Ground lease real estate investment trust Safehold Inc. has closed on a $45 million ground lease to support a new affordable housing development in the Soquel area of Santa Cruz. The ground lease structure is intended to provide long-term capital for the project while allowing the development team to focus equity resources on delivering the residential community.
The project is being developed by The Pacific Companies, described as a prolific firm and a repeat customer of Safehold. The relationship between the two organizations is expanding with this transaction, building on prior ground lease activity for affordable housing in the Santa Cruz area.
According to Safehold, the planned community is considered a large-scale affordable housing development in a high-cost coastal submarket where demand for income-restricted housing remains unmet. The Soquel location within the broader Santa Cruz area is expected to be the site of 256 affordable units once the project is completed.
The affordable housing community is structured as a Low-Income Housing Tax Credit development, providing a framework for long-term affordability and access to tax credit equity. The project is scheduled to deliver its 256 units in 2028, adding a meaningful number of income-restricted apartments to the local housing supply.
On the financing side, Wells Fargo and Citi Community Capital are providing both construction financing and tax credit equity for the development. Citi Community Capital is also committed to permanent financing once the project transitions from construction to stabilized operations, creating a continuum of capital from initial build-out through long-term ownership.
Safehold views this transaction as an opportunity to deploy its ground lease capital into a high-cost coastal housing market while supporting an experienced repeat development partner. The company noted that this deal represents its second recent affordable housing ground lease in the Santa Cruz area, underscoring continued activity for the firm in this local market segment.
With the combination of a $45 million ground lease, construction financing, tax credit equity, and a defined permanent financing takeout, the capital stack for the project is largely in place. The development now moves forward toward construction and an anticipated 2028 completion, at which point the 256 units are expected to come online as income-restricted housing in the Soquel area of Santa Cruz.
