What changed in this filing

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Item 1. Financial Statements

2021-04-29 compared with 2020-11-03 · 302 added, 492 removed, 884 unchanged (47% of the section changed)

2 unchanged sentences

(In thousands, except per share data) (1)

September 30,

2021 December 31,

4 unchanged sentences

Total real estate 1,476,993 1,489,493

Net investment in leases ($ 11,113 of allowances as of September 30, 2020)

Net investment in leases ($ 9,270 and $ 10,871 of allowances as of March 31, 2021 and December 31, 2020, respectively)

431,126 429,101

Land and development, net 406,781 430,663

Loans receivable and other lending investments, net ($ 33,447 and $ 28,634 of allowances as of September 30, 2020 and December 31, 2019, respectively)

Loans receivable and other lending investments, net ($ 9,058 and $ 13,170 of allowances as of March 31, 2021 and December 31, 2020, respectively)

533,716 732,330

Loan receivable held for sale 16,086 —

Other investments 1,237,295 1,176,560

13 unchanged sentences

Preferred Stock Series D, G and I, liquidation preference $ 25.00 per share (refer to Note 14)

Common Stock, $ 0.001 par value, 200,000 shares authorized, 74,433 and 77,810 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Common Stock, $ 0.001 par value, 200,000 shares authorized, 73,440 and 73,967 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital 3,204,862 3,240,535

7 unchanged sentences

_______________________________________________________________________________

Note - Refer to Note 2 for details on the Company's consolidated variable interest entities ("VIEs").

(1) Refer to Note 2 for details on the Company's consolidated variable interest entities ("VIEs").

The accompanying notes are an integral part of the consolidated financial statements.

1 unchanged sentence

(In thousands, except per share data)

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2019 2020 2019

For the Three Months Ended March 31,

Operating lease income $ 47,444 $ 47,346

11 unchanged sentences

(Recovery of) provision for loan losses ( 3,794 ) 4,003

Provision for losses on net investment in leases 175 — 2,001 —

(Recovery of) provision for losses on net investment in leases ( 1,601 ) 1,292

Impairment of assets 1,785 1,708

2 unchanged sentences

Income from sales of real estate 612 —

Income (loss) from operations before earnings from equity method investments and other items 7,648 ( 3,907 ) ( 34,593 ) 174,156

Loss from operations before earnings from equity method investments and other items ( 5,445 ) ( 25,322 )

Loss on early extinguishment of debt, net — ( 4,115 )

Earnings from equity method investments 12,769 16,612

Selling profit from sales-type leases — — — 180,416

Net income (loss) before income taxes 7,324 ( 12,825 )

Income tax expense ( 78 ) ( 84 ) ( 165 ) ( 323 )

Income tax benefit (expense) 665 ( 60 )

Net income (loss) 7,989 ( 12,885 )

3 unchanged sentences

Preferred dividends ( 5,874 ) ( 5,874 )

Net income (loss) allocable to common shareholders $ ( 2,069 ) $ ( 7,343 ) $ ( 46,850 ) $ 337,807

Net loss allocable to common shareholders $ ( 405 ) $ ( 21,450 )

Per common share data:

Net income (loss) allocable to common shareholders:

Net loss allocable to common shareholders:

Basic $ ( 0.01 ) $ ( 0.28 )

6 unchanged sentences

(In thousands)

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2019 2020 2019

For the Three Months Ended March 31,

Net income (loss) $ 7,989 $ ( 12,885 )

1 unchanged sentence

Reclassification of losses on cash flow hedges into earnings upon realization (1)

2,371 665 5,792 13,408

Unrealized gains on available-for-sale securities 19 777 1,195 2,486

Unrealized (losses) gains on available-for-sale securities ( 1,031 ) 203

Unrealized gains (losses) on cash flow hedges 11,973 ( 27,776 )

1 unchanged sentence

Comprehensive income (loss) 21,269 ( 39,144 )

Comprehensive (income) attributable to noncontrolling interests ( 3,299 ) ( 1,581 ) ( 2,894 ) ( 2,224 )

Comprehensive (income) loss attributable to noncontrolling interests ( 4,978 ) 2,753

Comprehensive income (loss) attributable to iStar Inc.

