facility(present value by participant by line item) 8694 366 623 
Windsong Housing Associates : LIHTC(present value by participant by line item) 8849 371 623 
Turnkey Syndication : LIHTC(present value by participant by line item) 9150 391 623 
BHP II Limited Partnership : LIHTC(present value by participant by line item) 11136 478 623 

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