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Are FMV rent resets deal killers? One of the biggest “deal killers” during ground lease negotiations circles around the issue of whether or not to include a rent reset in the ground lease. In general, rent resets are used to protect the landlord (lessor) from inflation which in turn can increase future ground rent paid by the ground tenant (lessee). As a consequence, the lessee is reluctant to accept a rent reset whereby “killing the deal.” However, crafting language to protect both the landlord and tenant can help keep the deal Why ground lease and why now? The New York Real Estate Journal caught up with Robert Khodadadian, Skyline Properties’ founder, and CEO, for an overview on why the current market conditions have led to the recent resurgence of ground leasing in the city. Kaufman inking ground lease Sister act: Kaufman inking ground lease for NoMad office building The Real Deal Skyline Properties Robert Khodadadian Daniel Shirazi St. Mark’s portfolio under contract Four-building St. Mark’s Place multifamily portfolio under contract for $44M The Real Deal Robert Khodadadian Skyline Properties Skyline triples its NYC footprint with its move to the 31st floor in SL Green’s “Daily News Building” to accommodate more space for the firms growing investment sales team Tenant inks 99-year ground lease Tenant inks 99-year ground lease for Bargain World spot The Real Deal Skyline Properties Robert Khodadadian Show More Skyline Properties is a boutique investment sales advisory firm headquartered in Manhattan. Our primary focus is on identifying "quiet deals," which entail off-market transactions that offer the seller full discretion while enabling the buyer to acquire high-quality real estate investments. Skyline manages and negotiates every phase of the transaction, resulting in mutually beneficial outcomes that encourage repeat business from both sellers and buyers alike. Our diverse range of expertise covers a wide array of property types and deal structures, including ground leases, commercial buildings, office buildings, mixed-use investment and user buildings, townhouses, apartment buildings, live-plus-income buildings, industrial properties, and development/conversion sites. Our team of seasoned professionals is adept at representing properties of all values and has a proven track record of successfully serving the needs of even the most discerning clients. FEATURED TRANSACTIONS Skyline Properties 530 West 25th Street, New York, New York The Feil Organization is buying an office building in Chelsea that is home to several art galleries for about $72 million, according to sources familiar with the deal. 530 West 25th Street between 10th and 11th avenues and spans 95,000 square feet across seven stories. 236 5th Avenue, New York, NY 99-Year Ground Lease NYC Real Estate - The Real Deal Skyline Properties 133-135 Prince Street, New York, New York Acadia Closes $50M Buy of Soho Retail Co-ops- The Commercial Observer Skyline Properties 711 Madison Avenue, New York, New York Sitt Purchases Mixed use with retail tenant Roberto Cavali on Madison Avenue 72 Greene Street, New York, New York 72-76 Greene St. for $42 million, which equates to $1,186 per square foot, to Chicago-based L3 Capital with partner ASB Capital Management 4-14 West 125th Street, New York, New York Tenant inks 99-year ground lease for Bargain World spot Show More contact us CONTACT US SKYLINE PROPERTIES 220 East 42nd Street, Suite 3102 New York, New York 10017 Phone: 212.537.9 239 Fax: 212.257.7028 info@skylineprp.com Message received. We will get back to you soon. SEND PRESS Feil buys Chelsea office for $72MM The Feil Organization is buying an office building in Chelsea that is home to several art galleries for about $72 million, according to sources familiar with the deal. The property is located at 530 West 25th Street between 10th and 11th avenues and spans 95,000 square feet across seven stories. The Feil Organization partnered on the purchase with Peter Armstrong of Rigby Asset Management. Kaufman Organization Closes on $35M Haymarket Building Ground Lease The Kaufman Organization closed on a newly formed ground lease at The Haymarket Building in Manhattan’s NoMad, valued at $34.5 million, Commercial Observer has learned. Kaufman Organization inks $35M 99-year ground lease in Midtown South The commercial building, at 135 W. 29th St., stands 12 stories tall and spans 82,000 square feet. It is about 70% occupied, with roughly 25,000 square feet of space available for lease, according to the Kaufman Organization. The company plans to renovate and reposition the building, which it acquired from MFM Properties. Skyline Properties NYREJ Company of the Month Skyline Properties – Brokering outside the box: Off-market deals, ground leases and customized canvassing Kaufman inking ground lease Sister act: Kaufman inking ground lease for NoMad office building The Real Deal Skyline Properties Robert Khodadadian Daniel Shirazi Queens, NY Skyline Properties sells 6101 Springfield Blvd. in Oakland Gardens to the Lee Family for Earlier this year Skyline Properties also completed the following off-market transactions: an affordable housing property located at 246 West 116 th St. for $6.3 million and a mixed-use property located at 165-167 Eldridge St. for $19.275 million. Wildflower, the company behind Robert De Niro’s Wildflower Studios in Queens.. industrial site in Hunts Point from a Long Island company. The sites were last purchased for about $2.3 million in 2003, according to property records. The lots total 55,000 square feet and allow for 110,000 square feet of buildable space. Show More

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CONTACT US SKYLINE PROPERTIES 220 East 42nd Street, Suite 3102 New York, New York 10017 Phone: 212.537.9239 Fax: 212.257.7028 E-Mail: info@skylineprp.com Success! Message received. SEND

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ABOUT US Skyline Properties main focus is to seek out “quiet deals”. These deals are off-market transactions designed to provide the seller with complete discretion and the buyer with a valuable asset. Skyline controls and negotiates every stage of the deal, producing win-win transactions causing both the sellers and buyers alike to repeatedly return to Skyline Properties to sell and purchase additional assets. ​ Skyline Properties handles many different property types, including ground leases , commercial buildings, apartment buildings, townhouses, mixed use investment building, mixed use user buildings, live plus income buildings, industrial properties and development/conversion sites. Our staff is experienced in representing properties of all values and are expert in meeting the needs of the most demanding clients. ​ Understanding the value of your property or potential investment is the critical first step in making the right sale. Whether you are an owner considering selling your asset or would like to know the current market value of your property, our asset evaluation will provide you with a thorough analysis of your investment property. Combining a complete financial analysis with the most up to date market data, our evaluation will help you establish the current market value of the asset. Skyline will not only review today’s pricing environment but will also explore every possible opportunity that could result in maximizing the asset’s value. Such opportunities include, the sale, ground lease , joint venture, refinancing, or repositioning of the asset. ​ Skyline Properties Brokerage Services Include: ​ Ground Lease (Net Lease) Multifamily Residential and Mixed-Use properties Retail Condominiums and Shopping/Strip Centers Office and Loft Buildings Hospitality related, including hotels, assisted and senior living Industrial, warehouses, storage and parking garages Development Site Assemblages, Conversions and Air Rights Transfer Triple Net leased (NNN) Properties Estate Sales Bulk Sales of Unsold Condo/Coop Packages 1031 Exchange Properties Joint Venture and Partnership Buyouts Nonperforming and Performing Bank Mortgage Sales Bank Owned (REOs)

New York Times Investment Sales This six-story apartment building in the Clinton Hill neighborhood was built in 1939. It has seven one-bedroom units, eight two-bedrooms, 21 three-bedrooms and four four-bedrooms, as well as 16 parking spaces. The building last changed hands in 2012. Wildflower, the company behind Robert De Niro’s Wildflower Studios in Queens.. industrial site in Hunts Point from a Long Island company. The sites were last purchased for about $2.3 million in 2003, according to property records. The lots total 55,000 square feet and allow for 110,000 square feet of buildable space. Concerning Ground Leases Question of the Month: Concerning ground leases: How should landlords handle picking the ground tenant for their property? New York Real Estate Journal Skyline Properties, Daniel Shirazi Khodadadian Executive of Month Executive of the Month Robert Khodadadian of Skyline Properties: An Entrepreneur Evolving with Changing Markets, Providing Optimal Results Kaufman Expands Midtown Portfolio Kaufman Expands Midtown Manhattan Portfolio Commercial Property Executive Skyline Properties Robert Khodadadian Daniel Shirazi Show More