1 unchanged sentence

_______________________________________________________________________________

(1) Amounts reclassified to "Interest expense" in the Company's consolidated statements of operations for the three months ended September 30, 2020 and 2019 are $ 2,038 and $ 539 , respectively, and amounts reclassified to "Interest expense" in the Company's consolidated statements of operations for the nine months ended September 30, 2020 and 2019 are $ 4,926 and $ 957 , respectively.

Amount reclassified to "Income from sales of real estate" in the Company's consolidated statements of operations is $ 806 for the nine months ended September 30, 2019.

Amounts reclassified to "Earnings (losses) from equity method investments" in the Company's consolidated statements of operations for the three months ended September 30, 2020 and 2019 are $ 333 and $ 126 , respectively, and amounts reclassified to "Earnings (losses) from equity method investments" in the Company's consolidated statements of operations for the nine months ended September 30, 2020 and 2019 are $ 866 and $( 28 ), respectively.

Amount reclassified to "Other expense" in the Company's consolidated statements of operations is $ 11,673 for the nine months ended September 30, 2019 resulting from hedged forecasted transactions becoming not probable to occur.

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Statements of Changes in Equity

(In thousands)

Shareholders' Equity

Preferred Stock Series J (1)

Par Additional

Capital Retained

(Deficit) Accumulated

Comprehensive

Income (Loss) Noncontrolling

Interests Total

Balance as of June 30, 2020 $ 12 $ — $ 76 $ 3,260,173 $ ( 2,279,284 ) $ ( 59,045 ) $ 191,853 $ 1,113,785

Dividends declared—preferred — — — ( 5,874 ) — — ( 5,874 )

Dividends declared—common ($ 0.11 per share)

— — — — ( 8,315 ) — — ( 8,315 )

Issuance of stock/restricted stock unit amortization, net — — — 903 — — 894 1,797

Net income — — — — 3,805 — 2,646 6,451

Change in accumulated other comprehensive income (loss) — — — — — 1,934 653 2,587

Repurchase of stock — — ( 2 ) ( 13,623 ) — — — ( 13,625 )

Contributions from noncontrolling interests — — — — — — 444 444

Distributions to noncontrolling interests — — — — — — ( 3,802 ) ( 3,802 )

Balance as of September 30, 2020 $ 12 $ — $ 74 $ 3,247,453 $ ( 2,289,668 ) $ ( 57,111 ) $ 192,688 $ 1,093,448

Balance as of June 30, 2019 $ 12 $ 4 $ 62 $ 3,297,303 $ ( 2,139,611 ) $ ( 34,137 ) $ 197,564 $ 1,321,197

Dividends declared—preferred — — — — ( 8,124 ) — — ( 8,124 )

Dividends declared—common ($ 0.10 per share)

— — — — ( 6,291 ) — — ( 6,291 )

Issuance of stock/restricted stock unit amortization, net — — 944 — — 677 1,621

Net income — — — — 781 — 2,845 3,626

Change in accumulated other comprehensive income (loss) — — — — — ( 6,385 ) ( 1,264 ) ( 7,649 )

Repurchase of stock — — — ( 442 ) — — — ( 442 )

Distributions to noncontrolling interests — — — — — — ( 3,315 ) ( 3,315 )

Balance as of September 30, 2019 $ 12 $ 4 $ 62 $ 3,297,805 $ ( 2,153,245 ) $ ( 40,522 ) $ 196,507 $ 1,300,623

_______________________________________________________________________________

(1) Refer to Note 14 for details on the Company's Preferred Stock.

(1) Amounts reclassified to "Interest expense" in the Company's consolidated statements of operations for the three months ended March 31, 2021 and 2020 are $ 2,104 and $ 1,088 , respectively.

