The Ground Up

Modern ground lease adoption increasing as perception evolves

Safehold was founded in 2017 for the purpose of reinventing the ground lease to make it value-enhancing for building owners. Since creating the modern ground lease, the company has grown its portfolio to nearly $4 billion in more than 30 major markets in the U.S. Safehold Chairman and CEO Jay Sugarman recently spoke to the Commercial Observer about how the company is responding to an evolving ground lease landscape.

Commercial Observer: How has the ground lease market changed since Safehold pioneered the modern ground lease just over four years ago?

Jay Sugarman: The first and most important thing we did was to turn the ground lease business into a customer business. We understand what building owners need and how we can best provide them the lowest cost, longest term, most efficient capital. This type of modern ground lease capital has never been available before, and we’re seeing increasing adoption as we educate the market about its benefits. From a customer’s perspective, then, one of the biggest changes in the market is that ground leases can be customer-friendly and value-creating as part of the capital structure, in contrast to the landlord-friendly, value-destroying structures of the past.

Another thing that’s happened is multifamily has become one of the asset classes where modern ground leases are being used more and more often. In fact, our customer base right now is mostly urban office and multifamily. There was initially skepticism as to whether we could break into multifamily, particularly in gateway cities and fast-growing Southern cities. As we have established ourselves in top cities across the country — like D.C., New York, Austin, L.A., and Nashville — the perception around the applicability of this new modern ground lease has changed.


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