RECENT PRESS © Queens, NY Skyline Properties sells 6101 Springfield Blvd. in Oakland Gardens to the Lee Family for Earlier this year Skyline Properties also completed the following off-market transactions: an affordable housing property located at 246 West 116 th St. for $6.3 million and a mixed-use property located at 165-167 Eldridge St. for $19.275 million. Skyline Properties NYREJ Company of the Month Skyline Properties – Brokering outside the box: Off-market deals, ground leases and customized canvassing Feil buys Chelsea office for $72MM The Feil Organization is buying an office building in Chelsea that is home to several art galleries for about $72 million, according to sources familiar with the deal. The property is located at 530 West 25th Street between 10th and 11th avenues and spans 95,000 square feet across seven stories. The Feil Organization partnered on the purchase with Peter Armstrong of Rigby Asset Management. Kaufman Organization Closes on $35M Haymarket Building Ground Lease The Kaufman Organization closed on a newly formed ground lease at The Haymarket Building in Manhattan’s NoMad, valued at $34.5 million, Commercial Observer has learned. Lee family pays $32M for retail in Oakland Gardens Ui Kun Lee of the Lee family based in Manhattan through the entity Main 15-Lee Springfield LLC paid $32 million to Alfredo Li through the entity Mandarin Realty NY LLC for the retail strip mall (K1) at 61-01 Springfield Boulevard in Oakland Gardens, Queens. Ground Lease Resurgence Resurgence of the Ground Lease: Q&A With Skyline Properties CEO Robert Khodadadian - The Commercial Observer Kaufman Org closes on $35M ground lease deal The Kaufman Organization continues to expand in Midtown South after closing on a $34.5 million ground lease at the Haymarket Building. The organization signed a 99-year ground lease with MFM Properties for the 12-story office building at 135 West 29th Street, the Commercial Observer reported. Kaufman inking ground lease Sister act: Kaufman inking ground lease for NoMad office building The Real Deal Skyline Properties Robert Khodadadian Daniel Shirazi Wildflower, the company behind Robert De Niro’s Wildflower Studios in Queens.. industrial site in Hunts Point from a Long Island company. The sites were last purchased for about $2.3 million in 2003, according to property records. The lots total 55,000 square feet and allow for 110,000 square feet of buildable space. Are FMV rent resets deal killers? One of the biggest “deal killers” during ground lease negotiations circles around the issue of whether or not to include a rent reset in the ground lease. In general, rent resets are used to protect the landlord (lessor) from inflation which in turn can increase future ground rent paid by the ground tenant (lessee). As a consequence, the lessee is reluctant to accept a rent reset whereby “killing the deal.” However, crafting language to protect both the landlord and tenant can help keep the deal Firm behind Wildflower Studios buys Bronx industrial site for $11M Wildflower bought the adjacent properties at 1340 Lafayette Ave., 749 Whittier St. and 745 Whittier St. in Hunts Point from a Long Island-based limited liability company, which had bought the sites for about $2.3 million in 2003, according to sources and property records. The lots span 55,000 square feet and include 110,000 buildable square feet. New York Times Investment Sales This six-story apartment building in the Clinton Hill neighborhood was built in 1939. It has seven one-bedroom units, eight two-bedrooms, 21 three-bedrooms and four four-bedrooms, as well as 16 parking spaces. The building last changed hands in 2012. Why ground lease and why now? The New York Real Estate Journal caught up with Robert Khodadadian, Skyline Properties’ founder, and CEO, for an overview on why the current market conditions have led to the recent resurgence of ground leasing in the city. Real Estate Alerts 2022 Rankings Real Estate Alerts Top Multifamily Brokers - Skyline Properties Acadia Closes $50M Buy SoHo Acadia Closes $50M Buy of Soho Retail Co-ops Commercial Observer Robert Khodadadian Skyline Properties Kaufman Expands Midtown Portfolio Kaufman Expands Midtown Manhattan Portfolio Commercial Property Executive Skyline Properties Robert Khodadadian Daniel Shirazi Kaufman Organization inks $35M 99-year ground lease in Midtown South The commercial building, at 135 W. 29th St., stands 12 stories tall and spans 82,000 square feet. It is about 70% occupied, with roughly 25,000 square feet of space available for lease, according to the Kaufman Organization. The company plans to renovate and reposition the building, which it acquired from MFM Properties. NYREJ Ones to Watch Fall 2022 Ones to Watch Fall 2022: Stephen Alcala, Skyline Properties Bayside shopping center goes for $32M to lead mid-market sales 40,000-square-foot shopping center for 40 years. Built in 1949, the single-floor shopping center’s tenants include Subway, UPS, Walgreens, and Chase. The property also has a 100-space parking lot. St. Mark’s portfolio under contract Four-building St. Mark’s Place multifamily portfolio under contract for $44M The Real Deal Robert Khodadadian Skyline Properties Khodadadian Executive of Month Executive of the Month Robert Khodadadian of Skyline Properties: An Entrepreneur Evolving with Changing Markets, Providing Optimal Results Skyline triples its NYC footprint with its move to the 31st floor in SL Green’s “Daily News Building” to accommodate more space for the firms growing investment sales team Tenant inks 99-year ground lease Tenant inks 99-year ground lease for Bargain World spot The Real Deal Skyline Properties Robert Khodadadian Concerning Ground Leases Question of the Month: Concerning ground leases: How should landlords handle picking the ground tenant for their property? New York Real Estate Journal Skyline Properties, Daniel Shirazi Considering a ground lease? Consider these questions when vetting prospective ground tenants - by Robert Khodadadian 2020 Ones to Watch: Daniel Shirazi Which project, deal, or transaction was the “game-changer” in the advancement of your career? The sale of 516-530 West 25th St. was a game changer because this was the largest transaction Skyline Properties sold using their customized canvassing services. How do you contribute to your community or your profession? Myself and my firm have donated to various organizations to help those in need. I also, make myself available as a source to those who need guidance in any transaction. NYREJ Year in Review 2018 Year in Review 2018: Robert Khodadadian, Skyline Properties - Since inception Skyline Properties has prided itself on strictly off-market deals and our ability to efficiently and effectively customize canvass for our clients. For Skyline, 2018 was the year that we honed the customized canvassing tools we have developed which enabled us to close successful transactions for our clients, which in turn created an organic expansion of our Investment Sales Team. Real Estate Weekly Who's News Skyline Properties announced the hiring of three new executives. Real Estate Weekly Who's News Khodadadian Strikes Out On His Own Robert Khodadadian Strikes Out On His Own Again The Real Deal Skyline Properties NYREJ discuss their 30th Anniversary What year did you discover the NYREJ and how has been a benefit to you and/or your business? I was first made aware of NYREJ when their publishing director, Kristine Wolf reached out to me in 2013 to congratulate me on opening Skyline and to inform me that she was on our new company website and noticed a typo on the word “syndication.” $wells Take Bowery $wells Take Bowery New York Post Robert Khodadadian NYREJ Broker Spotlight - Kamil Praszkowicz Ground Leases 101 Ground leases 101: Creativity is required New York Real Estate Journal Skyline Properties Daniel Shirazi Prime Soho Mixed Use Retail Play 72-76 Greene Street Sells for $41.5 M Globe St. Robert Khodadadian NYREJ Broker Spotlight New York Real Estate Journal's 2020 Broker Spotlight NYREJ Broker Spotlight - Daniel Shirazi Esq. Skyline Properties Issues Statement Skyline Properties Issues Mission Statement Real Estate Weekly Skyline Properties Robert Khodadadian Skyline Expands Footprint by more than three times with its move to the 31st floor in SL Green’s “Daily News Building” to accommodate more space for the firms growing investment sales team Acadia snaps up 210 Bowery Acadia snaps up 210 Bowery The Real Deal Robert Khodadadian Nonprofit Sells Midtown Properties Nonprofit Sells Midtown Properties to Moin, John K. Rapp for $18M The Real Deal Skyline Properties Robert Khodadadian Khodadadian Brokers $2.5 M Sale Robert Khodadadian Brokers $2.5 Million Sale New York Real Estate Journal Rainmaker Aiming to be His Own.. Rainmaker Robert Khodadadian Aiming to be His Own Headline Act Real Estate Weekly 521-523 E 12th St. Sell for $10M Two Five-Story Walk-Ups at 521-523 E 12th St. Sell for $10M New York Real Estate Journal Robert Khodadadian Shirazi joins Skyline Properties Shirazi joins Skyline Properties as senior director of sales New York Real Estate Journal Daniel Shirazi ML7 buys commercial space in Tribeca ML7 buys commercial space at Tribeca condo building for $18M The Real Deal Robert Khodadadian Skyline Properties Hidrock Realty to Build a 150,000SF Hidrock Realty to Build a 150,000SF, 33-Story Building New York Real Estate Journal Robert Khodadadian Blaichman Pays $25M for site CB Developers to pay $25M for site next to Murray Hill project The Real Deal Show More Skyline Properties Skyline Properties Skyline Properties Skyline Properties Skyline Properties Skyline Properties

ABOUT NOTABLE TRANSACTIONS RECENT PRESS DANIEL SHIRAZI, ESQ. Daniel Shirazi is the Executive Vice President of Skyline Properties (“Skyline”) and works with President, Robert Khodadadian on a broad and diversified range of investment quality real estate opportunities. In his first year at Skyline, Mr. Shirazi successfully negotiated a $65 million ground lease for 236 5th Avenue, NY, NY, a 100,000-square-foot office building. Leveraging a decade’s worth of real estate experience both as an attorney and real estate broker, Mr. Shirazi is able to offer his clients unique insight along with knowledge that is unparalleled. Prior to joining Skyline, Mr. Shirazi was an Associate at a law firm in Manhattan. As an attorney, Mr. Shirazi worked in both the residential and commercial real estate practice groups, representing buyers and sellers of residential and commercial properties and the representation of landlords and tenants in commercial lease negotiations. During his tenure as an attorney, he was involved in over $100 million worth of real estate transactions throughout the United States. A motivated self-starter, Mr. Shirazi has developed relationships with a wide array of investors, taking the lead on complex transactions. Prior to his legal career, he was a real estate salesperson at The Corcoran Group while he was in college. While his background gives him a wide range of experience, Mr. Shirazi has been especially active in ground leasing office buildings and other commercial assets in the Tri-State area. His expertise and discipline allowed him to develop an extensive database of customers that includes all of the major investors, brokers, and individuals that are active in the commercial real estate arena. Daniel has contributed to the success of Skyline in multiple facets: from the $65 million ground lease completed in his first year at Skyline, his growing number of deals in the pipeline, and bringing greater visibility to Skyline through frequent mention in the press. Mr. Shirazi has been featured in The Real Deal and New York Real Estate Journal where his article “Ground Leases 101: Creativity is Required” and “Ground Leases: Picking the Ground Tenant” were published. Mr. Shirazi is a team player and not only works successfully with Mr. Khodadadian but also with all other brokers. Mr. Shirazi is a graduate of St. John’s University, The Peter J. Tobin College of Business where he received his BS in Marketing and Touro College Jacob D. Fuchsberg Law Center where he received his JD in Law.

