What is the difference between a ground lease and a build-to-suit?

In a ground lease, the tenant leases the land and usually builds and pays for its own building. In a build-to-suit, the developer delivers the building to the tenant's specifications and the tenant leases the finished location.

Who pays for the building in a build-to-suit?

The developer typically funds and delivers the project, and the tenant's long-term rent reflects that cost. The exact terms depend on the agreement between the parties.

Which structures does Reed Ventures work with?

Ground leases, build-to-suits, joint ventures and fee development. The right one depends on the proposed site, the use and the tenant's requirements.

Ground Lease, Build-to-Suit or Joint Venture?

When a national retailer, restaurant or service brand enters a new market, the site is only half of the decision. The other half is the structure: who owns the land, who pays for the building, who carries the risk and who controls the outcome.

Four structures come up most often, and none is best for everyone. This is a general overview, not legal, tax or financial advice.

Ground lease

The tenant leases the land long term, then usually builds and pays for its own building to its own prototype. The landowner keeps the land and receives rent.

Works well when the brand has capital and a firm prototype, and wants control of the building.
Keep in mind that the tenant carries the construction cost and schedule, and that improvements often pass to the landowner when the lease ends, depending on its terms.

Build-to-suit

The developer secures the site, handles entitlements and constructs the building to the tenant's specifications. The tenant then leases the finished location, typically long term, at a rent that reflects the cost of delivering the project.

Works well when the brand wants to grow without tying up capital in real estate, and prefers one partner responsible for delivery.
Keep in mind that specifications should be settled early, because later changes affect both cost and schedule.

Joint venture

Two or more parties, such as a landowner, a developer and an investor, share the capital, the risk and the returns. It is often used for larger or phased sites, where no single party wants to carry everything.

Works well when one party brings the land or capital and another brings development experience.
Keep in mind that it needs a clear agreement on decisions, funding and exit from the start.

Fee development

The owner keeps ownership and funds the project, and pays a developer a fee to manage the work: site selection, entitlements, design, permitting and construction.

Works well when an owner wants to keep the asset but has no development team in that market.
Keep in mind that the owner keeps the financial risk of the project.

Four questions that usually decide it

How much capital do you want tied up in real estate?
Do you want to own, lease or simply control the building long term?
How firm is the prototype, and how much of it must be built exactly as drawn?
How soon do you need to open, and how much approval risk can you accept?

Why local experience matters either way

Every structure depends on the same work: finding a site with the right access and visibility, getting it entitled, and coordinating design, engineering, permitting and construction. A local partner knows the municipalities and reviewers involved, and can tell you early whether a site is likely to work.

How we work with national tenants

National tenant development is a focus at Reed Ventures. We pursue opportunities in Delaware, Maryland, Virginia, North Carolina, South Carolina, Georgia, Florida, Tennessee and select surrounding markets, and the structure follows the opportunity: ground leases, build-to-suits, joint ventures and fee development.

Our portfolio includes locations such as Starbucks in Pocomoke City, and Texas Roadhouse and Lowe's in Millsboro. Have a location requirement? Send us your criteria.