Shopping Center Ground Leases: Pitfalls and Opportunities

Construction Industry Advisor

PUBLISHED ON: May 8, 2007

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Many American shopping centers and large standalone stores sit on ground that is leased, typically for substantial periods on a triple net basis. Often, the lease terms are tied economically to the costs of construction or expansion of the stores, and the expectation of both the lessor and the lessee is that the lease will run for decades.

Where the center or the single tenant fails, generally it can walk away on a non-recourse basis and the ground lessor is the beneficiary of, or is stuck with, the improvement. When the value of the center or "standalone" store has increased, the curse or opportunity of sharing the value can come up in interesting and unexpected ways.

Anderson Kill has recently represented the ground lessor in cases involving this issue.