Safety

Ground leases are one of the safest ways to invest in commercial real estate, since they occupy a senior part of the capital structure.

In addition, our ground lease rent is senior in terms of the payment priority and well covered by the income of the property.

Illustrative P & L

Note: The illustrative P&L example does not necessarily reflect a particular property owned by SAFE but is rather simply an illustrative example to indicate certain expenses required to be paid by an owner of a leasehold interest.

Growing Income

In addition to the safety afforded by ground leases, our ground lease investments provide a secure and growing cash flow stream. Our ground leases typically have built-in contractual rent escalators that compound over the duration of the lease, resulting in meaningful income growth and the opportunity for the value of our ground lease investments to increase.

Comparing ground lease investments to other fixed income or equity investments with similar risk profiles, we believe that ground leases offer the investor the opportunity to potentially realize superior risk adjusted returns.

Ground Rent Growth Chart

Capital Appreciation – Value Bank

At expiration (or default) of our ground leases, we continue to own the land and have the right to take title to all buildings and improvements. When we acquire or create a ground lease, we target our exposure to the Combined Property Value of 25%-40%, with the tenant investing 60%-75% which is subordinate (junior) to our position. We refer to the difference of the Combined Property Value and our historical ground purchase cost as the “Value Bank”.

Due to the reversion of the building and improvements at lease expiration, the Value Bank may grow significantly to the benefit of the investor in the ground lease.

Combined Property Value (CPV)

Value Bank
62.5% of CPV

Ground Lease
37.5% of CPV

Interest Rate Protection

Ground leases produce a growing income stream vs. similar risk fixed debt

Adding fixed rate leverage amplifies the increases

Note: Charts reflect an illustrative example with the following assumptions: ROA of 4.0%, annual bumps of 2.0%, leverage of 2.0x debt to equity and fixed-rate liabilities of 3.5%.

Stockholder-Friendly Management Contract

Best-in-class management contract and fee arrangement to support growth

Manager Wholly owned subsidiary of iStar Inc.
Management Fee 1.0% of total shareholder’s equity (1) (up to $2.5B)
0.75% of total shareholder’s equity (1) (> $2.5B)
Management Fee Consideration Payment will be in SAFE stock (at the greater of the volume weighted average market price of our stock during the quarter for which the fee is being paid or the IPO price)
Lock-up Restriction from selling common stock received for management fees for 2 years from the date of such issuance (2)
Management Fee Waiver No management fee paid to manager during first year
Incentive Fee None (alignment as largest shareholder)
Term 1 Year
Renewal Provision Annual renewal to be approved by majority of SAFE independent directors
Termination Fee None

(1) Based on the total stockholder’s equity.
(2) Such restriction will terminate at the effective date of the termination of the management agreement.

1 Unique Market Opportunity
  • First and Only Public Company
  • Large and Untapped Market
  • Best Origination Capabilities
2 Strong Relative Value
  • Investment Grade Cash Flows
  • Growing, Inflation Protected Income
  • Imbedded Capital Gains from Rent Bumps and Value Bank
3 Motivated Sponsor Driven to Succeed
  • Strong Institutional Backing
  • Manager is Largest Shareholder
  • Subsidized Management Agreement

Investment Summary

Safety, Income & Growth is a unique investment opportunity to participate in ground lease investments that provides attractive risk adjusted returns, growing inflation protected income flows and imbedded capital appreciation from Value Bank. iStar, our manager and largest shareholder, brings the resources and expertise necessary to support SAFE as the preeminent ground lease company.

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