Safehold announced that it has entered into a joint venture arrangement with an unnamed sovereign wealth fund focused on new acquisitions for ground lease investments.
The REIT said it has committed approximately $275 million for a 55% interest in the joint venture, and the SWF committed approximately $225 million for a 45% interest in the joint venture. The Sovereign Wealth Fund Institute believes the unnamed fund is GIC Private Limited, Singapore’s SWF which is also one of the REIT’s largest shareholders, but this has not been confirmed by GIC.
“As we navigate the rapidly changing market environment and volatile capital markets, this partnership provides Safehold with accretive capital to help serve our customers,” said Marcos Alvarado, president and chief investment officer.
Safehold is a REIT centered on ground lease structures and has a $6 billion portfolio. It targets multifamily, office, industrial, hospitality, and student housing properties.
Safehold has not yet determined the assets it intends to acquire; the committed capital will be funded as investment opportunities are identified.
“Overall, this joint venture enables Safehold to originate new tenant relationships, while keeping on balance sheet capital requirements low amid a volatile capital market environment, which should be a positive in the long run,” wrote Harsh Hemnani in a Green Street report on the transaction. However, he cautioned the market reaction — which saw the REIT’s shares sold off by ~4% on April 5, the day of the announcement, underperforming the equity REIT index by ~350 bps — suggests that shareholders might dislike the overall capital allocation strategy.
If the entire amount committed to the venture is invested in 2023, Safehold’s pro-rata share of acquisitions would result in a ~6.5% expansion in its asset base and represent ~45% of Green Street’s full year acquisition expectations of $600 million for the REIT, according to Hemnani’s report.
Green Street also pointed out the last time Safehold partnered with an SWF, the venture acquired 425 Park Ave – a trophy office asset in midtown Manhattan – for a combined purchase price of approximately $620 million. It is currently Safehold’s largest asset.