FEATURED TRANSACTIONS 530 West 25th Street, New York, New York The Feil Organization is buying an office building in Chelsea that is home to several art galleries for about $72 million, according to sources familiar with the deal. 530 West 25th Street between 10th and 11th avenues and spans 95,000 square feet across seven stories. 236 5th Avenue, New York, NY 99-Year Ground Lease NYC Real Estate - The Real Deal Skyline Properties 133-135 Prince Street, New York, New York Acadia Closes $50M Buy of Soho Retail Co-ops- The Commercial Observer Skyline Properties 711 Madison Avenue, New York, New York Sitt Purchases Mixed use with retail tenant Roberto Cavali on Madison Avenue 28-34 St. Marks Place, New York, New York Four-building St. Mark’s Place multifamily portfolio under contract for $44M 72 Greene Street, New York, New York 72-76 Greene St. for $42 million, which equates to $1,186 per square foot, to Chicago-based L3 Capital with partner ASB Capital Management 135 West 29th Street, New York, New York The Kaufman Organization closed on a newly formed ground lease at The Haymarket Building in Manhattan’s NoMad, valued at $34.5 million, Commercial Observer has learned. 6101 Springfield Blvd., Queens, NY 11364 82,000 Square Feet Prime Retail property Including a 100 car parking lot with national tenants; United States Postal Office, Walgreens, Chase Bank, UPS, Red Mango and Subway. 133 Greenwhich Street, New York, New York Hidrock Realty to build a 150,000 s/f, 33-story building 587-591 Third Avenue, New York, NY CB Developers to pay $25M for site next to Murray Hill project 4-14 West 125th Street, New York, New York Tenant inks 99-year ground lease for Bargain World spot 79 Clifton Place, Brooklyn, NY NYC Real Estate Sale Brooklyn Multi-family 165-167 Eldridge Street, New York, New York Mixed-use property located in New York was sold for $19,250,000 72 Reade Street, New York, NY ML7 buys commercial space at Tribeca condo building for $18M NJ landlord to convert second-floor offices to residential 1055-1057 2nd Avenue, New York, Ny Moin Development to buy Sutton Place rentals for $19M 2012 Broadway, New York, NY NYC Real Estate Commercial Sale 338 Bowery, New York, NY Sam Chang, McSam investor to sell East Village hostel 353 West 48th Street, New York, NY NYC Real Estate Commercial Sale 1340 Lafayette Ave, Bronx, NY 10474 Wildflower Ltd., a frequent lessor to Amazon and the company behind Robert De Niro's Wildflower Studios project in Queens, has purchased an industrial site in the South Bronx for about $11 million. 521-523 East 12th Street, Manhattan Package of Mixed Use Buildings located in the East Village 210 bowery, New York, NY Acadia Realty Trust has snatched up four-story 210 Bowery for $7.5 million. The purchase price sounds puny until you realize it set a record for the street of $815 per square foot. 246-250 West 116th Street, New York, NY 40,000 square foot new construction affordable housing. 216-218 East 36th Street, Manhattan NYC Real Estate Multi-family sale 711 Brighton Beach Ave, Brooklyn, NY Skyline Properties handle $3.2 million off-market deal Show More

ABOUT NOTABLE TRANSACTIONS RECENT PRESS ROBERT KHODADADIAN Robert Khodadadian is an experienced commercial real estate broker in New York City and founder of Skyline Properties. Skyline Properties specializes in off-market or “quiet” real estate transactions, allowing buyers and seller to bypass traditional avenues and extraneous expenses of high-profile listings in the New York City area. Khodadadian has been involved with several prominent real estate firms, including Massey Knakal Realty Services and Eastern Consolidated. Throughout his career, Khodadadian has participated in the sale of hundreds of properties across Manhattan, Queens, Long Island, the Bronx, and other areas. ​ Khodadadian began his career in real estate in 2002 as a junior studying finance at New York’s Pace University. He purchased a foreclosed home in Hempstead, Long Island and executed a complete renovation on the property in three months. He sold the home and continued buying, remodeling, and selling homes in the area while attending college, completing seven more successful sales. These sales caught the attention of Robert Knakal, founder of Massey Knakal who hired Khodadadian out of college in 2004 as an associate. Khodadadian continued his success for three years with the company, where he helped sell more than 100 investment properties, with gross total capitalizations reaching over $300 million. Using his experience in the highly competitive, fast-paced metropolitan market, Khodadadian saw an opportunity to streamline the process and offer optimal results. He left Massey Knakal Realty in 2006 to begin his own venture, Skyline Properties, with the mission of connecting buyers and sellers outside the networking politics and competitive bidding wars surrounding traditional markets. Skyline offered a discrete and personal alternative to publicized, wide-open opportunities presented by New York’s most well-known brokerage firms. Skyline closes real estate opportunities from public formats, so all parties enjoy a discretionary shield and see opportunities that most interest them, without sifting through numerous exclusive listing ads. By removing high-priced marketing materials and connecting directly with sellers, brokers, investors and buyers, Skyline optimizes the value on each opportunity. Many buyers that are intimidated by the drawn out, aggressive environments of public listings and sellers that seek to close sales quickly and quietly with the most interested buyers look to Skyline. Personal connections between individuals and ongoing assistance throughout the sale gives every participant a comfortable, informed and positive real estate experience, as well as the highest value on their assets. The burgeoning real estate powerhouse continued to grow until the financial crisis hit the real estate market in 2010. Khodadadian temporarily put Skyline on hold in 2011 to explore opportunities with Eastern Consolidated. However, in May of 2013, Khodadadian decided to reinvigorate Skyline Properties to seize the uptick in Manhattan commercial sales spurred by the low interest rates. ​ Since its inception, Khodadadian’s pioneering pursuits have been featured across many prominent New York real estate publications, including The Real Deal, Real Estate Weekly, The Commercial Observer, and “Company of the Month” with the New York Real Estate Journal. Khodadadian has also been recognized for his outstanding work in the field as “Executive of the Month” with NYREJ.