Amounts reclassified to "Earnings (losses) from equity method investments" in the Company's consolidated statements of operations for the three months ended March 31, 2021 and 2020 are $ 234 and $ 226 , respectively.

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

Shareholders' Equity

Preferred Stock Series J (1)

Par Additional

10 unchanged sentences

Issuance of stock/restricted stock unit amortization, net (2)

Net income (loss) — — — — ( 29,228 ) — 8,435 ( 20,793 )

— — 2,572 — — 1,370 3,942

Net income — — — 5,469 — 2,520 7,989

Change in accumulated other comprehensive income (loss) — — — — 10,822 2,458 13,280

2 unchanged sentences

Distributions to noncontrolling interests — — — — — ( 2,145 ) ( 2,145 )

Balance as of September 30, 2020 $ 12 $ — $ 74 $ 3,247,453 $ ( 2,289,668 ) $ ( 57,111 ) $ 192,688 $ 1,093,448

Balance as of March 31, 2021 $ 12 $ 73 $ 3,204,862 $ ( 2,309,763 ) $ ( 41,858 ) $ 197,681 $ 1,051,007

Balance as of December 31, 2019 $ 12 $ 78 $ 3,284,877 $ ( 2,205,838 ) $ ( 38,707 ) $ 197,538 $ 1,237,960

Impact from adoption of new accounting standards — — — ( 12,382 ) — — ( 12,382 )

Dividends declared—preferred — — — ( 5,874 ) — — ( 5,874 )

2 unchanged sentences

Issuance of stock/restricted stock unit amortization, net (2)

Net income — — — — 362,179 — 8,168 370,347

— 2,222 — — 727 2,949

Net income (loss) — — — ( 15,576 ) — 2,691 ( 12,885 )

Change in accumulated other comprehensive income (loss) — — — — ( 20,815 ) ( 5,444 ) ( 26,259 )

2 unchanged sentences

Distributions to noncontrolling interests — — — — — ( 3,724 ) ( 3,724 )

Balance as of September 30, 2019 $ 12 $ 4 $ 62 $ 3,297,805 $ ( 2,153,245 ) $ ( 40,522 ) $ 196,507 $ 1,300,623

Balance as of March 31, 2020 $ 12 $ 77 $ 3,275,055 $ ( 2,247,504 ) $ ( 59,522 ) $ 191,951 $ 1,160,069

_________________________________________________________

(1) Refer to Note 14 for details on the Company's Preferred Stock.

(2) Net of payments for withholding taxes upon vesting of stock-based compensation.

The accompanying notes are an integral part of the consolidated financial statements.

1 unchanged sentence

(In thousands)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flows from operating activities:

1 unchanged sentence

Adjustments to reconcile net income (loss) to cash flows from operating activities:

Provision for loan losses 4,093 ( 3,792 )

Provision for losses on net investment in leases 2,001 —

(Recovery of) provision for loan losses ( 3,794 ) 4,003

(Recovery of) provision for losses on net investment in leases ( 1,601 ) 1,292

Impairment of assets 1,785 1,708

5 unchanged sentences

Deferred interest on loans received 23,703 —

Selling profit from sales-type leases — ( 180,416 )

Earnings from equity method investments ( 12,769 ) ( 16,612 )

6 unchanged sentences

Changes in assets and liabilities:

Deposit on loan to be held for sale — ( 21,226 )

Origination of loan receivable held for sale ( 16,086 ) —

Changes in accrued interest and operating lease income receivable 1,945 79

1 unchanged sentence

Changes in accounts payable, accrued expenses and other liabilities ( 17,414 ) ( 12,324 )

Cash flows used in operating activities ( 6,178 ) ( 75,796 )

Cash flows provided by (used in) operating activities ( 3,795 ) ( 20,997 )

Cash flows from investing activities:

2 unchanged sentences

Capital expenditures on land and development assets ( 4,134 ) ( 15,035 )

