Safehold (SAFE) - 2025 Q1 - Quarterly Results

Q1'25 Executive Summary Safehold Inc. engaged in significant new investment activity and maintained strong portfolio metrics with substantial remaining capital for future growth Investment Activity Safehold Inc. engaged in non-binding Letters of Intent (LOIs) for new investments totaling approximately $386 million in Q1'25, primarily in ground leases and leasehold loans across 8 markets and 11 sponsors Investment Activity Details | Investment Activity | Details | | :------------------ | :------ | | Non-Binding LOIs | 11 Ground Leases, 4 Leasehold Loans | | Ground Lease Value | ~$273 million | | Leasehold Loan Value| ~$113 million | | Markets | 8 | | Sponsors | 11 | | GLTV | ~34% | | Rent Coverage | ~2.6x | | Economic Yield | ~7.3% | Portfolio Metrics & Capital Sources The total portfolio's aggregate Gross Book Value (GBV) to estimated Unrealized Capital Appreciation (UCA) ratio is 52% / 3.5x, with a GLTV of $1.3 billion and Rent Coverage of $400 million. The company has $400 million remaining capital for a JV with a sovereign wealth fund - Total Portfolio Aggregate GBV / Total Portfolio Estimated UCA: 52% / 3.5x[3] - GLTV / Rent Coverage: $1.3 billion / $400 million[3] - Remaining Capital for JV with Leading Sovereign Wealth Fund: $400 million (SAFE $220 million, Partner $180 million)[3] Portfolio Performance & Growth Safehold's portfolio has demonstrated substantial growth since its IPO, marked by increased asset value, count, and strategic Q1'25 fundings across diversified asset types Portfolio Growth Trends Safehold's portfolio has shown significant growth since its IPO, with Aggregate GBV increasing from $3.4 billion at IPO to $8.9 billion in Q1'25, and asset count growing from 12 to 147. The estimated Unrealized Capital Appreciation (UCA) has grown 20x since IPO Portfolio Growth Metrics | Metric | IPO (6/22/2017) | Q1'21 | Q1'25 | | :----- | :-------------- | :---- | :---- | | Aggregate GBV (Ground Leases) | $3.4 billion | $5.6 billion | $8.9 billion | | Asset Count | 12 | 76 | 147 | - Estimated Unrealized Capital Appreciation (UCA) growth since IPO: 20x[6] Q1'25 Fundings & Portfolio Composition In Q1'25, Safehold funded $20 million, comprising $16 million in existing ground leases (6.7% Economic Yield) and $4 million in existing leasehold loans (SOFR+386). The portfolio's total square footage is 36.0 million SF, with multifamily assets representing 41% of the portfolio by count - Q1'25 Fundings: $20 million ($16 million existing ground leases at 6.7% Economic Yield, $4 million existing leasehold loan at SOFR+386)[6] Portfolio Composition by Asset Type | Asset Type | Portfolio by Count (Q1'25) | | :--------- | :------------------------- | | Multifamily| 85 (41%) | | Office | 36 (40%) | | Hotel | 16 (11%) | | Life Science| 2 (6%) | | Mixed Use & Other | 5 (2%) | | Total | 147 (100%) | - Total Portfolio Square Feet: 36.0 million SF (Multifamily: 17.7 million SF, Office: 12.5 million SF, Hotel: 3.8 million SF, Life Science: 1.3 million SF, Other: 0.7 million SF)[6][7] Financial Results Safehold Inc. reported a 5% increase in Q1'25 revenues, with GAAP net income decreasing due to a non-recurring loss, while adjusted net income and EPS showed modest growth Q1'25 Earnings Overview Safehold Inc. reported Q1'25 revenues of $97.7 million, a 5% increase year-over-year. GAAP Net Income attributable to common shareholders decreased by 4% to $29.4 million, primarily due to a $1.9 million non-recurring loss. Excluding non-recurring items, net income increased by 2% and EPS increased by 1% to $0.44 Q1'25 Key Financial Metrics | Metric | Q1'25 | Q1'24 | Y/Y Change | | :-------------------------------------- | :---- | :---- | :--------- | | Revenues | $97.7 million| $93.2 million| 5% | | Net Income Attributable to Safehold Inc. (GAAP) | $29.4 million| $30.7 million| -4% | | Net Income Attributable to Safehold Inc. (Excluding Non-Recurring) | $31.3 million| $30.7 million| 2% | | Earnings Per Share (GAAP) | $0.41 | $0.43 | -5% | | Earnings Per Share (Excluding Non-Recurring) | $0.44 | $0.43 | 1% | | Diluted Share Count | 71.6 million | 71.2 