LANDLORDS GUIDE TO GROUND LEASES Ground leases are an effective tool that property owners can use to maximize the upside potential of their asset without the expenses associated with transferring ownership of the property through a conventional sale. WHAT IS A GROUND LEASE? WHAT IS A GROUND LEASE? HOW DO I CHOOSE A GROUND TENANT? HOW DO I CHOOSE A GROUND TENANT? WHAT IS A RENT RESET? WHAT IS A RENT RESET? WHAT ARE THE BENEFITS OF A GROUND LEASE? WHAT ARE THE BENEFITS OF A GROUND LEASE? SUBORDINATED VS. UNSUBORDINATED SUBORDINATED VS. UNSUBORDINATED GROUND LEASE PUBLICATIONS GROUND LEASE PUBLICATIONS CAN I GROUND LEASE MY PROPERTY? CAN I GROUND LEASE MY PROPERTY? WHAT IS A GROUND LEASE? ​ In the simplest form, a ground lease is a long-term net lease (usually 49 years or 99 years) of land including any improvements on the said land. Assets that can be subject to a ground lease include but are not limited to, vacant land, office buildings, and large residential buildings. Advantages for Owners/Ground Lessor: The owner retains ownership to the property and therefore: is not responsible for any capital gains or transfer tax payments they would incur if they were to sell (although there are instances where transfer taxes might be incurred); keep the property in the family and thus will generate a hassle-free income stream for generations; they can mortgage the leased property; and can sell the property. The ground lessee (the tenant) under the ground lease would be responsible for all of the management, costs, and expenses of the leased property. The ground lessee will maximize the potential and improve the property by: making capital improvements to the existing structure; or in the case of a development site, they will be constructing a new building. Many ground leases contain a clause (reversionary clause) which transfers any improvements made by the tenant to the landlord at the end of the lease. ​ Advantages for Tenants/Ground Lessee: The tenant’s basis would be significantly reduced because the tenant would not need to provide the upfront capital that is needed to purchase the property. If an owner is unwilling to sell his property, this gives the tenant/investor a way to utilize this asset in a way that can benefit both parties. The tenant can mortgage the lease, however, any financing obtained will not be against the leased asset. wigl gt CHOOSING A GROUND TENANT ​ Ground leases are an effective tool that property owners can use to maximize the upside potential of their asset without the expenses associated with transferring ownership of the property through a conventional sale. In general, a ground lease (master lease) is a long-term net lease (usually 49 years or 99 years) of land including any improvements (if any) on the said land. Once a landlord decides to ground lease their property they must pick the right ground tenant to partner with. Unfortunately, often times owners choose a ground tenant based solely on receiving the highest offer for their property. However, this should not be the only factor to take into consideration. Landlords must properly vet any prospective ground tenant and should take into consideration asking the ground tenant my “Top 5” questions as outlined below. What is the ground tenant’s transaction history; have they done a ground lease in the past? Ground leases are known to be very complex transactions and are in many ways like a partnership. It is crucial to choose a sophisticated and experienced ground tenant to successfully negotiate the terms of the lease. Working with a ground tenant that has past experiences with ground leases can provide the owner with comfort and guidance through the sometimes grueling lease negotiations. Furthermore, experienced ground tenants can provide tax efficient structures to help save the landlord money. An example of this is compounding/deferring the taxes associated with an upfront payment made by the tenant. What type of work is the ground tenant guaranteeing? Unlike a standard office or retail lease, obtaining a personal guaranty and/or security deposit from a ground tenant are not common practice on ground leases. However, a personal guaranty from the ground tenant guaranteeing to complete certain capital improvements on the property within a specific timeframe provides the landlord with security. All such work should be outlined in an itemized “Scope of Work” that should be attached as an exhibit to the lease. Furthermore, the more money a tenant spends the more “skin in the game” they have. It is important to note, however, that the amount of money that the ground tenant should spend depends on the condition of the property and the type of property. Has the ground tenant ever defaulted on a ground lease? A prior default on a ground lease does not necessarily mean that you should not pick that ground tenant. It is more important to find out the reasons for defaulting and how many times they have defaulted. Multiple defaults or defaulting due to over leveraging or inexperience should be considered red flags. How many years has the ground tenant been in business? Due to the cyclical nature of the real estate market, it is important to pick a ground tenant who has been through it all, and survived! However, this should not rule out new companies whose principals have ground leasing experience in their repertoire. Has the ground tenant completed similar projects that you can tour/visit? Ground leases can be made on all different property types including but not limited to: vacant land, industrial properties, office buildings, residential buildings, and hotels. Therefore, it is important to pick a ground lessee who specializes in the same asset class as your property. It is also helpful to visit and tour the prospective ground lessee’s projects in an effort to get a better idea of their craftsmanship and expertise in their execution.

LANDLORDS GUIDE TO GROUND LEASES Ground leases are an effective tool that property owners can use to maximize the upside potential of their asset without the expenses associated with transferring ownership of the property through a conventional sale. WHAT IS A GROUND LEASE? WHAT IS A GROUND LEASE? WHAT IS A GROUND LEASE? HOW DO I CHOOSE A GROUND TENANT? HOW DO I CHOOSE A GROUND TENANT? HOW DO I CHOOSE A GROUND TENANT? WHAT IS A RENT RESET? WHAT IS A RENT RESET? WHAT IS A RENT RESET? WHAT ARE THE BENEFITS OF A GROUND LEASE? WHAT ARE THE BENEFITS OF A GROUND LEASE? WHAT ARE THE BENEFITS OF A GROUND LEASE? CAN I GROUND LEASE MY PROPERTY? CAN I GROUND LEASE MY PROPERTY? CAN I GROUND LEASE MY PROPERTY? SUBORDINATED VS. UNSUBORDINATED

SUBORDINATED VS. UNSUBOR DINATED GROUND LEASES There are two main types of ground leases: subordinated and unsubordinated. And the difference is what happens if a tenant runs into financial trouble during the lease term. ​ Subordinated Ground Lease: In a subordinated ground lease, the tenant agrees to be a lower priority when it comes to any other financing the tenant obtains on the property. For example, let's say that you sign a ground lease on a parcel of land, and then borrow $500,000 to build a restaurant on it. If you default on the loan while under a subordinated ground lease, your lender can go after the property (including the land) as collateral. ​ Unsubordinated Ground Lease: On the other hand, in an unsubordinated ground lease, the tenant has higher priority than any other lenders when it comes to claims on the property. In other words, the tenant's lenders may not foreclose on the land if they default. In the event of default, a lender on a property in an unsubordinated ground lease may be able to go after the assets of the business but cannot take full control of the property as they may be able to in a subordinated ground lease. ​ Obviously, with all things being equal, landlords would want to sign unsubordinated ground leases. After all, why would a landlord want to risk their property? In practice, landlords generally have to charge lower rent on unsubordinated ground leases in order to entice tenants to accept such an arrangement. Many lenders won't originate loans to build commercial buildings on ground leases unless they have the recourse to take control of the property in the event of the tenant's default. Unsubordinated ground leases are the more common arrangement. Even though they generate less rental income, landlords typically don't want to put their property at risk, essentially taking an active stake in the tenant's business.

GROUND LEASE RENT RESETS One of the biggest “deal killers” during ground lease negotiations circles around the issue of whether or not to include a rent reset in the ground lease. In general, rent resets are used to protect the landlord (lessor) from inflation which in turn can increase future ground rent paid by the ground tenant (lessee). As a consequence, the lessee is reluctant to accept a rent reset whereby “killing the deal.” However, crafting language to protect both the landlord and tenant can help keep the deal “alive.” Most of the time, unfortunately, the discussion surrounding rent resets is not properly handled because the parties do not have a proper understanding of the specifics and reasons for these resets. In order for a ground lease to make sense, the rent reset clause must take into consideration the needs of both the lessor and lessee. ​ Today, ground leases are being utilized more and more to creatively maximize value for both the lessors and the lessees. A ground lease, in essence, is a long-term net lease of land between the lessor and lessee. Depending on the terms in the lease, a ground lease can provide the lessor with substantial benefits while simultaneously allowing the lessee to maximize the assets upside potential. ​ For example, ground-leased properties have a host of tax advantages for lessors. Lessors will not be responsible for paying the capital gains taxes they may incur if they were to sell the property (although there are instances where capital gain taxes might be incurred). Leasing rather than selling their property via a ground lease allows owners to establish generational streams of income from the property without the responsibility of managing the property. ​ For lessees, they are not burdened by the upfront cost to purchase the property, therefore having more cash on hand to work on other projects. Depreciation from capital improvements they have made on the property and depending on the lease structure, the rent paid to the lessor can be deducted from their pre-tax income as expenses, whereby decreasing the overall cost-basis for the lessee. Still, despite the benefits, one of the biggest issues in ground leases that is often in contention are the clauses regarding the lease’s rent reset and how the reset will be calculated at pre-determined dates throughout the lease (generally every 25th, 33rd, or 49th year of a 100-year ground lease). The most common types of rent resets, include but are not limited to: ​ Fair Market Value (FMV) Reset Appraisals are done to ensure that the rents being paid by the lessee are representative of the property’s current fair market value. The danger for the lessees is that in many cases the rent that is being paid is substantially less than the current FMV resulting in a dramatic rent increase. However, dramatic rent increases can be avoided if a rent floor and ceiling has been established during lease negotiations. Generally, the rent floor would be that the rent cannot be lower than the current rent and the ceiling would be that the rent cannot exceed a certain amount. The Lotte New York Palace hotel is set to have a rent-reset based on a fair market value reset in 2023. SL Green Realty Corp. is also set to have a rent-reset at 625 Madison Ave. based on the property’s fair market value in 2022. Consumer Price Index (CPI) Reset In many cases rent resets and structure are determined using the Consumer Price Index also known as a CPI. An increase in the CPI over a given period (usually in the 25th, 33rd, or 49th year of the lease term) and the loss in the property value is compensated by a proportionate percentage increase in rent that is calculated based on the change to the CPI, thereby protecting the lessor from inflationary pressures. Using the same rent floor and ceiling discussed above can alleviate the lessee’s risk. ​ Set Escalation Set escalation clauses are very simple and easy to underwrite. Set escalation clauses usually calculate rent increases by (i) taking an agreed upon percentage and then multiplying it by the then current rent or (ii) agreeing that the rent will increase to a set number (e.x. from $1 million to $2 million). This method allows both parties to know the exact rent amount at any given point during the course of the lease. RFR Realty struggled to refinance their mortgage on 390 Park Ave. due to a set escalation clause in which the ground lease rent was set to increase to $20 million in 2023 relative to the current $6 milllion. Another example, the Abu Dhabi Investment Council and Tishman Speyer were forced to put up the Chrysler Tower for sale this past January due to their rent-bill ballooning as a result of a rent reset. After paying $7.75 million in 2017, the rent in 2018 after the rent reset was $32.5million, an increase of more than 400%. Highest and Best Use Reset One method of calculating rent increase that has been causing issues for many iconic ground-leased properties is the method of increasing rent based on the property’s “highest and best use.” This is particularly true for areas where former business/office districts such as Park Ave. South and the Financial District have seen a huge rise in luxury residential development. Under this method of calculating rent resets, the rents are determined based on what is appraised to be the most profitable asset type for that parcel of land regardless of what currently exists on the plot of land. Tenants may find themselves stuck with an office building whose highest and best use is residential, but the tenant has neither the financial means nor the ability to convert the property type. If a lessor is stern on using this method, the lessee must request rent concessions in the form of free rent or reduced rent while they are repositioning the property. ​ Rent reset clauses should be collaboratively determined and meticulously reviewed before either party agrees to sign a lease. This is crucial to ensure that the terms are fair and also helps to avoid any potential problems that may arise. There is no reason why the rent reset should continue to be a “deal killer.” Ground leases are used to benefit both parties in a transaction; the rent reset clause should be no different.

