![]() Sugarman said that the possibilities for the modern ground lease space are next to unlimited - at least, for now - within what he’s said is a $7 trillion commercial real estate market. It just so happens that the pool of buyers is now starting to fill up. Roth said it’s all similar to when commercial mortgage-backed securities (CMBS) came around and buyers of different risk profiles were then able to price different parts of the cash flow stream. Not long after Haven launched last November, one source told CO that Safehold’s legwork in popularizing the modern ground lease has likely opened the floodgates, and that it’s only a matter of time until the space becomes crowded. Depending on the value of the leasehold position, you can actually increase the value of the total cash flow stream.” ![]() “It’s a sale of a part of the cash flow at a higher price than what you’d get on the open market. “We think that, particularly in a time where it’s tough to find financing in many sectors, this is an attractive source of unlocking value for an underlying owner,” David Roth, a partner at Ares Management, told CO last fall. ![]() It’s quite a head start in an attempt to catch up with Safehold, which holds ground in every region of the country - mostly under office product - and went into 2021 with $700 million in purchasing power, and a credit revolver that was upsized and sits at $600 million. Interestingly enough, both Haven and GLR came out of the gates armed with $1 billion in capital to deploy in the U.S.’s top 50 metropolitan areas across every asset class. And Dallas-based real estate investment firm Montgomery Street Partners announced in early February that it partnered with a “U.S.-based Fortune 500 insurance company” to launch a private REIT called GLR (short for Ground Lease REIT). and London-based global investor Regis Group joined forces amid the pandemic to launch Haven Capital, a private, ground lease investment vehicle, before the end of the year. Related Companies has a small, ground lease-focused operation that flies under the radar, and other firms, like Miami-based Kawa Capital Management and New York-based real estate investment banking firm Eyzenberg & Co., have been proponents of different models of the modern ground lease.īut, in 2020, the space welcomed a couple of new fleet-footed players to the dance floor.īehemoth investment manager Ares Management (ARES) Corp. The ground lease revolution in New York, specifically, has been underway for some time now, with city development staples like the Kaufman Organization making it a key component of its business, first in Midtown South. And Sugarman, as well as other industry veterans who spoke to Commercial Observer, could not be happier about the revolution that’s been sparked. The economic realities of COVID-19 have helped capture the attention of the broader market. We want everybody who owns or deals in real estate to put the old-fashioned ground leases behind them and take a fresh look.” “We think we have a four-year head start on everybody. “We are delighted if it continues to grow,” Sugarman said of the ground lease space. It quickly became the most recognizable institutional player in the modern ground lease space, but it lacked true competitors, much to the disappointment of its Chairman and CEO, Jay Sugarman. Up until the last several months, Safehold has been lonely. ![]() The company needed to teach the industry about the long-term benefits of a modern, consumer-friendly and flexible, ground lease structure that would limit equity requirements, reduce the cost of capital and - in turn - increase returns and asset values for owners and developers (as well as inject a level of transparency and calculability for lenders). Since its initial public offering in 2017, the publicly traded real estate investment trust (REIT) has mounted a campaign to change the way the commercial property sector works, separating physical real estate structures, and the dirt on which they stand, into two separate investments in a bid to help further line the pockets of building owners, and create more stability and predictability for every party involved in a real estate transaction. SEE ALSO: Brookfield Properties, G&S Seal $420M Loan for Jersey City Multifamily Tower ![]()
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