NEW YORK--(BUSINESS WIRE)--Safety, Income and Growth, Inc. (NYSE:SAFE) announced today it has acquired two ground net leases (GNLs) under two new, Class A multifamily projects in Los Angeles, CA. The combined $142 million acquisition represents approximately 60% of the equity capital raised in SAFE’s recent initial public offering, or 20% when fully leveraged.
“We are very excited about SAFE’s first acquisitions following our successful initial public offering last week,” said Jay Sugarman, chairman and chief executive officer. “We believe these GNLs deliver on our goal of providing our shareholders with safe, growing income and capital appreciation.”
The tenant on both ground net leases, which are leased through 2104, is a venture comprised of two institutional real estate developers. The improvements are located on Hollywood Boulevard, adjacent to the Hollywood / Vine subway station and will be comprised of over 1,000 apartments, more than 125,000 square feet of retail and approximately 2,500 underground parking spaces. The development is expect to cost an estimated $450 million, giving the project a Combined Property Value (CPV) of approximately $600 million. CPV represents the value of the land, buildings and improvements relating to the underlying property, assuming no GNL on the property.
The first GNL is located at 6201 Hollywood Boulevard (6201 Hollywood) and houses the recently completed Eastown development, with approximately 530 multifamily units and more than 70,000 square feet of street-level retail occupied by CVS, Dunkin’ Donuts, Shake Shack, Soul Cycle, Sushi of Gari and others. The GNL at 6201 has periodic rental escalations linked to a percentage of CPI plus fair market value adjustments in 2059 and 2079.
The second GNL is the sister project to 6201 Hollywood, located across the street at 6200 Hollywood Boulevard (6200 Hollywood). The project, which is currently under construction, is expected to contain approximately 500 multifamily units and more than 55,000 square feet of street-level retail. The GNL at 6200 has periodic rental escalations similar linked to a percentage of CPI plus fair market value adjustments in 2058 and 2078.
Once stabilized, the projects are estimated to generate in excess of 5.0x coverage to ground rent and we estimate that SAFE’s basis will represent less than 20% of the stabilized CPV or approximately 24% of combined cost of the project. SAFE estimates 6200 and 6201 Hollywood will add approximately $450 million to its Value Bank.
Tim Doherty, head of ground net lease acquisitions at iStar, SAFE’s largest shareholder and manager, said, “These two acquisitions best represent our brand of ground net leases focused on major markets, high cash flow coverage and low exposure to CPV. 6200 and 6201 Hollywood are a strong step forward toward our goal to double the size of SAFE’s portfolio by the end of the year.”
Safety, Income and Growth, Inc. (NYSE: SAFE) is the first publicly traded company that focuses on acquiring, owning, managing and capitalizing ground net leases (GNLs). The Company seeks to provide safe, growing income and capital appreciation to shareholders by building a diversified portfolio of high quality GNLs. The Company is managed by its largest shareholder, iStar Inc. Additional information on SAFE is available on its website at www.safetyincomegrowth.com.