STEPHEN TANG Stephen Tang Alcala is an experienced off-market broker specializing in custom canvassing for his clients in the NYC commercial real estate market. Stephen has closed numerous high-value deals for his clients, leveraging his extensive network and industry expertise. He works closely with the Skyline Properties team to deliver customized solutions that meet the unique needs of each client. He has proven his success by making two sales totaling $58 million in his first 6 months with Skyline Properties, where he is a valued member of the team and Director of Investment Sales. ​ Prior to his career in real estate, Stephen spent 20 years as managing partner of Robbie Wagner's Tournament Training Center. He also has extensive experience as a USTA Youth Tournament Director. When he's not busy closing deals, Stephen loves spending time with his two young children. Stephen holds a BBA degree in entrepreneurship with a minor in marketing from Hofstra University's Frank G. Zarb School of Business. His education, combined with his industry experience and deep knowledge of the NYC commercial real estate market, makes him a highly sought-after broker for clients seeking personalized, effective solutions. FEATURED CLOSINGS 6101 Springfield Blvd., Queens, NY 11364 82,000 Square Feet Prime Retail property Including a 100 car parking lot with national tenants; United States Postal Office, Walgreens, Chase Bank, UPS, Red Mango and Subway. 165-167 Eldridge Street, New York, New York

MITCHEL (MINSUK) KIM “Mitchel (Minsuk) Kim joined Skyline Properties in May 2019 as an Investment Sales Professional. He is currently attending New York University for a B.A. in Economics and a minor in Business Administration. At NYU, Mitchel participated in an variety of student organizations such as the NYU Economics Club where he served as president. Mitchel has had experience working in many different industries from hard-money lending to supply chain management, and is now starting his foray into the world of commercial real estate. Mitchel’s hobbies include playing guitar, trading equities, and skateboarding.”

The Kaufman Organization closed on a newly formed ground lease at The Haymarket Building in Manhattan’s NoMad, valued at $34.5 million, Commercial Observer has learned. Kaufman signed a 99-year ground lease with owner MFM Properties for the 12-story office building at 135 West 29th Street between Seventh Avenue and Avenue of the Americas, according to Kaufman. Under the deal, Kaufman will manage the 86,000-square-foot office building, which is currently 70 percent occupied, and plans to start a renovation program for the property. “We really built an expertise in Midtown South, as well as have built a strong expertise in forming newly created office ground leases, so this opportunity checked both those boxes,” Michael Kazmierski, president and principal of Kaufman’s investment arm, Kaufman Investments, said. “We’re still very optimistic in regard to the performance of this core Midtown South market and we think this building is well-positioned to be part of the recovery.” The deal marks the third office asset Kaufman has closed on in the past 14 months, and 10th in recent years, Kazmierski said. That includes Kaufman signing eight ground leases, including one at 236 Fifth Avenue that it closed on in 2017 . Ground leases developed a bad reputation in recent decades — with structural issues in some legacy leases causing things like the Chrysler Building’s shockingly low sale price — but investment in the space has started to gain more momentum during the coronavirus pandemic. For long-term owners of properties, modern ground lease structures — that aren’t improperly sized to the value of the real estate and that lack things like fair market value resets — can provide a stable cash flow and help with estate planning. And for the lease owners, they require less upfront capital and risk than buying a building outright. “Ground leases provide a tax-efficient structure that benefits both parties,” Skyline Properties’ Robert Khodadadian, who brokered the ground lease for both sides along with Daniel Shirazi, said in a statement. “Similar to the ground lease we did with the Kaufman Organization at 236 Fifth Avenue, ground leases provide a great solution for multi-generational owners who now benefit from a hassle-free income stream for generations" Home

CHOOSING A GROUND TENANT Ground leases are an effective tool that property owners can use to maximize the upside potential of their asset without the expenses associated with transferring ownership of the property through a conventional sale. In general, a ground lease (master lease) is a long-term net lease (usually 49 years or 99 years) of land including any improvements (if any) on the said land. Once a landlord decides to ground lease their property they must pick the right ground tenant to partner with. Unfortunately, often times owners choose a ground tenant based solely on receiving the highest offer for their property. However, this should not be the only factor to take into consideration. Landlords must properly vet any prospective ground tenant and should take into consideration asking the ground tenant my “Top 5” questions as outlined below. What is the ground tenant’s transaction history; have they done a ground lease in the past? Ground leases are known to be very complex transactions and are in many ways like a partnership. It is crucial to choose a sophisticated and experienced ground tenant to successfully negotiate the terms of the lease. Working with a ground tenant that has past experiences with ground leases can provide the owner with comfort and guidance through the sometimes grueling lease negotiations. Furthermore, experienced ground tenants can provide tax efficient structures to help save the landlord money. An example of this is compounding/deferring the taxes associated with an upfront payment made by the tenant. What type of work is the ground tenant guaranteeing? Unlike a standard office or retail lease, obtaining a personal guaranty and/or security deposit from a ground tenant are not common practice on ground leases. However, a personal guaranty from the ground tenant guaranteeing to complete certain capital improvements on the property within a specific timeframe provides the landlord with security. All such work should be outlined in an itemized “Scope of Work” that should be attached as an exhibit to the lease. Furthermore, the more money a tenant spends the more “skin in the game” they have. It is important to note, however, that the amount of money that the ground tenant should spend depends on the condition of the property and the type of property. Has the ground tenant ever defaulted on a ground lease? A prior default on a ground lease does not necessarily mean that you should not pick that ground tenant. It is more important to find out the reasons for defaulting and how many times they have defaulted. Multiple defaults or defaulting due to overleveraging or inexperience should be considered red flags. How many years has the ground tenant been in business? Due to the cyclical nature of the real estate market, it is important to pick a ground tenant who has been through it all, and survived! However, this should not rule out new companies whose principals have ground leasing experience in their repertoire. Has the ground tenant completed similar projects that you can tour/visit? Ground leases can be made on all different property types including but not limited to: vacant land, industrial properties, office buildings, residential buildings, and hotels. Therefore, it is important to pick a ground lessee who specializes in the same asset class as your property. It is also helpful to visit and tour the prospective ground lessee’s projects in an effort to get a better idea of their craftsmanship and expertise in their execution.

Are ground lease rent resets deal killers? How to structure rent resets By: Daniel Shirazi - August 06, 2019 How should landlords handle picking the ground tenant for their property? By: Daniel Shirazi - March 20, 2018 Is the Ground Lease a COVID-19 savior? By: Daniel Shirazi - November 3, 2020 Back to the Future: Resurgence of the Ground Lease By Robert Khodadadian - August 20, 2019 Question of the Month: Why ground lease and why now? By Robert Khodadadian - JULY 17, 2018 Ground leases 101: Creativity is required By: Daniel Shirazi - February 21, 2017 Consider these questions when vetting prospective ground tenants By Robert Khodadadian - August 20, 2019

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IS THE GROUND LEASE A COVID-19 SAVIOR? The declining retail market coupled with the COVID-19 pandemic has left many real estate investors in limbo. Buyers are uncertain what the future may bring and are thus not inclined to buy in this market. This leaves cash strapped owners no other option but to continue to let their property “bleed” or alternatively for owners who want to sell to keep their properties since they cannot find a replacement property via a 1031 transaction. Ground leases may prove to be a valuable alternative to a sale of the property. Simply put, a ground lease is a long-term net lease (usually 49 years or 99 years) of land including any improvements on the said land. ​ In recent years, ground leases have provided life support to cash strapped owners as once the ground lease is executed, the ground tenant would be responsible for all of the expenses and maintenance of the property. The owner would then receive an influx in cash via the lease. The ground lease would also eliminate the need to find a 1031 since the owner retains ownership of the property and therefore not subject to capital gains tax (although there are instances where capital gains tax might be incurred). The ground lease provides a generational hassle-free income stream that can be sold or mortgaged at any time by the owner. The ground lessee will maximize the potential and improve the property by making capital improvements to the existing structure; or in the case of a development site, they will be constructing a new building that would revert back to the owner at the end of the lease. ​ Ground leases enable reluctant buyers to participate in the market since they would not need to provide the upfront capital that is needed to purchase the property therefore widening the potential pool of buyers for an owner. Many developers and commercial tenants have long been faced with property owners who ask for a price that isn’t supported by comparable sales. The owners are emotionally attached to the asset, and they’d rather sit on it than do a deal that makes sense for both parties. If an owner is unwilling to sell, a ground lease can still get a deal done that will give them long-term access to prime locations. ​ Although ground leases can be complex, they provide a tax efficient and a cost-effective alternative to a sale needed to navigate through the uncertainties in the current real estate market. Written By Daniel Shirazi, Esq November 3, 2020

JIABAO "GRACE" CUI Jiabao “Grace” Cui – Ground Lease Analyst Ms. Cui, A native of Beijing, China has been hired as a ground lease analyst for the firm. In this role Ms. Cui will be focused on canvassing and researching all investment properties in Manhattan and the outer boroughs that are currently ground leased to enable the firm to better educate property owners on the benefits.

