Safehold (US:SAFE)2022-11-03 19:57Financial Data and Key Metrics Changes - For Q3 2022, net income was $12.1 million or $0.14 per diluted common share, while adjusted earnings were $28.5 million or $0.33 per diluted common share [12] - The company ended the quarter with approximately $1.3 billion of unrestricted cash and a total asset value of $3.5 billion [13][14] - The significant decrease in common equity per share was attributed to the pullback in Safehold's market value, with adjusted common equity per share estimated at approximately $12.33 [15] Business Line Data and Key Metrics Changes - Safehold closed on $280 million in new ground leases during the quarter, contributing to a total of $284 million in new ground lease transactions [8][16] - The company recognized a significant gain of approximately $46 million from the sale of a ground lease in Washington DC [16] - iStar generated $105 million from asset sales, loan repayments, and ground lease sales during the quarter [23] Market Data and Key Metrics Changes - The current market environment is characterized by historic interest rate increases, leading to a slowdown in real estate transaction activity and limited capital availability [7][9] - Ground lease volumes are expected to reflect a slowing backdrop in Q4 due to these market conditions [9] Company Strategy and Development Direction - The company is focused on building a fully integrated pure play ground lease company and simplifying its balance sheet by monetizing non-core assets [6][7] - The merger with Safehold is expected to close by the end of Q1 or early Q2 2023, with a potential extension to September 30 if necessary [32][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term prospects of the ground lease business despite current market challenges [7] - The company is actively working to navigate the uncertain economic environment and is optimistic about future asset sales and the merger process [10][24] Other Important Information - The company extinguished $155 million of debt during Q3, including $93 million of convertible notes [23] - Moody's has recognized the benefits of the merger transaction, providing a positive outlook for the company [18] Q&A Session Summary Question: Update on asset sales and future expectations - Management indicated that approximately a dozen smaller operating assets are still to be sold, with some larger assets also in the pipeline, but timelines may slip due to market conditions [29][30] Question: Timeline for merger proxy filing - The merger proxy is expected to be filed soon, with a targeted closing by the end of Q1 or early Q2 2023, and an outside date of September 30 [32][33] Question: Strategy for retiring debt - Management discussed the approach to retiring debt, focusing on market conditions and the attractiveness of bonds, with plans to continue reducing the debt balance [34][37] Question: Thoughts on current liabilities and interest rates - Management acknowledged the attractiveness of current liabilities but emphasized the need for a comprehensive strategy that aligns with market conditions [40][41] Question: Office market outlook - Management expressed a selective approach to the office market, recognizing potential value disruption but remaining open to opportunities for the right assets [46] Question: Update on SpinCo and specific assets - Management provided updates on Asbury Park and Magnolia Green, indicating ongoing development and sales processes, while acknowledging potential slowdowns due to the current rate environment [55]