iStar, Safehold’s $1.6B Merger Moves Forward

Photo by Scott Graham via Unsplash.com

Stockholders of both iStar Inc. and Safehold Inc. have voted, in separate virtual special meetings, to approve the proposed merger between iStar—Safehold’s largest shareholder—and Safehold. In addition, iStar stockholders approved the issuance of iStar common stock in connection with the move. The merger reportedly will create the only publicly traded, self-managed, pure-play ground lease company.

This brings Safehold full circle, as the company was created as an iStar subsidiary following a $250 million IPO and private placement in June 2017.

For several years now, Jay Sugarman, who’s chairman & CEO of both Safehold and iStar, has been on a mission to reinvent the ground lease sector. In an interview with Commercial Property Executive in early 2021, Sugarman highlighted a ground lease’s virtues in times like these: “(W)hen markets get stressed, the capital efficiency, cost efficiency and risk reduction created by doing a Safehold ground lease become even more valuable. Debt coming due is always the most vulnerable moment for a property owner, so using a 99-year ground lease to eliminate half that risk is gaining increasing interest from owners.”

The closing of the merger and related transactions, while subject to the satisfaction or waiver of various closing conditions, is targeted at the end of this month.

Not just Manhattan

In a special report last August, Trepp highlighted some key points about CRE securitizations involving ground leases, noting in the process Safehold’s prominence in working to modernize what many had considered a complex, out-of-date structure that wasn’t friendly to most building owners and lenders.

Trepp noted that CMBS loans with properties subject to a ground lease are largely concentrated in New York, California and Hawaii with $5.5 billion, $2.4 billion, and $1.4 billion in investment, respectively, followed by Arizona and Florida.