Safety, Income & Growth Strives to Reinvent the Ground Lease Business

Jay Sugarman, CEO and chairman of Safety, Income & Growth Inc. (NYSE: SAFE), participated in a video interview at Nareit’s REITweek: 2018 Investor Conference in New York.

Sugarman said he likes to refer to Safety, Income & Growth as “the ground lease company” since it is the only company focused on trying to “radically reinvent the ground lease concept.” He said the company is also focused on changing general perceptions about owning real estate. “Every property is really two things. It’s a building, and it’s the land underneath the building,” Sugarman said.

Sugarman noted the difference between the expertise of owning a building—which includes buying, managing, marketing and leasing—and the expertise of owning the land, which he says is essentially a high-quality, long-term bond.

“There’s really no other part of the investment world where the same investor wants to own both,” he said. “We want to help our customers see that they can earn a lot more on a safer basis by splitting that apart and having us be the most efficient owner of that long-term bond, and them being the most efficient owner of the building component.”

Sugarman historically focused on top 25 markets at iSTAR, his other company, and he said those would be the same markets that SAFE will have a competitive advantage in. In addition, though, SAFE has “done deals in multi-family, office, industrial [and] hospitality,” and Sugarman says this idea of splitting the building apart from the land “works on almost every type of real estate.”

Sugarman compared what SAFE is doing with ground leases to the net lease business in the early 2000s. He said that at that time he saw that real estate could be deconstructed into real estate corporate credit and a capital markets component and that taking each piece apart added up to a sum bigger than its individual parts.

“We think the ground lease business is that same opportunity to take a building and the land and make one plus one equal way more than two,” he said.