1000000 SELECT OFF MARKET OPPORTUNITIES MULTIFAMILY PACKAGE - HELLS KITCHEN, NEW YORK Combined Gross Sq ft: 35,000 sq. ft Residential Units: 44 (38R S/4FM/2RC) Commercial Units: 6 Total buildable: 64,000 SQ FT ASKING PRICE: $23,000,000 MORE INFO 5-STORY COMMERCIAL, EAST VILLAGE, NY 5,000 SF (2,000 SF of Air Rights) 21 X 61 M1-5A Gross Income: $720,000 ASKING PRICE: $13,000,000 MORE INFO ELEVATORED MULTIFAMILY, BROOKLYN, NY 62 units 60,000 SF 421A in place until 2028 NOI: $2,350,000 ASKING PRICE: SUBMIT OFFERS MORE INFO UES ELEVATORED MULTIFAMILY 13,000 SF 25 x 92 23 Units (all FM) Gross Income: $563,820 ASKING PRICE: $8,000,000 MORE INFO 138,000 SF DEVELOPMENT SITE, BRONX, NY ​100 x 227 21,000 SF existing structure R8/C4-4D 6 FAR ASKING PRICE: $18,500,000 MORE INFO ELEVATORED MULTIFAMILY, BROOKLYN, NY ​40 units 37,000 SF 421A in place until 2023 NOI: $1,330,000 ASKING PRICE: SUBMIT OFFERS MORE INFO

BENEFITS OF A GROUND LEASE Are most owners familiar with ground leases? How do they respond when you explain how they work? Most owners either don’t know anything about ground leasing or they’ve only heard part of the story, so we created an informational website (groundlease.nyc ) to help educate them. The way ground leases are structured opens opportunities for owners who don’t want to sell but are still open to doing a deal. Ultimately, owners should understand that a ground lease is just like any other type of real estate transaction in that both sides of the table need to feel like they’re making a deal that works for them economically. ​ On the other side of the equation, an investor who’s looking to purchase an office property south of 96th street in Manhattan should understand that there are only roughly 1,571 office buildings that are over 20,000 square feet, which means there’s a finite amount of inventory. This knowledge helps tenants approach deals creatively as well. Who should consider a ground lease? Ground leases make the most sense for long-term property owners who aren’t prepared to make the necessary capital improvements required to maximize their property’s upside potential. Someone who owns a plot of land, a property with significant air rights, doesn’t want or need to build, or someone who wants to ensure that their property remains in the family to produce generational income would also benefit from considering a ground lease. ​ How do owners benefit from ground leases? The property title never transfers to the tenant; therefore, the owner stays the owner of the property while generating income on the property. The owner is not responsible for capital gains tax, unless there is an upfront payment, and in some cases the owner is eligible to avoid transfer tax payments. The property also remains in the family, which means the asset will generate a hassle-free income stream for generations to come. ​ The ground lessee (the tenant) is responsible for all the management, costs, and expenses of the leased property. By making capital improvements to the existing structure or in the case of a development site, constructing a new building the ground lessee will maximize the potential and improve the property. Many ground leases contain a reversionary clause, which transfers any improvements made by the tenant to the landlord at the end of the lease. ​ How do tenants benefit from a ground lease? Many developers and commercial tenants have long been faced with property owners who ask for a price that isn’t supported by comparable deals. The owners are emotionally attached to the asset, and they’d rather sit on it than do a deal that makes sense for both parties. The tenant’s basis is significantly reduced because they don’t need to invest upfront capital for a purchase. If an owner is unwilling to sell, a ground lease can still get a deal done that will give them long-term access to prime locations. Are ground leases complicated? The more knowledge each party brings to the transaction, the smoother it will go. To that end, our real edge at Skyline is our personal relationships with the most active real estate players in today’s market. For owners, this translates into not wasting time and getting a deal done correctly. Ground leases are considered sophisticated and complex transactions. If structured correctly, ground leases can be tax efficient and protect both the ground lessee and lessor. What asset classes can be ground leased? Technically, you can ground lease any asset class, but most commonly vacant land, industrial properties, office buildings, residential buildings, and hotels are ground leased. An example of recent ground lease transactions in New York City include: SL Green leased 885 Third Avenue, “The Lipstick Building,” to Ceruzzi Holdings; Extell Development signed a 99-year lease for Goldman-owned properties at 516 East 14th Street, 530 East 14th Street and 222 Avenue A; and Skyline Properties’ most recent ground lease at 236 Fifth Avenue with The Kaufman Organization . Is the owner stuck once the ground lease is in place? Since the title to the property never transfers to the tenant, the owner retains the right to mortgage the leased property or sell it. In fact, the owner can borrow more money from the bank once the ground lease is in place because often their net income has increased substantially. Once the tenant has committed to a ground lease, are they trapped? The ground lease tenant retains the option to mortgage their lease or assign the lease to a new tenant. It’s also worth mentioning that since the tenant is not on the title, the owner is not responsible for any debt they incur, so if the tenant default on the debt, the landlord isn’t held accountable. What makes an appropriate ground lease tenant? Ground leases can be thought of as long-term partnerships. Therefore, it’s vital that landlords have partners who are knowledgeable about ground leases to provide the owner with tax efficient structures. The tenant also needs the financial ability to perform the renovations or development in the timeframe outlined in the lease. When picking a ground tenant, owners should look for tenants who are willing to provide personal guarantees for the work they are saying they are going to do, and they should obtain a comprehensive understanding of the tenant’s financial history including defaults.

