Safehold (US:SAFE)2023-11-01 19:04Financial Data and Key Metrics Changes - For Q3 2023, GAAP revenue was $85.6 million, net income was negative $123.0 million, and earnings per share was negative $1.81 [49] - Excluding non-recurring items, net income was positive $22.5 million, and earnings per share was positive $0.33 [19][21] - The total portfolio at quarter end was valued at $6.4 billion, with an unrealized capital appreciation of $10 billion [7][18] Business Line Data and Key Metrics Changes - The ground lease portfolio now consists of 135 assets, having grown 19 times since the IPO, with estimated unrealized capital appreciation increasing 23 times since the IPO [17] - In Q3, the company funded a total of $88 million, earning a blended yield of 6.6% across three categories [16] - The portfolio's cash yield is currently 3.5%, with an annualized GAAP yield of 5.2% [24][63] Market Data and Key Metrics Changes - The company noted that commercial real estate investment activity remains muted, with a significant gap between buyers and sellers due to volatility in rates and liquidity issues [12] - The geographic breakdown of the portfolio shows diversification, with the top 10 markets representing approximately 70% of the portfolio [29] Company Strategy and Development Direction - The company aims to expand its ground lease ecosystem and explore new sources of capital and product initiatives to adapt to the current environment [6][41] - The management expressed confidence in the durability of the asset base and balance sheet, planning to be opportunistic yet disciplined in capital allocation [12][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging interest rate cycle, indicating that this has been one of the worst markets for fixed income investments on record [4] - The company received a credit rating upgrade from Moody's to A3 with a stable outlook, which is expected to provide long-term benefits [33] Other Important Information - The company raised $152 million in new equity at a gross price of $21.40 per share, which was viewed favorably by creditors and rating agencies [43][44] - The company ended the quarter with $858 million of liquidity, enhanced by unused capacity in its joint venture [14][30] Q&A Session Summary Question: What is the current deal flow pipeline? - Management indicated that there is less confidence in the pipeline due to recent market conditions, with some transactions falling apart at the closing table [68][89] Question: How does the company view its value proposition to sponsors in the current rate environment? - Management stated that the company remains the most efficient source of capital, despite changes in the cost of capital [72] Question: What is the impact of the recent credit rating upgrade on debt costs? - The upgrade is expected to save approximately 30 to 50 basis points on debt costs once a second A rating is achieved [91] Question: What is the company's approach to underwriting and rent coverage? - The company takes a conservative approach in underwriting, with a focus on maintaining consistent credit metrics [94][133] Question: Are there plans to explore other asset classes beyond multifamily? - Management confirmed that while multifamily remains a focus, they are also exploring other asset classes, though these may have less liquidity [134]