Acquisitions of real estate, net investments in leases and land assets — ( 240,487 )

Repayments of and principal collections on loans receivable and other lending investments, net 109,926 18,346

1 unchanged sentence

Net proceeds from sales of real estate 2,967 7,493

Net proceeds from net investment in leases 6,575 —

Net proceeds from sales of land and development assets 30,801 76,776

21 unchanged sentences

(In thousands)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Supplemental disclosure of non-cash investing and financing activity:

Fundings and (repayments) of loan receivables and loan participations, net $ ( 42,501 ) $ 2,110

Contributions of land and development assets to equity method investments, net — 4,073

Accrued repurchase of stock 1,802 250

Acquisition of land and development asset through joint venture consolidation — 27,000

Assumption of mortgage by third party — 228,000

Accounts payable for finance costs — 1,878

Sales-type lease origination — 411,523

The accompanying notes are an integral part of the consolidated financial statements.

24 unchanged sentences

The liabilities of these VIEs are non-recourse to the Company and can only be satisfied from each VIE's respective assets.

The Company did not have any unfunded commitments related to consolidated VIEs as of September 30, 2020.

The following table presents the assets and liabilities of the Company's consolidated VIEs as of September 30, 2020 and December 31, 2019 ($ in thousands):

September 30,

The Company did not have any unfunded commitments related to consolidated VIEs as of March 31, 2021 and December 31, 2020.

The following table presents the assets and liabilities of the Company's consolidated VIEs as of March 31, 2021 and December 31, 2020 ($ in thousands):

2021 December 31,

13 unchanged sentences

Unconsolidated VIEs —The Company has investments in VIEs where it is not the primary beneficiary and accordingly the VIEs have not been consolidated in the Company's consolidated financial statements.

As of September 30, 2020, the Company's maximum exposure to loss from these investments does not exceed the sum of the $ 140.5 million carrying value of the investments, which are classified in "Other investments" on the Company's consolidated balance sheets, and $ 10.0 million of related unfunded commitments.

As of March 31, 2021, the Company's maximum exposure to loss from these investments does not exceed the sum of the $ 127.7 million carrying value of the investments, which are classified in "Other investments" on the Company's consolidated balance sheets, and $ 17.0 million of related unfunded commitments.

Note 3— Summary of Significant Accounting Policies

The following paragraph describes the impact on the Company's consolidated financial statements from the adoption of Accounting Standards Updates ("ASUs") on January 1, 2021.

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), as amended, on January 1, 2020 using the modified retrospective approach method.

Under the modified retrospective approach, the Company recorded a cumulative effect adjustment to retained earnings by increasing its allowance for loan losses and recording an initial allowance for losses on net investment in leases.

The Company adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06") on January 1, 2021 using the modified retrospective approach method.

Under the modified retrospective approach, the Company recorded a cumulative effect adjustment on January 1, 2021 by increasing "Debt obligations, net" by $ 10.0 million, increasing retained earnings by $ 15.9 million and decreasing "Additional paid-in capital" by $ 25.9 million with respect to its 3.125 % senior convertible notes (refer to Note 11).

Periods presented that are prior to the adoption date of January 1, 2021 will not be adjusted.

ASU 2016-13 replaced the incurred loss impairment methodology with a methodology that reflects a current expected credit loss ("Expected Loss").

ASU 2016-13 impacted all of the Company’s investments held at amortized cost, which included its loans (including unfunded loan commitments), financing receivables, net investment in leases and held-to-maturity debt securities.

Upon adoption of ASU 2016-13 on January 1, 2020, the Company recorded an increase to its allowance for loan losses of $ 3.3 million and an initial allowance for losses on net investment in leases of $ 9.1 million, both of which were recorded as a cumulative effect adjustment to retained earnings.

Subsequent increases or decreases in the allowance for loan losses or the allowance for losses on net investment in leases will be charged to "Provision for (recovery of) loan losses" and "Provision for (recovery of) losses on net investment in leases," respectively, in the Company's consolidated statements of operations.

