Safehold Inc. Q3 2024 10-Q Filed

TL;DR

Safehold Inc. Q3 10-Q is in: financials updated, equity details disclosed.

AI Summary

Safehold Inc. filed its 10-Q for the period ending September 30, 2024. The filing details financial performance and operational updates for the real estate investment trust. Key financial figures and changes in equity accounts like retained earnings and common stock are reported.

Why It Matters

This filing provides investors with a detailed look at Safehold Inc.'s financial health and operational status as of the end of the third quarter of 2024.

Risk Assessment

Risk Level: medium — As a real estate investment trust, Safehold Inc. is subject to market fluctuations and interest rate risks inherent in the real estate sector.

Key Numbers

• 71,077,000 — Retained Earnings (As of September 30, 2024)
• 71,436,000 — Noncontrolling Interest (As of September 30, 2024)

Key Players & Entities

• Safehold Inc. (company) — Filer of the 10-Q
• 2024-09-30 (date) — Period of report for the 10-Q
• 2024-10-29 (date) — Filing date of the 10-Q
• ISTAR INC. (company) — Former company name
• ISTAR FINANCIAL INC (company) — Former company name
• STARWOOD FINANCIAL INC (company) — Former company name

FAQ

Key Financial Figures

• $0.01 — 28, 2024, there were 71,436,180 shares, $0.01 par value per share, of Safehold Inc. c

Filing Documents

• safe-20240930x10q.htm (10-Q) — 3211KB
• safe-20240930xex22d1.htm (EX-22.1) — 3KB
• safe-20240930xex31d0.htm (EX-31.0) — 20KB
• safe-20240930xex32d0.htm (EX-32.0) — 13KB
• 0001095651-24-000028.txt ( ) — 16224KB
• safe-20240930.xsd (EX-101.SCH) — 111KB
• safe-20240930_cal.xml (EX-101.CAL) — 108KB
• safe-20240930_def.xml (EX-101.DEF) — 425KB
• safe-20240930_lab.xml (EX-101.LAB) — 885KB
• safe-20240930_pre.xml (EX-101.PRE) — 675KB
• safe-20240930x10q_htm.xml (XML) — 3749KB

Financial Statements

Financial Statements: Consolidated Balance Sheets (unaudited) as of September 30, 2024 and December 31, 2023 1 Consolidated Statements of Operations (unaudited)—For the three and nine months ended September 30, 2024 and 2023 2 Consolidated Statements of Comprehensive Income (Loss) (unaudited)—For the three and nine months ended September 30, 2024 and 2023 3 Consolidated Statements of Changes in Equity (unaudited)—For the three and nine months ended September 30, 2024 and 2023 4 Consolidated Statements of Cash Flows (unaudited)—For the nine months ended September 30, 2024 and 2023 5

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 43 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 56 Item 4.

Controls and Procedures

Controls and Procedures 56 PART II Other Information 58 Item 1.

Legal Proceedings

Legal Proceedings 58 Item 1A.

Risk Factors

Risk Factors 58 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities 58 Item 3. Defaults Upon Senior Securities 58 Item 4. Mine Safety Disclosures 58 Item 5. Other Information 58 Item 6. Exhibits 59

SIGNATURES

SIGNATURES 60 Table of Contents

CONSOLIDATED FINANCIAL INFORMATION

PART I. CONSOLIDATED FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Safehold Inc. Consolidated Balance Sheets (1) (In thousands) (unaudited) As of September 30, 2024 December 31, 2023 ASSETS Net investment in sales-type leases ($ 6,047 and $ 465 of allowances as of September 30, 2024 and December 31, 2023, respectively) $ 3,440,042 $ 3,255,195 Ground Lease receivables, net ($ 3,384 and $ 369 of allowances as of September 30, 2024 and December 31, 2023, respectively) 1,779,147 1,622,298 Real estate Real estate, at cost 740,971 744,337 Less: accumulated depreciation ( 44,921 ) ( 40,400 ) Real estate, net 696,050 703,937 Real estate-related intangible assets, net 210,399 211,113 Real estate available and held for sale 7,779 9,711 Total real estate, net and real estate-related intangible assets, net and real estate available and held for sale 914,228 924,761 Loans receivable, net - related party ($ 2,291 and $ 2,429 of allowances as of September 30, 2024 and December 31, 2023, respectively) 112,345 112,111 Equity investments 246,310 310,320 Cash and cash equivalents 15,579 18,761 Restricted cash 8,683 27,979 Deferred tax asset, net 6,706 7,619 Deferred operating lease income receivable 203,120 180,032 Deferred expenses and other assets, net (2) 88,760 89,238 Total assets $ 6,814,920 $ 6,548,314 LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY Liabilities: Accounts payable, accrued expenses and other liabilities $ 138,601 $ 134,518 Real estate-related intangible liabilities, net 63,130 63,755 Debt obligations, net 4,295,673 4,054,365 Total liabilities 4,497,404 4,252,638 Commitments and contingencies (refer to Note 10) Redeemable noncontrolling interests (refer to Note 3) — 19,011 Equity: Safehold Inc. shareholders' equity: Common stock, $ 0.01 par value, 400,000 shares authorized, 71,436 and 71,077 shares issued and outstanding as of September 30, 2024 and Decemb