million | 1% | - Q1 GAAP Net Income and EPS decreased Year-over-Year primarily due to a $1.9 million non-recurring loss in Q1'25[9] - EPS excluding non-recurring gains and losses increased by approximately $0.01 Year-over-Year[9] Portfolio Yields Analysis Safehold's Core Ground Lease Portfolio demonstrates diverse yield metrics, including a 3.7% GAAP Earnings Yield and a 7.4% Inflation Adjusted Yield, reflecting its long-term value Core Ground Lease Portfolio Yields Safehold's Core Ground Lease Portfolio, with a Gross Book Value of $6.8 billion and a 91-year weighted average lease term, exhibits various yield metrics. The GAAP Earnings Yield is 3.7%, while the Economic Yield is 5.8%, and the Forward Yield-to-Maturity is 5.9%. The Inflation Adjusted Yield is 7.4% (assuming 2.2% CPI growth) - Core Ground Lease Portfolio Gross Book Value: $6.8 billion on 91-Year Weighted Average Lease Term with Extension[10] Core Ground Lease Portfolio Yield Metrics | Yield Metric | Value | Assumed CPI / Growth Rate | | :------------------------ | :---- | :------------------------ | | GAAP Earnings Yield | 3.7% | 0.0% | | Annualized Cash Yield | 5.4% | 0.0% | | Economic Yield | 5.8% | 2.2% | | Inflation Adjusted Yield | 7.4% | 2.2% | | Caret Adjusted Yield | 7.4% | 2.2% | | Forward Yield-to-Maturity | 5.9% | 2.0% | - Economic Yield is calculated using projected cash flows incorporating contractual fixed escalators and assumed inflation impact on variable rate escalators (e.g., CPI lookbacks, percentage rent, fair market valuations)[11][42] Portfolio Diversification Safehold's $6.8 billion Core Ground Lease Portfolio is strategically diversified across asset types and top U.S. MSAs, with a strong presence in multifamily and key urban markets Diversification by Asset Type and Geography Safehold's $6.8 billion Core Ground Lease Portfolio is diversified across the top 30 U.S. MSAs, with a growing focus on multifamily assets. Multifamily represents 41% of the portfolio by count, followed by Office at 40%. Manhattan is the largest market, accounting for 21% of GBV - Safehold primarily invests in the top 30 MSAs across the U.S.[13] Portfolio Diversification by Asset Type | Asset Type | GBV % | Count | Rent Coverage | GLTV | | :--------- | :---- | :---- | :------------ | :--- | | Multifamily| 41% | 85 | 3.7x | 38% | | Office | 40% | 36 | 3.2x | 69% | | Hotel | 11% | 16 | 3.7x | 47% | | Life Science| 6% | 2 | 4.7x | 42% | | Mixed Use & Other | 2% | 5 | 3.3x | 45% | Top 10 Markets by Gross Book Value | Top 10 Markets (by GBV %) | GBV % | Assets | Rent Coverage | GLTV | | :------------------------ | :---- | :----- | :------------ | :--- | | Manhattan | 21% | 10 | 3.0x | 67% | | Washington D.C. | 10% | 17 | 3.2x | 63% | | Boston | 8% | 3 | 3.2x | 49% | | Los Angeles | 7% | 9 | 4.0x | 41% | | San Francisco | 5% | 7 | 3.6x | 65% | Capital Structure & Liquidity Safehold maintains a robust capital structure with $4.7 billion in total debt, strong credit ratings, effective interest rate hedges, and substantial liquidity Debt Overview & Credit Ratings Safehold's total debt stands at $4.7 billion, primarily composed of unsecured notes ($2.2 billion) and secured debt ($1.5 billion). The company has no corporate maturities due until 2027 and holds strong credit ratings from Moody's (A3 Stable), S&P (BBB+ Positive), and Fitch (A- Stable) Debt Composition | Debt Type | Amount | | :---------------- | :----- | | Unsecured Notes | $2.2 billion | | Secured | $1.5 billion | | Unsecured Revolver| $712 million | | Pro-Rata Held by JVs | $0.3 billion | | Total Debt | $4.7 billion | - No corporate maturities due until 2027[20] Credit Ratings | Rating Agency | Rating | Outlook | | :------------ | :----- | :------ | | Moody's | A3 | Stable | | S&P | BBB+ | Positive| | Fitch | A- | Stable | Outstanding Hedges Safehold utilizes SOFR swaps and Treasury locks to manage interest rate risk. A $500 million notional SOFR swap provides approximately $1.7 million in interest savings for Q1'25. Treasury locks with a $250 million notional amount have a gain position of ~$30 million in-the-money, with $100 million unwound in April 2025 