WHAT IS A GROUND LEASE? In the simplest form, a ground lease is a long-term net lease (usually 49 years or 99 years) of land including any improvements on the said land. Assets that can be subject to a ground lease include but are not limited to, vacant land, office buildings, and large residential buildings. Advantages for Owners/Ground Lessor: The owner retains ownership to the property and therefore: is not responsible for any capital gains or transfer tax payments they would incur if they were to sell (although there are instances where transfer taxes might be incurred); keep the property in the family and thus will generate a hassle-free income stream for generations; they can mortgage the leased property; and can sell the property. The ground lessee (the tenant) under the ground lease would be responsible for all of the management, costs, and expenses of the leased property. The ground lessee will maximize the potential and improve the property by: making capital improvements to the existing structure; or in the case of a development site, they will be constructing a new building. Many ground leases contain a clause (reversionary clause) which transfers any improvements made by the tenant to the landlord at the end of the lease. ​ Advantages for Tenants/Ground Lessee: The tenant’s basis would be significantly reduced because the tenant would not need to provide the upfront capital that is needed to purchase the property. If an owner is unwilling to sell his property, this gives the tenant/investor a way to utilize this asset in a way that can benefit both parties. The tenant can mortgage the lease, however, any financing obtained will not be against the leased asset. GUIDE TO GROUND LEASES Ground leases are an effective tool that property owners can use to maximize the upside potential of their asset without the expenses associated with transferring ownership of the property through a conventional sale. RENT RESETS CHOOSING A GROUND TENANT BENFITS OF A GROUND LEASE COMPLIMENTARY EVALUATION SUBORDINATED VS. UNSUBORDINATED GROUND LEASE ARTICLES CHOOSING A GROUND TENANT Ground leases are an effective tool that property owners can use to maximize the upside potential of their asset without the expenses associated with transferring ownership of the property through a conventional sale. In general, a ground lease (master lease) is a long-term net lease (usually 49 years or 99 years) of land including any improvements (if any) on the said land. Once a landlord decides to ground lease their property they must pick the right ground tenant to partner with. Unfortunately, often times owners choose a ground tenant based solely on receiving the highest offer for their property. However, this should not be the only factor to take into consideration. Landlords must properly vet any prospective ground tenant and should take into consideration asking the ground tenant my “Top 5” questions as outlined below. What is the ground tenant’s transaction history; have they done a ground lease in the past? Ground leases are known to be very complex transactions and are in many ways like a partnership. It is crucial to choose a sophisticated and experienced ground tenant to successfully negotiate the terms of the lease. Working with a ground tenant that has past experiences with ground leases can provide the owner with comfort and guidance through the sometimes grueling lease negotiations. Furthermore, experienced ground tenants can provide tax efficient structures to help save the landlord money. An example of this is compounding/deferring the taxes associated with an upfront payment made by the tenant. What type of work is the ground tenant guaranteeing? Unlike a standard office or retail lease, obtaining a personal guaranty and/or security deposit from a ground tenant are not common practice on ground leases. However, a personal guaranty from the ground tenant guaranteeing to complete certain capital improvements on the property within a specific timeframe provides the landlord with security. All such work should be outlined in an itemized “Scope of Work” that should be attached as an exhibit to the lease. Furthermore, the more money a tenant spends the more “skin in the game” they have. It is important to note, however, that the amount of money that the ground tenant should spend depends on the condition of the property and the type of property. Has the ground tenant ever defaulted on a ground lease? A prior default on a ground lease does not necessarily mean that you should not pick that ground tenant. It is more important to find out the reasons for defaulting and how many times they have defaulted. Multiple defaults or defaulting due to overleveraging or inexperience should be considered red flags. How many years has the ground tenant been in business? Due to the cyclical nature of the real estate market, it is important to pick a ground tenant who has been through it all, and survived! However, this should not rule out new companies whose principals have ground leasing experience in their repertoire. Has the ground tenant completed similar projects that you can tour/visit? Ground leases can be made on all different property types including but not limited to: vacant land, industrial properties, office buildings, residential buildings, and hotels. Therefore, it is important to pick a ground lessee who specializes in the same asset class as your property. It is also helpful to visit and tour the prospective ground lessee’s projects in an effort to get a better idea of their craftsmanship and expertise in their execution. Choosing Groun Tenant BENEFITS OF A GROUND LEASE Are most owners familiar with ground leases? How do they respond when you explain how they work? Most owners either don’t know anything about ground leasing or they’ve only heard part of the story, so we created an informational website (groundlease.nyc ) to help educate them. The way ground leases are structured opens opportunities for owners who don’t want to sell but are still open to doing a deal. Ultimately, owners should understand that a ground lease is just like any other type of real estate transaction in that both sides of the table need to feel like they’re making a deal that works for them economically. ​ On the other side of the equation, an investor who’s looking to purchase an office property south of 96th street in Manhattan should understand that there are only roughly 1,571 office buildings that are over 20,000 square feet, which means there’s a finite amount of inventory. This knowledge helps tenants approach deals creatively as well. Who should consider a ground lease? Ground leases make the most sense for long-term property owners who aren’t prepared to make the necessary capital improvements required to maximize their property’s upside potential. Someone who owns a plot of land, a property with significant air rights, doesn’t want or need to build, or someone who wants to ensure that their property remains in the family to produce generational income would also benefit from considering a ground lease. ​ How do owners benefit from ground leases? The property title never transfers to the tenant; therefore, the owner stays the owner of the property while generating income on the property. The owner is not responsible for capital gains tax, unless there is an upfront payment, and in some cases the owner is eligible to avoid transfer tax payments. The property also remains in the family, which means the asset will generate a hassle-free income stream for generations to come. ​ The ground lessee (the tenant) is responsible for all the management, costs, and expenses of the leased property. By making capital improvements to the existing structure or in the case of a development site, constructing a new building the ground lessee will maximize the potential and improve the property. Many ground leases contain a reversionary clause, which transfers any improvements made by the tenant to the landlord at the end of the lease. ​ How do tenants benefit from a ground lease? Many developers and commercial tenants have long been faced with property owners who ask for a price that isn’t supported by comparable deals. The owners are emotionally attached to the asset, and they’d rather sit on it than do a deal that makes sense for both parties. The tenant’s basis is significantly reduced because they don’t need to invest upfront capital for a purchase. If an owner is unwilling to sell, a ground lease can still get a deal done that will give them long-term access to prime locations. Are ground leases complicated? The more knowledge each party brings to the transaction, the smoother it will go. To that end, our real edge at Skyline is our personal relationships with the most active real estate players in today’s market. For owners, this translates into not wasting time and getting a deal done correctly. Ground leases are considered sophisticated and complex transactions. If structured correctly, ground leases can be tax efficient and protect both the ground lessee and lessor. What asset classes can be ground leased? Technically, you can ground lease any asset class, but most commonly vacant land, industrial properties, office buildings, residential buildings, and hotels are ground leased. An example of recent ground lease transactions in New York City include: SL Green leased 885 Third Avenue, “The Lipstick Building,” to Ceruzzi Holdings; Extell Development signed a 99-year lease for Goldman-owned properties at 516 East 14th Street, 530 East 14th Street and 222 Avenue A; and Skyline Properties’ most recent ground lease at 236 Fifth Avenue with The Kaufman Organization . Is the owner stuck once the ground lease is in place? Since the title to the property never transfers to the tenant, the owner retains the right to mortgage the leased property or sell it. In fact, the owner can borrow more money from the bank once the ground lease is in place because often their net income has increased substantially. Once the tenant has committed to a ground lease, are they trapped? The ground lease tenant retains the option to mortgage their lease or assign the lease to a new tenant. It’s also worth mentioning that since the tenant is not on the title, the owner is not responsible for any debt they incur, so if the tenant default on the debt, the landlord isn’t held accountable. What makes an appropriate ground lease tenant? Ground leases can be thought of as long-term partnerships. Therefore, it’s vital that landlords have partners who are knowledgeable about ground leases to provide the owner with tax efficient structures. The tenant also needs the financial ability to perform the renovations or development in the timeframe outlined in the lease. When picking a ground tenant, owners should look for tenants who are willing to provide personal guarantees for the work they are saying they are going to do, and they should obtain a comprehensive understanding of the tenant’s financial history including defaults. BENEFITS GROUND LEASE RENT RESETS One of the biggest “deal killers” during ground lease negotiations circles around the issue of whether or not to include a rent reset in the ground lease. In general, rent resets are used to protect the landlord (lessor) from inflation which in turn can increase future ground rent paid by the ground tenant (lessee). As a consequence, the lessee is reluctant to accept a rent reset whereby “killing the deal.” However, crafting language to protect both the landlord and tenant can help keep the deal “alive.” Most of the time, unfortunately, the discussion surrounding rent resets is not properly handled because the parties do not have a proper understanding of the specifics and reasons for these resets. In order for a ground lease to make sense, the rent reset clause must take into consideration the needs of both the lessor and lessee. ​ Today, ground leases are being utilized more and more to creatively maximize value for both the lessors and the lessees. A ground lease, in essence, is a long-term net lease of land between the lessor and lessee. Depending on the terms in the lease, a ground lease can provide the lessor with substantial benefits while simultaneously allowing the lessee to maximize the assets upside potential. ​ For example, ground-leased properties have a host of tax advantages for lessors. Lessors will not be responsible for paying the capital gains taxes they may incur if they were to sell the property (although there are instances where capital gain taxes might be incurred). Leasing rather than selling their property via a ground lease allows owners to establish generational streams of income from the property without the responsibility of managing the property. ​ For lessees, they are not burdened by the upfront cost to purchase the property, therefore having more cash on hand to work on other projects. Depreciation from capital improvements they have made on the property and depending on the lease structure, the rent paid to the lessor can be deducted from their pre-tax income as expenses, whereby decreasing the overall cost-basis for the lessee. Still, despite the benefits, one of the biggest issues in ground leases that is often in contention are the clauses regarding the lease’s rent reset and how the reset will be calculated at pre-determined dates throughout the lease (generally every 25th, 33rd, or 49th year of a 100-year ground lease). The most common types of rent resets, include but are not limited to: ​ Fair Market Value (FMV) Reset Appraisals are done to ensure that the rents being paid by the lessee are representative of the property’s current fair market value. The danger for the lessees is that in many cases the rent that is being paid is substantially less than the current FMV resulting in a dramatic rent increase. However, dramatic rent increases can be avoided if a rent floor and ceiling has been established during lease negotiations. Generally, the rent floor would be that the rent cannot be lower than the current rent and the ceiling would be that the rent cannot exceed a certain amount. The Lotte New York Palace hotel is set to have a rent-reset based on a fair market value reset in 2023. SL Green Realty Corp. is also set to have a rent-reset at 625 Madison Ave. based on the property’s fair market value in 2022. Consumer Price Index (CPI) Reset In many cases rent resets and structure are determined using the Consumer Price Index also known as a CPI. An increase in the CPI over a given period (usually in the 25th, 33rd, or 49th year of the lease term) and the loss in the property value is compensated by a proportionate percentage increase in rent that is calculated based on the change to the CPI, thereby protecting the lessor from inflationary pressures. Using the same rent floor and ceiling discussed above can alleviate the lessee’s risk. ​ Set Escalation Set escalation clauses are very simple and easy to underwrite. Set escalation clauses usually calculate rent increases by (i) taking an agreed upon percentage and then multiplying it by the then current rent or (ii) agreeing that the rent will increase to a set number (e.x. from $1 million to $2 million). This method allows both parties to know the exact rent amount at any given point during the course of the lease. RFR Realty struggled to refinance their mortgage on 390 Park Ave. due to a set escalation clause in which the ground lease rent was set to increase to $20 million in 2023 relative to the current $6 milllion. Another example, the Abu Dhabi Investment Council and Tishman Speyer were forced to put up the Chrysler Tower for sale this past January due to their rent-bill ballooning as a result of a rent reset. After paying $7.75 million in 2017, the rent in 2018 after the rent reset was $32.5million, an increase of more than 400%. Highest and Best Use Reset One method of calculating rent increase that has been causing issues for many iconic ground-leased properties is the method of increasing rent based on the property’s “highest and best use.” This is particularly true for areas where former business/office districts such as Park Ave. South and the Financial District have seen a huge rise in luxury residential development. Under this method of calculating rent resets, the rents are determined based on what is appraised to be the most profitable asset type for that parcel of land regardless of what currently exists on the plot of land. Tenants may find themselves stuck with an office building whose highest and best use is residential, but the tenant has neither the financial means nor the ability to convert the property type. If a lessor is stern on using this method, the lessee must request rent concessions in the form of free rent or reduced rent while they are repositioning the property. ​ Rent reset clauses should be collaboratively determined and meticulously reviewed before either party agrees to sign a lease. This is crucial to ensure that the terms are fair and also helps to avoid any potential problems that may arise. There is no reason why the rent reset should continue to be a “deal killer.” Ground leases are used to benefit both parties in a transaction; the rent reset clause should be no different. RENT RESET SUBORDINATED VS. UNSUBORDINATED There are two main types of ground leases: subordinated and unsubordinated. And the difference is what happens if a tenant runs into financial trouble during the lease term. ​ Subordinated Ground Lease: In a subordinated ground lease, the tenant agrees to be a lower priority when it comes to any other financing the tenant obtains on the property. For example, let's say that you sign a ground lease on a parcel of land, and then borrow $500,000 to build a restaurant on it. If you default on the loan while under a subordinated ground lease, your lender can go after the property (including the land) as collateral. ​ Unsubordinated Ground Lease: On the other hand, in an unsubordinated ground lease, the tenant has higher priority than any other lenders when it comes to claims on the property. In other words, the tenant's lenders may not foreclose on the land if they default. In the event of default, a lender on a property in an unsubordinated ground lease may be able to go after the assets of the business but cannot take full control of the property as they may be able to in a subordinated ground lease. ​ Obviously, with all things being equal, landlords would want to sign unsubordinated ground leases. After all, why would a landlord want to risk their property? In practice, landlords generally have to charge lower rent on unsubordinated ground leases in order to entice tenants to accept such an arrangement. Many lenders won't originate loans to build commercial buildings on ground leases unless they have the recourse to take control of the property in the event of the tenant's default. Unsubordinated ground leases are the more common arrangement. Even though they generate less rental income, landlords typically don't want to put their property at risk, essentially taking an active stake in the tenant's business. SUBORDINATED WHAT IS GROUND LEASE ARTICLES How should landlords handle picking the ground tenant for their property? By: Daniel Shirazi - March 20, 2018 Ground leases 101: Creativity is required By: Daniel Shirazi - February 21, 2017 Back to the Future: Resurgence of the Ground Lease By Robert Khodadadian - August 20, 2019 EVALUATION COMPLIMENTARY GROUND LEASE EVALUATION To register your property for a complimentary Ground Lease evaluation, please fill out the form below SUBMIT Upload File Max File Size 15MB Thanks for submitting!