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (unaudited) Note 1—Business and Organization Business —On March 31, 2023, Safehold Inc. ("Old SAFE") merged with and into iStar (see Merger Transaction below), at which time Old SAFE ceased to exist and iStar continued as the surviving corporation and changed its name to "Safehold Inc." (the "Merger"). References to iStar refer to iStar prior to the Merger. For accounting purposes, the Merger is treated as a "reverse acquisition" in which iStar is considered the legal acquirer and Old SAFE is considered the accounting acquirer. Unless context otherwise requires, references to the "Company" refer to the business and operations of Old SAFE and its consolidated subsidiaries prior to the Merger and to Safehold Inc. (formerly known as iStar) and its consolidated subsidiaries following the consummation of the Merger. The Company operates its business through one reportable segment by acquiring, managing and capitalizing ground leases. The Company also manages entities focused on ground leases (refer to Note 7) and a wholly-owned subsidiary of the Company serves as external manager to Star Holdings ("Star Holdings"), a Maryland statutory trust that holds the legacy non-ground lease assets previously held by iStar. Ground leases are long-term contracts between the landlord (the Company) and a tenant or leaseholder. Ground leases generally represent ownership of the land underlying commercial real estate projects that is net leased by the fee owner of the land to the owners/operators of the real estate projects built thereon ("Ground Leases"). Under a Ground Lease, the tenant is generally responsible for all property operating expenses, such as maintenance, real estate taxes and insurance and is also responsible for development costs and capital expenditures. Ground Leases are typically long-term (base terms ranging from 30 to 99 years , often with tenant renewal options) and have contractual base rent increases (either at a s

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (unaudited) As part of a restructuring in connection with the Merger (the "Caret Restructuring"), Safehold Operating Partnership LP converted into a Delaware limited liability company and renamed itself "Safehold GL Holdings LLC" ("Portfolio Holdings"), with the Company as its managing member. The Company conducts all of its business and owns all of its properties through Portfolio Holdings. In addition, holders of Caret units in Old SAFE's subsidiary, Caret Ventures LLC ("Caret Ventures"), contributed their interests in Caret Ventures to Portfolio Holdings in return for Caret units issued by Portfolio Holdings. Following the restructuring, 100 % of the equity interests in Caret Ventures is held by Portfolio Holdings. The Company, management of the Company, employees and former employees of the Company, affiliates of MSD Partners (as defined below) and other outside investors own the issued and outstanding equity of Portfolio Holdings. Merger Transaction —On August 10, 2022, Old SAFE entered into an Agreement and Plan of Merger (the "Merger Agreement") with iStar, and on March 31, 2023, the Merger was completed in accordance with the terms of the Merger Agreement. For accounting purposes, the Merger was accounted for as a business combination using the acquisition method of accounting under Accounting Standards Codification ("ASC") 805, Business Combinations ("ASC 805") and treated as a "reverse acquisition" in which iStar is considered the legal acquirer and Old SAFE is considered the accounting acquirer. The Company considered the following relevant facts for this determination: At the time of the Merger closing, Old SAFE shareholders, excluding the Old SAFE shares held directly by iStar, members of iStar management and Star Holdings, control a majority of the voting interests in the Company and the combined company operates under the name "Safehold Inc.;" The composition of the combined company's board of direct

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (unaudited) On August 10, 2022, MSD Partners also agreed to purchase 100,000 Caret units (refer to Note 12) from the Company for an aggregate purchase price of $ 20.0 million (the "MSD Caret Purchase"). MSD Partners received a credit against their purchase price for Caret units equal to the amount they would have received had they held Caret units at the time of a December 2022 distribution to other Caret unit holders, which was equal to $ 0.6 million. MSD Partners' rights and obligations under the purchase agreement were subsequently assigned to certain of its affiliates. The closing of the MSD Caret Purchase took place in conjunction with the closing of the Merger on March 31, 2023. Star Holdings was capitalized in part with an 8.0 %, four-year term loan from the Company having an initial principal amount of $ 115.0 million, as well as SOFR plus 3.00 % bank debt with an initial principal balance of $ 140.0 million from Morgan Stanley Bank, N.A. which is secured by approximately 13.5 million shares of the Company (refer to Note 6). In connection with the Spin-Off, Safehold Management Services Inc. ("SpinCo Manager"), a Delaware corporation and a subsidiary of the Company, entered into a management agreement with Star Holdings effective as of March 31, 2023, pursuant to which SpinCo Manager will continue to operate and pursue the orderly monetization of Star Holding's assets. Star Holdings paid SpinCo Manager an annual management fee of $ 25.0 million for the term ended March 31, 2024, and will pay an annual fee of $ 15.0 million for the term ended March 31, 2025. The annual fee declines to $ 10.0 million and $ 5.0 million, respectively, for each of the following annual terms, and adjusts to 2.0 % of the gross book value of Star Holdings' assets, excluding shares of the Company's common stock, thereafter. The Company and Star Holdings also entered into a governance agreement that places certain restrictions on the tr

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