IPO article: Safety, Income and Growth
On April 10, 2017, Safety, Income and Growth (Pending:SAFE) filed for an S-11/A (IPO) with the SEC, seeking to raise $215.3 million.
The company plans to offer 10.25 million shares with 1.5 million shares as an over-allotment option for underwriters at a price range of between $19 to $21. iStar Inc., plans to purchase $45 million worth of shares at the IPO price at the time of the offering, representing a 27.6% stake in the company.
Assuming SAFE prices at the mid-point of its proposed price range it would commend a fully diluted market cap value of $363.8M. The company is expected to IPO on Thursday (6.22).
Underwriters for the IPO include: Barclays, JP Morgan, Bank of America Merrill Lynch, Raymond James and Associates, Mizuho Securities USA and Citigroup. The company plans to use approximately $142 million of its total proceeds from the offering to purchase the acquisition GNLs.
Safety, Income and Growth is one of three REITs expected to IPO this week.
Company Overview
New York-based Safety, Income and Growth was founded in 2017 with the objective of acquiring, owning, managing, financing and capitalizing on ground net leases (GNLs). GNLs involves leasing land, typically for a long period of time (ranging from 30 to 99 years), to a tenant for the purpose of building real estate on the property and are most often “triple net” leases, which means the tenant is responsible for costs including: development costs, capital expenditures and all property operating expenses.
The objective in creating the GNL provide a safe, secure and growing cash flow stream in the form of rental income. GNL lists the following criteria for properties: (i) the initial value of the GNL represents 30% to 45% of the Combined Property Value; (ii) the Ground Rent Coverage of the GNL is between 2.0x to 5.0x; and (iii) the GNL contains contractual rent escalation clauses or percentage rent that participates in gross revenues generated by the commercial real estate on the land.
