Eyzenberg & Co., a New York-based investment bank, has closed two ground lease deals on behalf of institutional sponsors.
In the first transaction, the firm structured a ground lease for Greystar to develop an existing apartment community into an 850-bed student-housing complex at 425 Hillsborough Street near the University of North Carolina at Chapel Hill. The property will be renamed Grove Park.
The Segar family’s Townhouse Apartments LLC, which owns the land, re-entitled the property in order to replace the current 111-unit multifamily building that currently stands on the site. “They decided to do a ground lease because from their standpoint, they maintain ownership of the land, and get the upside value they created with the re-entitlement process,” said David Eyzenberg, president of the investment bank.
The 348,886-square-foot building comprises 339 residential units and will include a five-story parking garage, study spaces, a swimming pool, and fitness facilities. “With only 10,000 on-campus beds to serve 30,000 students and just 1,094 existing beds of purpose-built student housing pedestrian to campus, this is an incredibly desirable location in a tight market with … meaningful barriers to entry,” Ezyenberg added.
The total project cost is more than $100m and TD Bank has provided a construction loan, according to public records. Greystar started demolition on the property earlier this month. The developer plans to break ground this summer and the project is expected to come online for the 2020-2021 academic year.
Meanwhile, The Dinerstein Companies, a Texas-based construction company, has moved forward with a ground lease structure on a property in Orlando, Florida called Promenade Crossing, which Eyzenberg & Co. also structured. Safety, Income & Growth Inc., a public REIT externally managed by iStar, purchased the 212-unit garden-style multifamily building, from Waterton Associates for $41m, according to published reports.
SAFE originated a ground lease for Dinerstein, which effectively allowed it to purchase the capital improvements on the property. “If there was no iStar, Dinerstein would have had to come up with $42m in equity and debt,” Eyzenberg said.
A bank then provided a leasehold mortgage so Dinerstein could buy the leasehold interest, or the right to occupy the property. The ground lease terms include fixed annual rent escalations of 99 years with periodic CPI-based adjustments.
The transaction is SAFE’s first in the Orlando MSA.