RESURGENCE OF THE GROUND LEASE: Q&A WITH SKYLINE PROPERTIES EVP OF INVESTMENT SALES New York, NY The New York Real Estate Journal caught up with Daniel Shirazi Esq., Skyline Properties’ EVP of Investment Sales, for an overview on why the current market conditions have led to the recent resurgence of ground leasing in the city. Skyline Properties is a commercial real estate advisory firm. Traditionally, Skyline focuses on off-market investment sales, but over the last few years, Shirazi and his team have garnered attention guiding owners and tenants through the sophisticated yet lucrative process of ground leasing. ​ What is a ground lease? Shirazi: Simply put, a ground lease is a long-term net lease of land between an owner (ground lessor) and a tenant (ground lessee). Among other things, this arrangement allows property owners to maximize their asset’s upside potential without incurring the expenses associated with a conventional sale, such as capital gains tax. ​ What inspired you to start introducing owners to the concept of ground leasing? Shirazi: As the market evolved, we wanted to find a way to help both investors and owners make money on deals, so we looked to see how deals were structured in the past to guide us. We came to understand how well ground leases work for both parties, so we began reintroducing this concept with our creative approach, and it’s been producing long-term positive outcomes for everyone who’s gone down this road with us. Are most owners familiar with ground leases? Shirazi: Most owners either don’t know anything about ground leasing or they’ve only heard part of the story. The way ground leases are structured opens opportunities for owners who don’t want to sell but are still open to doing a deal. Ultimately, owners should understand that a ground lease is just like any other type of real estate transaction in that both sides of the table need to feel like they’re making a deal that works for them. ​ Who should consider a ground lease? Shirazi: Ground leases make the most sense for long-term property owners who aren’t prepared to make the necessary capital improvements required to maximize their property’s upside potential. Someone who owns a plot of land, a property with significant air rights, doesn’t want or need to build, or someone who wants to ensure that their property remains in the family to produce generational income would also benefit from considering a ground lease. ​ How do owners benefit from ground leases? Shirazi: The property title never transfers to the tenant; therefore, the owner stays the owner of the property while generating income on the property. The owner is not responsible for capital gains tax, unless there is an upfront payment, and in some cases the owner is eligible to avoid transfer tax payments. The property also remains in the family, which means the asset will generate a hassle-free income stream for generations to come. ​ How do tenants benefit from a ground lease? Shirazi: Many developers and commercial tenants have long been faced with property owners who ask for a price that isn’t supported by comparable deals. The owners are emotionally attached to the asset, and they’d rather sit on it than do a deal that makes sense for both parties. The tenant’s basis is significantly reduced because they don’t need to invest upfront capital for a purchase. If an owner is unwilling to sell, a ground lease can still get a deal done that will give them long-term access to prime locations. Are ground leases complicated? Shirazi: The more knowledge each party brings to the transaction, the smoother it will go. To that end, our real edge at Skyline is our personal relationships with the most sophisticated real estate investors. For owners, this translates into not wasting time and getting a deal done correctly. Ground leases are considered sophisticated and complex transactions. If done correctly, ground leases can be tax efficient and protect both the landlord and the tenant. ​ What asset classes can be ground leased? Shirazi: Technically, you can ground lease any asset class, but most commonly vacant land, industrial properties, office buildings, residential buildings, and hotels are ground leased. ​ Is the owner stuck once a ground lease is in place? Shirazi: Since the title to the property never transfers to the tenant, the owner retains the right to mortgage the leased property or sell it. In fact, the owner can borrow more money from the bank once the ground lease is in place because often their net income has increased substantially. ​ Once the tenant has committed to a ground lease, are they trapped? Shirazi: The ground lease tenant retains the option to mortgage their lease or assign the lease to a new tenant. It’s also worth mentioning that since the tenant is not on the title, the owner is not responsible for any debt they incur, so if the tenant default on the debt, the landlord isn’t held accountable. ​ What makes an appropriate ground lease tenant? Shirazi: Ground leases can be thought of as long-term partnerships. Therefore, it’s vital that landlords have partners who are knowledgeable about ground leases to provide the owner with tax efficient structures. The tenant also needs the financial ability to perform the renovations or development in the timeframe outlined in the lease. When picking a ground tenant, owners should look for tenants who are willing to provide personal guarantees for the work they are saying they are going to do, and they should obtain a comprehensive understanding of the tenant’s financial history including defaults.

MEET THE TEAM President & CEO READ BIO ROBERT KHODADADIAN Director of Investment Sales READ BIO STEPHEN TANG Investment Sales Professional READ BIO DANIEL DAVIDOV Investment Sales Professional READ BIO JIN WOONG "GENE" CHUNG Marketing Director READ BIO JESSICA NADELSON EVP - Investment Sales READ BIO DANIEL SHIRAZI ESQ. Investment Sales Professional READ BIO MIN-SUK "MITCHEL" KIM Investment Sales Professional READ BIO KAMIL PRASZKOWICZ Ground Lease Analyst READ BIO JIABAO "GRACE" CUI

EMPLOYMENT OPPORTUNITES As part of Skyline Properties' aggressive growth strategy, we are looking for ambitious individuals who want to put 110% into their careers to join our Real Estate Investment Sales Team. ​ QUALIFICATIONS The ideal candidate for this position must have an analytical mindset, possess the ability to succeed within a sales environment, and have the capacity to stay calm under fire while maintaining a positive can-do attitude. Additionally, the candidate should have the following: ​ Interpersonal skills – strong listening, speaking, communication, organization and presentation skills Disciplined, focused, and a true team player Entrepreneurial spirit, self-starter Eagerness and temperament to participate in a fast-paced/high volume work environment Excellent working knowledge of Microsoft Office NYS Salesperson License (must be obtained within first 30 days from start date) ​ TRAINING Since Skyline's inception in 2013, the team has sold more than $1 billion in commercial real estate. We accredit our firm's success to our strict focus on off-market opportunities and our preference to train our investment sales team in-house. This individually tailored training and our open-door policy increase agent potential and allows mentorship from some of the industry's finest experts. ​ Industry expert seminars Mentoring program Property Shark training COMPENSATION Competitive commission structure NYS Real Estate License sponsorship APPLY NOW!

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