New York-based iStar Inc. and Safety, Income & Growth Inc. revealed that iStar has made an additional $250 million equity investment in SAFE as part of an expanded effort to accelerate SAFE’s growth. The investment provides SAFE with new capital to pursue approximately $750 million of new ground leases assuming SAFE’s targeted two-to-one debt-to-equity ratio. Since going public 18 months ago, SAFE has nearly tripled the size of its aggregate ground lease portfolio to approximately $1 billion.
iStar’s investment is structured as a purchase of 12.5 million limited partnership units in SAFE’s operating partnership at a price of $20.00 per unit. The limited partnership units are economically equivalent to one share of SAFE’s common stock. The limited partnership units may be exchanged for shares of common stock subject to stockholder approval, which SAFE intends to seek at an upcoming meeting. After giving effect to the issuance of the new partnership units, iStar’s total investment in SAFE will be approximately $400 million or 65% of SAFE’s total equity.
In conjunction with the $250 million equity investment, the companies have entered into an amended and restated management agreement. The revised agreement reflects iStar’s increased commitment to SAFE and aligns with SAFE’s ambitious future growth targets.
In addition, iStar and SAFE entered into a Stockholder’s Agreement that provides, among other things, the following: iStar’s discretionary voting power in SAFE will be capped at 41.9%. iStar will cast all voting power in excess of 41.9% with respect to any matter in the same proportions as SAFE’s non-iStar stockholders; iStar will be subject to certain restrictions on transfer of its SAFE securities; iStar will be subject to a two year standstill; and iStar will be granted certain rights to maintain its ownership interest in SAFE upon future issuances of SAFE shares.
The transactions were negotiated and approved by committees of independent directors of iStar and of SAFE. iStar’s committee was advised by Lazard and Clifford Chance US LLP. SAFE’s committee was advised by Houlihan Lokey and Fried, Frank, Harris, Shriver and Jacobson LLP and Hogan Lovells US LLP (as to Maryland law).