for a $13 million cash gain - SOFR Swap (Revolver) Notional: $500 million, Term: 5-years (ends April 2028), Rate: 3.0% SOFR**, Interest Savings: **$1.7 million for Q1'25[21] - Treasury Locks (Long-Term Debt) Notional: $250 million, Rate: 4.0% 30-year treasury**, Gain Position: **$30 million in-the-money. $100 million notional unwound on 4/9/25 for **$13 million cash gain**[21][23] Debt and Liquidity Metrics As of Q1'25, Safehold reported total debt of $4.67 billion and total equity of $2.38 billion, resulting in a debt-to-equity ratio of 1.96x. The company maintains significant liquidity with $1.31 billion in cash and credit facility availability and $4.28 billion in unencumbered assets Q1'25 Debt and Liquidity Metrics | Metric | Q1'25 | | :---------------------------- | :--------- | | Total debt | $4.67 billion | | Total equity | $2.38 billion | | Total debt / Total equity | 1.96x | | Debt cash interest rate | 3.8% | | Debt effective interest rate | 4.2% | | Unencumbered assets | $4.28 billion | | Cash & credit facility availability | $1.31 billion | Appendix The appendix provides detailed financial statements, portfolio reconciliations, non-GAAP earnings adjustments, information on the Caret subsidiary, UCA details, a glossary, endnotes, and forward-looking statements Financial Statements This section provides detailed financial statements, including the Income Statement and Balance Sheet, offering a comprehensive view of Safehold Inc.'s financial position and performance for Q1'25 Income Statement This statement details Safehold Inc.'s revenues, expenses, and net income attributable to common shareholders for the first quarter of 2025 Income Statement (For the three months ended March 31, in thousands) | Income Statement (For the three months ended March 31, in thousands) | 2025 | 2024 | | :----------------------------------------------------------------- | :---------- | :---------- | | Total revenues | $97,677 | $93,213 | | Total costs and expenses | $72,376 | $68,625 | | Net income (loss) attributable to Safehold Inc. common shareholders| $29,364 | $30,728 | | Earnings (loss) per share (basic & diluted) | $0.41 | $0.43 | Balance Sheet This statement presents Safehold Inc.'s assets, liabilities, and equity as of March 31, 2025, providing a snapshot of its financial position Balance Sheet (As of March 31, in thousands) | Balance Sheet (As of, in thousands) | March 31, 2025 | December 31, 2024 | | :---------------------------------- | :------------- | :---------------- | | Total assets | $6,929,355 | $6,899,379 | | Net investment in sales-type leases | $3,471,953 | $3,454,953 | | Debt obligations, net | $4,341,484 | $4,317,439 | | Total liabilities | $4,548,179 | $4,525,352 | | Total equity | $2,381,176 | $2,374,027 | Portfolio Reconciliation The portfolio reconciliation shows the growth of key asset components from IPO to Q1'25. Gross Book Value (GBV) increased from $339 million at IPO to $6.751 billion in Q1'25, and Aggregate Gross Book Value reached $6.783 billion Portfolio Reconciliation (in thousands) | Metric (in thousands) | IPO (6/22/17) | 3/31/21 | 3/31/25 | | :-------------------- | :------------ | :---------- | :---------- | | Net investment in Sales-Type Leases | - | $1,312,000 | $3,472,000 | | Ground Lease receivables | - | $661,000 | $1,854,000 | | Gross Book Value | $339,000 | $3,292,000 | $6,751,000 | | Aggregate Gross Book Value | $339,000 | $3,395,000 | $6,783,000 | | Aggregate Cost Basis | $339,000 | $3,260,000 | $6,398,000 | Earnings Reconciliation (Non-GAAP) The earnings reconciliation highlights non-GAAP adjustments. For Q1'25, a non-recurring loss of $1.945 million was added back to GAAP net income, resulting in a non-GAAP net income of $31.309 million and EPS of $0.44, compared to $30.728 million and $0.43 in Q1'24 Earnings Reconciliation (Non-GAAP) (For the three months ended March 31, in millions) | Earnings Reconciliation (For the three months ended March 31, in millions) | 2025 | 2024 | | :----------------------------------------------------------------------- | :------ | :------ | | Net income (loss) attributable to Safehold Inc. common