About

Ground leases are long-term agreements (often 50 to 99 years) where a tenant is permitted to develop a piece of property during the lease period, after which the land and all improvements revert to the owner. Accurately projecting these costs is vital for developers and agricultural enterprises, as small variances in the "escalation rate" (the periodic increase in rent) can compound into millions of dollars over decades.

This tool combines a unit converter with financial projection logic. It allows users to input land size in various global units (Acres, Hectares, Square Feet) and calculates the initial annual rent, capitalization rate (Cap Rate), and the total cost over a specified term including compound escalations.

Formulas

The calculator first normalizes the area to a single unit to determine the Base Annual Rent:

Rent_base = Area × Price_unit

To project future rent with compound escalations (inflation adjustment):

Rent_year(n) = Rent_base × (1 + r)ⁿ

The Capitalization Rate (Cap Rate) for the land is calculated as:

CapRate = NetOperatingIncomeLandValue × 100

Reference Data

Unit Name	Symbol	Conversion to Square Feet (sq ft)	Common Usage
Acre	ac	43,560	US/UK Agriculture & Development
Hectare	ha	107,639	International Standard (Metric)
Square Meter	m²	10.764	Global Urban Real Estate
Square Foot	sq ft	1	US Commercial Real Estate
Are	a	1,076.39	European Rural Land

Frequently Asked Questions

An escalation clause is a provision in a lease that increases the rent at specific intervals (e.g., every year or every 5 years) to account for inflation or increased land value. It is usually a fixed percentage (e.g., 2% per year) or tied to the CPI (Consumer Price Index).

1 Hectare is approximately equal to 2.471 Acres. This calculator handles these conversions automatically when you select your input unit.

Land Cap Rates are typically lower than improved property Cap Rates, often hovering between 3% and 6%, because land is a lower-risk asset that doesn't depreciate like a building, though it generates no income unless leased.