Global Investment Manager Ares Management Corp. and global investor and operator based in London Régis Group have joined the land lease revolution.
The duo have reunited over the past nine months to form Paradise capital, a partnership to tackle land lease investment opportunities in many of the US’s fastest growing markets, Commercial Observer has learned. Haven will leverage the size and reach of its two founding partners to seek opportunities and drive growth, through Ares’ massive investment in the United States, asset management and operational footprint loans.
Regis’ history of rapidly growing new large-scale businesses – in the US and UK – and his track record as one of the largest land lease holders in the UK has been a driving force behind the company’s involvement in this partnership, sources said. The duo is ultimately aiming Haven Capital at an initial public offering in the future.
Deutsche Bank Securities served as financial advisor on behalf of Regis in the development of Haven Capital.
“Regis has solid experience in identifying emerging opportunities in real estate and creating national platforms to deliver solutions to the market”, President and Founder of Regis Nick gould said in a statement. “We believe land leases are an attractive source of long-term funding, and we have formed Haven Capital with Ares to provide flexible land leases to meet the needs of real estate owners across the United States. “
Haven will create personalized land lease positions, targeting land under “high quality assets” in the country’s top 50 markets, according to information obtained by CO. Ares and Regis are currently building a creative team for Haven, which will likely start in the Southeast and expand from there.
Old SL Green Realty Corp. vice-president Joe shanley was called upon to lead the expansion of the business.
“The formation of Haven Capital marks the entry of well-established institutional investors into what we believe to be a largely untapped area for commercial real estate investing,” said Shanley, who will hold the title of chief investment officer at Haven, in a statement. “Land leases are an underutilized tool that provides an alternative source of capital for existing assets and on-site developments. “
The new company is endowed with a first billion dollars to research and capitalize land lease opportunities in all categories of real estate assets at a minimum transaction size of 20 million dollars. Its 99-year ground lease structure will separate the land and building into two separate investments, while limiting capital requirements and lowering the total cost of capital, potentially increasing asset values for owners and developers. Perhaps more importantly, Haven will also offer a buyout option with different pricing mechanisms allowing landlords to buy back the land during the term or after the ground lease expires.
David roth, a partner and head of US real estate capital within the Ares real estate group, said in a statement that the company believes that “land leases offer a compelling solution to both landlords and long-term real estate developers, and we are looking forward to building this platform alongside Regis.
Roth, who joined Ares last year, was previously senior managing director at black stonethe real estate operation of, where he was responsible for the training of a single-family rental operator Houses Invitation, in which Regis was a partner.
The new investment vehicle will compete Jay sugarman‘s iStar subsidiary company Safehold, a publicly traded real estate investment trust launched in 2017 that set out to re-educate the market on the long-term benefits of a modern, user-friendly and flexible land lease structure. Although it does not own a single structural property, it has become one of the highest paying public REITs of 2019 and saw its portfolio increase by 187% last year. At the start of 2019, the company didn’t have a single land lease in New York’s five boroughs, but land leases in the city now represent about half of its overall portfolio.
Over the past decades, the land lease, which allows a landowner to lease the land to an operator under a long-term contract to build or manage real estate on site, has gained a bad reputation. Numerous real estate partnerships on large-scale assets, i.e. the Chrysler building, House lever or the Lipstick building in New York, for example – turned sour and made headlines, due to cost issues and the lack of flexibility in the land leases inherited from these properties. Many legacy land leases did not exhibit predictable cash flow and included fair market value resets, which proved costly, in some cases, given their typical century lease length of a century.
A source who spoke to CO about the ‘land lease 2.0’ space and Haven’s entry into the market said that Safehold had essentially taken much of the legwork necessary to educate the market about the benefits of modern land leases at long term freshly built.
Haven Capital, like its competitor Safehold, will add more fuel to the ongoing ground lease revolution by becoming more user-friendly and profitable, which is the bill for a real stable long-term real estate investment that could be a good value to play. in an uncertain investment climate that contemplates the possibility of prolonged disruption as a result of COVID-19.