Refer to "Significant Accounting Policies" below for more information on how the Company determines its allowance for loan losses and its allowance for losses on net investment in leases.

Notes to Consolidated Financial Statements (Continued)

Significant Accounting Policies

Allowance for Loan Losses and Net Investment in Leases— The Company performs quarterly a comprehensive analysis of its loan and sales-type lease portfolios and assigns risk ratings that incorporate management's current judgments about credit quality based on all known and relevant internal and external factors that may affect collectability.

The Company considers, among other things, payment status, lien position, borrower or tenant financial resources and investment collateral, collateral type, project economics and geographical location as well as national and regional economic factors.

This methodology results in loans and sales-type leases being risk rated, with ratings ranging from "1" to "5" with "1" representing the lowest risk of loss and "5" representing the highest risk of loss.

The Company estimates loss rates based on historical realized losses experienced within its portfolio taking into account current economic conditions affecting the commercial real estate market when establishing appropriate time frames to evaluate loss experience.

Upon adoption of ASU 2016-13 on January 1, 2020, the Company estimates its Expected Loss on its loans (including unfunded loan commitments), held-to-maturity debt securities and net investment in leases based on relevant information including historical realized loss rates, current market conditions and reasonable and supportable forecasts that affect the collectability of its investments.

The estimate of the Company's Expected Loss requires significant judgment and the Company analyzes its loan portfolio based upon its different categories of financial assets, which includes (i) loans and held-to-maturity debt securities;

(ii) construction loans;

and (iii) net investment in leases and financings that resulted from the acquisition of properties that did not qualify as a sale leaseback transaction and, as such, are accounted for as financing receivables (refer to Note 5).

For the Company's loans and held-to-maturity debt securities, the Company utilized a loan loss model developed by Trepp LLC ("Trepp") to estimate its Expected Loss.

The model is a loss forecasting tool that utilizes loan level data including each loans position in the capital structure, interest rates, maturity dates, unfunded commitments, debt service coverage ratios, etc.

and also utilizes forward looking macroeconomic variables and pool-level mean loss rates to produce an Expected Loss over the life each loan.

The Company utilized the model to estimate its Expected Loss for this category of loans after inputting its individual loan level data for this category of loans into the model.

For the Company's construction loans, the Company analyzed its historical realized loss experience on its construction loan portfolio to estimate its Expected Loss.

The Company also utilized third-party market data that included historical loss rates on commercial real estate loans and forecasted economic trends, including interest and unemployment rates.

The Company utilized the third-party market data to support the Expected Loss the Company calculated using its own historical realized loss experience.

For the Company's net investment in leases and financings that resulted from the acquisition of properties that did not qualify as sale leaseback transactions, the Company analyzed historical loss rates for lessors from tenants with a credit rating similar to the Company's tenant at these properties.

The Company also utilized third-party market information as well as market data from Trepp which forecasted economic trends, including interest and unemployment rates, to assist in developing a probability of default and loss given default to calculate the Company's Expected Loss.

The Company utilized the third-party market information to support the Expected Loss the Company calculated by analyzing the historical loss rates for lessors from tenants with a credit rating similar to the Company's tenant.

The Company considers a loan or sales-type lease to be non-performing and places it on non-accrual status at such time as:

(1) interest payments become 90 days delinquent;

(2) it has a maturity default;

or (3) management determines it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan or sales-type lease.

Non-accrual loans or sales-type leases are returned to accrual status when they have become contractually current and management believes all amounts contractually owed will be received.

The Company will record a specific allowance on a non-performing loan or sales-type lease if the Company determines that the collateral fair value less costs to sell is less than the carrying value of the collateral-dependent asset.

The specific allowance is increased (decreased) through "Provision for (recovery of) loan losses" or "Provision for losses on net investment in leases" in the Company's consolidated statements of operations and is decreased by charge-offs.

