Case Studies

Master Lease:

Master Lease – Southern California Lease Purchase

Description – A university in Southern California owns the land on which a 500+ unit apartment building was built. There is a 99 year lease on the land and upon the end of the term, the improvements will revert back to the Lessor. Rutherford (Lessee) is responsible for the improvements and all associated liability.

The Lessor’s goals:

  • Create durable income, cash flow plan
  • Eliminate ongoing management
  • Eliminate liability and financial risk of the improvements
  • Receive the improvements back in the future upon the term of the lease

There were several steps for this lease:

  • Step 1: Rutherford purchased the improvements subject to a 99 year lease
  • Step 2: Rutherford asset manages the property and provides ongoing lease payments to the Lessor
  • Step 3: Lessor to receive back the improvements upon the lease term
Ownership Responsibility: Daily property and asset management No management responsibility
Liability: Full responsibility for asset and liability Rutherford takes full responsibility for the asset and pays property insurance
Income Durability: Based on market fluctuation Provides ground lease payments regardless of the market changes
Cashflow: $600,000 $800,000
Lease Term: 34.5 Years
Ownership Structure: Fee ownership Fee ownership
Management: 3rd Party Management In-house management
Property Taxes: Current property tax basis Current property tax basis