shareholders (GAAP) | $29.364 | $30.728 | | Add: Non-recurring (gains) / losses | $1.945 | $0.000 | | Net income excluding non-recurring (gains) / losses | $31.309 | $30.728 | | EPS excluding non-recurring (gains) / losses - basic & diluted | $0.44 | $0.43 | Caret Subsidiary Information This section details the Caret subsidiary, including its formation timeline, purpose to capture unrealized capital appreciation, and its ownership structure involving Safehold, employees, and other investors Caret Timeline This timeline outlines key events in the formation and evolution of the Caret subsidiary, including its purpose and investor participation - Caret subsidiary formed in 2H'18 to recognize capital appreciation above Cost Basis and created an employee performance-based incentive plan[32] - Series A round saw outside investor participation (Nov'22) and was redeemed in April 2024[32][34] - MSD Partners committed to Series B round in May'19[32] Caret Ownership This section details the ownership structure of Caret Units, including stakes held by Safehold, employees, and other investors, and notes the redemption of the Series A Round - Safehold (NYSE: SAFE) owns ~84% of Caret Units[35] - Employees (2018 Incentive Plan) own ~15% of Caret Units[35] - MSD Partners + Other Family Offices own ~1% of Caret Units[35] - The Series A Round was redeemed in April 2024, settled with funds previously held in a restricted account, with no impact to liquidity[34] Unrealized Capital Appreciation (UCA) Details Unrealized Capital Appreciation (UCA) is calculated as the difference between the Combined Property Value (CPV) of the Core Ground Lease Portfolio and the Aggregate Cost Basis. UCA reflects the safety of Safehold's position, the quality of long-term cash flows, and changes in CPV. Caret units are structured to track and capture UCA upon sale of land or specified events - UCA is calculated as the difference between Combined Property Value (CPV) and Aggregate Cost Basis[42] - UCA provides information on the safety of Safehold's position, quality of long-term cash flows, and changes in CPV that ultimately revert to the company[42] - Caret units in subsidiary Safehold (d. Holdings LLC "Portfolio Holdings") are structured to track and capture UCA upon sale of land or other specified events[39] Glossary This section provides definitions for key financial and portfolio terms used throughout the report, such as Aggregate Cost Basis, Annualized Cash Yield, Combined Property Value (CPV), Economic Yield, Gross Book Value (GBV), Ground Lease-to-Value (GLTV), Rent Coverage, and Unrealized Capital Appreciation (UCA) - Definitions for key terms including Aggregate Cost Basis, Annualized Cash Yield, Combined Property Value (CPV), Economic Yield, Gross Book Value (GBV), Ground Lease-to-Value (GLTV), Rent Coverage, and Unrealized Capital Appreciation (UCA)[42] Endnotes The endnotes provide additional context, methodologies, and assumptions for various metrics and statements presented in the report, including details on non-binding LOIs, CPV calculation, Rent Coverage estimates, and specific yield calculations - Endnotes clarify methodologies for non-binding LOIs, CPV calculation, and Rent Coverage estimates[44] - Details on how Economic Yield and Inflation Adjusted Yield incorporate assumed inflation scenarios and variable rent components[44] Forward-Looking Statements & Other Matters This section contains disclaimers regarding forward-looking statements, outlining inherent risks and uncertainties that could cause actual results to differ materially. It also clarifies the basis of presentation following the merger transaction with iStar Inc. and provides investor relations contact information - The presentation contains forward-looking statements subject to risks and uncertainties, including business conditions, availability of funds, rent adjustment clauses, tenant concentrations, and interest rate changes[45][46] - Clarification on the basis of presentation following the merger of Safehold Inc. and iStar Inc. on March 31, 2023, where historical financial statements of Old Safe became those of Safehold Inc.[47]