Glossary

Ground-Leased Pad Tenant

Also known as: Ground-lease outparcel, Pad ground lease

A retailer that leases only the land underlying its outparcel or pad site from the shopping center owner and constructs, owns, and maintains its own building, rather than leasing improved space from the landlord.

Ground-leased pad structures are common for quick-service restaurants, banks, and gas/convenience operators that want architectural and operational control over a purpose-built prototype building, and they shift construction risk and capital entirely to the tenant while giving the landlord a long-term, low-management-intensity rent stream typically structured with fixed escalations rather than percentage rent. Because the landlord does not own the improvements, ground-leased pads are usually carved out of the center's overall CAM pool and instead pay a separate, often flat, common-area and REA maintenance contribution; at ground lease expiration, ownership of the building typically reverts to the landlord under the lease's reversion clause, which materially affects the asset's terminal value in an appraisal. Lenders analyze ground-leased pads distinctly from the balance of the collateral because the leasehold-versus-fee ownership split changes both the collateral package and the practical remedies available on tenant default.