Safehold Funds Affordable Housing Project in East San Jose

Safehold's Investment in Affordable Housing Project in East San Jose

Safehold has announced its funding of a 164-unit affordable housing project in East San Jose by acquiring the land for it. The Pacific Companies, a developer based in Idaho, will build the six-story complex at 2880 Alum Rock Avenue. Safehold, a New York-based real estate investment trust (REIT), has secured ground leases for this and three other sites in the Bay Area, leading to the development of 781 affordable homes. This collaboration marks the fifth project between Safehold and The Pacific Companies in the region. Safehold’s investment strategy involves land acquisition, providing capital for construction, and receiving ground rent, which is typically lower than traditional loans. The $98.6 million project will offer apartments for households earning between 30 and 70 percent of the area median income, with units ranging from studios to two-bedrooms, and will also include commercial spaces.

Key Takeaways

• Safehold is funding a 164-unit affordable housing project in East San Jose by purchasing the land beneath it.
• The Pacific Companies will develop a six-story complex on leased land, catering to low to moderate-income households.
• Safehold’s ground lease model provides developers with capital at lower costs than traditional loans.
• The project includes 164 apartments and 7,500 sq ft of commercial space, with a total cost of $98.6 million.
• This partnership expands Safehold’s focus on affordable housing solutions in collaboration with The Pacific Companies.

Analysis

Safehold's innovative ground lease model reduces construction costs, benefiting low-to-moderate-income households in East San Jose and expanding Safehold's portfolio. In the short term, Safehold secures steady ground rent, while in the long term, this partnership enhances regional housing stability. The model could potentially inspire other REITs and developers to adopt similar strategies, potentially reshaping the affordable housing landscape.

Did You Know?

• Safehold's Ground Lease Model:
  • Safehold purchases the land beneath properties and leases it back to developers, allowing them to secure capital for construction at lower costs compared to traditional loans. This model shifts the financial risk from the developer to Safehold, as the latter receives ground rent regardless of the property's performance.
• Affordable Housing Projects:
  • These projects aim to provide housing options for low to moderate-income households. They often receive government subsidies or are financed through innovative financial models like Safehold's ground lease strategy to ensure that the housing units are priced within the reach of these income groups.
• Real Estate Investment Trust (REIT):
  • REITs are companies that own, operate, or finance income-producing real estate. This unique investment vehicle allows individual investors to participate in large-scale real estate projects, and Safehold's focus on ground leases adds a distinctive angle within the real estate market.