During delinquency and the foreclosure process, there are typically numerous points of negotiation with the borrower or tenant as the Company works toward a settlement or other alternative resolution, which can impact the potential for repayment or receipt of collateral.

The Company's policy is to charge off a loan when it determines, based on a variety of factors, that all commercially reasonable means of recovering the loan balance have been exhausted.

This may occur at different times, including when the Company receives cash or other assets in a pre-foreclosure sale or takes control of the underlying collateral in full satisfaction of the loan upon foreclosure or deed-in-lieu, or when the Company has otherwise ceased significant

Notes to Consolidated Financial Statements (Continued)

collection efforts.

The Company considers circumstances such as the foregoing to be indicators that the final steps in the loan collection process have occurred and that a loan is uncollectible.

At this point, a loss is confirmed and the loan and related allowance will be charged off.

The Company made the accounting policy election to record accrued interest on its loan portfolio separate from its loans receivable and other lending investments and to exclude accrued interest from its amortized cost basis disclosures (refer to Note 7).

As of September 30, 2020 and December 31, 2019, accrued interest was $ 3.6 million and $ 4.2 million, respectively, and is recorded in "Accrued interest and operating lease income receivable, net" on the Company's consolidated balance sheets.

The Company places loans on non-accrual status once the loan becomes 90 days delinquent and reverses any accrued interest as a reduction to interest income or recognizes a credit loss expense at such time.

As such, the Company elected the practical expedient to not record an allowance against accrued interest receivable.

During the nine months ended September 30, 2020, the Company did not reverse any accrued interest on its loan portfolio.

In addition, upon the adoption of ASU 2020-06, the Company is required to use a modified if-converted method when calculating earnings per share.

The Company will settle conversions of the 3.125 % senior convertible notes by paying the conversion value in cash up to the original principal amount of the notes being converted and shares of common stock to the extent of any conversion premium.

The if-converted method is modified so that interest expense is not added back to the numerator, and the denominator only includes the net number of incremental shares that would be issued upon conversion.

For the remainder of the Company's significant accounting policies, refer to the Company's Annual Report.

New Accounting Pronouncements — In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06").

ASU 2020-06 was issued to reduce the complexity associated with applying current accounting guidance for certain financial instruments with characteristics of both liabilities and equity.

ASU 2020-06 removes certain separation models under ASC 470-20 so that a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives.

In addition, ASU 2020-06 requires that the if-converted method be used for all convertibles and that the treasury stock method no longer be used.

ASU 2020-06 is effective for interim and annual reporting periods beginning after December 15, 2021.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

Management is currently evaluating the impact of ASU 2020-06 on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform ("ASU 2020-04").

Notes to Consolidated Financial Statements (Continued)

New Accounting Pronouncements — In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform ("ASU 2020-04").

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

3 unchanged sentences

The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Notes to Consolidated Financial Statements (Continued)

Note 4— Real Estate

1 unchanged sentence

Net Lease (1)

As of September 30, 2020

As of March 31, 2021

Land, at cost $ 188,418 $ 103,530 $ 291,948

16 unchanged sentences

_______________________________________________________________________________

(1) As of September 30, 2020 and December 31, 2019, real estate, net included $ 760.4 million and $ 768.6 million, respectively, of real estate of the Net Lease Venture (refer to Net Lease Venture below).

During the nine months ended September 30, 2020, the Company's largest net lease tenant contributed 11.9 % of total revenues.

(2) As of September 30, 2020 and December 31, 2019, the Company had $ 5.5 million and $ 8.6 million, respectively, of residential condominiums available for sale in its operating properties portfolio.

(1) As of March 31, 2021 and December 31, 2020, real estate, net included $ 751.4 million and $ 755.5 million, respectively, of real estate of the Net Lease Venture (refer to Net Lease Venture below).

(2) As of March 31, 2021 and December 31, 2020, the Company had $ 2.6 million and $ 5.2 million, respectively, of residential condominiums available for sale in its operating properties portfolio.

