Safehold Ground Leases – SAFE bets on long-term income

By Daniel Foster, ad hoc news Software & Services Desk. Reviewed July 02, 2026, 6:19 PM ET. Details in the imprint.

Safehold Ground Leases sit quietly under some very visible buildings. Walking past a glassy office tower in Manhattan or a mid-rise multifamily block in Austin, you would never guess that the land beneath is part of a 99-year-plus ground lease that is designed as a financing tool rather than a typical rental contract. That long fuse of income is the product SAFE has built its entire business on.

How Safehold ground leases work

Safehold, the modern ground lease company managed by iStar, buys or retains the land under commercial properties and signs a long-term ground lease with the building owner. Under this structure, the building owner pays a predictable rent on the land for decades, while keeping full control over operations, leasing, and eventual sale of the building itself.

The ground lease is usually written for terms like 99 years or longer, with clearly defined rent schedules and often built-in escalations tied to inflation or fixed steps. In practice, this turns what used to be an opaque part of capital stacks into a standardized product that lenders and rating agencies can model more easily. Safehold pitches this as a way for owners to unlock equity trapped in the dirt while still running their properties. The company highlights examples in markets such as New York, Washington, D.C., and Denver where sponsors freed up capital for renovations or acquisitions by shifting the land into a Safehold structure.

US footprint and typical deal profile

SAFE’s ground leases are active across major US metros, with a focus on institutional-quality assets like offices, multifamily, hotels, and mixed-use projects. For example, the company has ground leases under the 425 Park Avenue office tower in New York and under residential properties in markets such as Seattle and Phoenix, according to its portfolio summaries and investor presentations.

A typical transaction involves SAFE providing capital to either buy the land outright or recapitalize it, while the building’s sponsor uses proceeds to reduce higher-cost debt or fund new projects. The owner agrees to pay a starting ground rent that generally sits well below what a senior mortgage would cost on the same amount of capital, with scheduled increases over time. SAFE stresses that its underwriting looks at long-term real estate value, lease coverage ratios, and sponsor quality, rather than short-term rent spikes. It emphasizes that, at lease expiry many decades from now, the landowner will own the building free and clear in most structures, a feature that has attracted pension funds and long-horizon investors.

Why sponsors use ground leases

For US property owners, the main appeal is balance sheet optimization. Shifting the land to a Safehold ground lease converts a non-yielding asset into cash, while the ground rent becomes a fixed operating cost they can plan around. Lenders may treat the structure similarly to a first mortgage on the leasehold interest, often allowing higher overall leverage because the ground rent is predictable and senior.

In public comments, Safehold CEO Jay Sugarman has argued that modern ground leases can lower a project’s weighted average cost of capital versus purely debt and equity financing. He describes the company’s product as “putting the land back to work” for owners who would rather deploy capital into building improvements or acquisitions than have it trapped in dirt. That narrative has resonated especially with sponsors in rising-rate environments, where permanent, ultra-long capital at known pricing can feel more comfortable than refinancing risk every five or seven years.

Investor angle and income profile

From the investor side, Safehold Ground Leases are packaged into SAFE’s public REIT portfolio. The company’s cash flows come mainly from the ground rent payments under its long-term contracts, which form a relatively stable stream tied to diversified properties and tenants across the US. Those leases often include CPI-linked or fixed escalators, providing some protection against inflation over time.

Analysts who follow SAFE point out that the asset class behaves differently from typical equity stakes in real estate. Ground leases sit at the bottom of the capital stack, ahead of building mortgages and equity, giving SAFE higher priority in cash flow waterfalls and in any distress scenario. However, the company is also exposed to property market cycles and interest rates, which can affect cap rates and the valuation of its leaseholds. Some research notes from banks such as JPMorgan and Wells Fargo describe SAFE as a hybrid between long-duration fixed income and real estate equity, because its leases stretch across multiple business cycles in one contract.

Key risks and structuring questions

Despite the promise of predictable income, SAFE’s product is not without complications. Ground leases can be complex instruments, and sponsors need to understand how they interact with mortgage financing, tenant expectations, and resale value. Some critics worry that future buyers may discount properties with ground leases if they prefer to own the land outright, potentially affecting valuations or liquidity after decades.

Safehold addresses these concerns by emphasizing standardization and clarity in its documentation. It aims to keep ground rents at levels that allow strong coverage by building cash flows, and it works with lenders to structure consent and cure rights that minimize friction in refinancings. The firm also maintains an active dialogue with rating agencies to explain how its product fits into large capital stacks. Legal structuring can vary state by state, so sponsors typically involve counsel early in negotiations to map out default remedies, leasehold mortgage protections, and any purchase options.

SAFE context and stock

Safehold Ground Leases are the core engine behind SAFE’s revenue as a US-listed REIT. The company positions itself as a specialist in land capital, focused on growing a portfolio of long-term ground rents from institutional-quality commercial properties. For US investors, the product’s performance feeds directly into SAFE’s ability to pay dividends and reinvest in new deals, making it central to thesis-building around the stock.

SAFE stock (NYSE: SAFE) gives investors exposure to this portfolio of long-term ground leases, with the ISIN US78645L1008 recorded for international settlement. There is no direct US-listed ADR structure because the shares already trade on the New York Stock Exchange in US dollars, and the stock’s behavior reflects both US commercial real estate cycles and interest-rate expectations as they affect valuation multiples.

This article was AI-assisted and editorially reviewed. Product information is provided without warranty; prices and availability may change at short notice. Not investment advice and not a buy or sell recommendation. Securities trading carries risks up to total loss.