Safehold forms $348 million joint venture with Brookfield
Safehold Inc. formed a joint venture with a Brookfield affiliate for a diversified ground lease portfolio, generating $14 million in annualized cash ground rent. Brookfield acquired a 49% interest valued at $348 million, while Safehold retains management control and call options to repurchase the stake after year 7. The proceeds will be used for debt repayment and general corporate purposes.
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Safehold Inc. has formed a joint venture with a Brookfield affiliate for a diversified ground lease portfolio, a move aimed at de-leveraging its balance sheet and increasing liquidity. The assets contributed by Safehold are diversified across the United States and generate current annualized cash ground rent of approximately $14 million. Brookfield purchased a non-controlling 49% interest in the venture at a gross valuation of approximately $348 million.
Safehold will retain day-to-day control and management of the assets, with the venture expected to be consolidated on its financial statements. Brookfield's investment will be recognized as an equity non-controlling interest. Safehold holds a series of call options beginning after year 7 to repurchase Brookfield's interest. The company plans to use the net proceeds for debt repayment and general corporate purposes.
Financial Details of the Transaction
The joint venture structure allows Safehold to access capital priced below its current equity cost of capital while retaining future flexibility to repurchase the venture assets. The following table outlines the key financial metrics of the agreement:
| Metric | Value |
|---|---|
| Gross Valuation | $348 million |
| Brookfield Interest | 49% |
| Annualized Cash Ground Rent | $14 million |
| Call Option Start | After year 7 |
Strategic Benefits and Management Commentary
Brett Asnas, Chief Financial Officer of Safehold, highlighted the strategic benefits of the transaction. "This joint venture creates several important benefits for Safehold, de-leveraging the balance sheet with capital priced below our current equity cost of capital, increasing liquidity and capacity to pursue new ground lease investments, demonstrating institutional demand in the asset class and retaining future flexibility to repurchase the venture assets," said Asnas.
Ben Brown, Co-President of Real Estate at Brookfield, expressed optimism about the partnership. "We are pleased to partner with Safehold on this transaction, which provides access to a diversified portfolio of high-quality ground leases in major U.S. markets," said Brown. "We continue to see compelling opportunities to deploy flexible capital across high-quality real estate investment opportunities supported by durable real estate fundamentals and stable cash flows while tailoring capital solutions to support our partners' balance sheet objectives."
Eastdil Secured, L.L.C. and BofA Securities acted as advisors to Safehold for the transaction.
How will the reduction in leverage impact Safehold's ability to secure financing for future ground lease acquisitions?
What factors will influence Safehold's decision to exercise the call options after year 7?
Could this joint venture structure become a template for future capital-raising initiatives by Safehold?
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