Customer focus core to Safehold's ground lease innovation
Four years after modernizing the ground lease, Safehold is seeing increasing evidence of its capital solution unlocking hidden value for building owners across a portfolio approaching $4 billion. Commercial Observer spoke to Marcos Alvarado, Safehold’s President and Chief Investment Officer, to learn more about how the company is pursuing its mission to transform a $7 trillion industry.
Commercial Observer: Safehold’s creation of the modern ground lease industry has given building owners a new tool to unlock hidden value. What key innovations made this evolution possible?
Marcos Alvarado: Ground leases have been around forever. But nobody ever said, “Let’s put the customer first.” That was our primary objective when we launched the business just over four years ago.
We were looking at how we could create incremental value, allow our customers to be more capital efficient, reduce their risks, and reduce the friction costs on their real estate transactions. We removed variables that made it difficult to underwrite ground leases and historically destroyed value. Reinventing ground leases as a customer-focused business was the real innovation.
We want our customers to think about using ground leases at multiple points in the life cycle of an asset, so we’ve evolved our offerings to accommodate each stage. We’ve launched SAFE x SWAP, where we acquire existing ground leases and modernize them. We’re preliminarily exploring a program to help customers who are looking at upgrading their buildings and reducing their carbon footprint, called SAFE Planet. We’ve even started to do ground leases on development transactions, targeting an even earlier part of the life cycle with a product called Ground Lease Plus.