Net Lease Venture —In February 2014, the Company partnered with a sovereign wealth fund to form a venture to acquire and develop net lease assets (the "Net Lease Venture") and gave a right of first offer to the venture on all new net lease investments.

8 unchanged sentences

These senior executives are also entitled to an amount equal to 50 % of any incentive fee received based on the 47.5 % external partner's interest.

The Company earned $ 0.4 million and $ 0.4 million, respectively, of management fees after the effect of eliminations during the three months ended September 30, 2020 and 2019 and earned $ 1.1 million and $ 1.1 million, respectively, of management fees after the effect of eliminations during the nine months ended September 30, 2020 and 2019, with respect to services provided to other investors in the Net Lease Venture, which was recorded as a reduction to "Net income attributable to noncontrolling interests" in the Company's consolidated statements of operations.

Acquisitions— During the nine months ended September 30, 2019, the Company acquired a net lease asset for $ 11.5 million.

In addition, the Company acquired the leasehold interest in a net lease asset for $ 98.2 million, inclusive of closing costs, and simultaneously entered into a new 98 -year Ground Lease with SAFE (refer to Note 8) and also acquired the leasehold interest in a net lease asset for $ 110.6 million and simultaneously entered into a new 99 -year Ground Lease with SAFE (refer to Note 8).

Dispositions— During the three months ended March 31, 2020, the Company sold a net lease asset for net proceeds of $ 7.5 million and recognized an impairment of $ 1.7 million in connection with the sale.

Real Estate Available and Held for Sale— During the three months ended March 31, 2020, the Company transferred a net lease asset with an aggregate carrying value of $ 25.7 million to held for sale due to an executed contract with SAFE.

The net lease asset was sold to SAFE in September 2020.

Notes to Consolidated Financial Statements (Continued)

Dispositions— During the nine months ended September 30, 2020, the Company sold a net lease asset for net proceeds of $ 7.5 million and recognized an impairment of $ 1.7 million in connection with the sale.

During the nine months ended September 30, 2019, the Company sold a portfolio of net lease assets with an aggregate carrying value of $ 220.4 million and recognized gains of $ 219.7 million in "Income from sales of real estate" in the Company's consolidated statements of operations.

In connection with the sale of this portfolio of assets the buyer assumed a $ 228.0 million non-recourse mortgage.

In addition, during the nine months ended September 30, 2019, the Company sold commercial and residential operating properties with an aggregate carrying value of $ 69.9 million and recognized gains of $ 10.2 million in "Income from sales of real estate" in the Company's consolidated statements of operations.

Real Estate Available and Held for Sale— During the nine months ended September 30, 2020, the Company transferred a net lease asset with an aggregate carrying value of $ 25.7 million to held for sale due to an executed contract with SAFE.

The net lease asset was sold to SAFE in September 2020 (refer to Note 8).

Impairments— During the nine months ended September 30, 2020, the Company recorded an impairment of $ 1.7 million in connection with the sale of a net lease asset and an impairment of $ 3.0 million on a real estate asset held for sale.

During the nine months ended September 30, 2019, the Company recorded an impairment of $ 3.3 million on a commercial operating property based on an executed purchase and sale agreement and recorded $ 0.6 million of impairments in connection with the sale of residential condominium units.

Impairments— During the three months ended March 31, 2020, the Company recorded an impairment of $ 1.7 million in connection with the sale of a net lease asset.

Tenant Reimbursements— The Company receives reimbursements from tenants for certain facility operating expenses including common area costs, insurance, utilities and real estate taxes.

Tenant expense reimbursements were $ 5.8 million and $ 17.1 million for the three and nine months ended September 30, 2020, respectively, and $ 4.9 million and $ 14.8 million for the three and nine months ended September 30, 2019, respectively.

Tenant expense reimbursements were $ 7.0 million and $ 5.9 million for the three months ended March 31, 2021 and 2020, respectively.

These amounts are included in "Operating lease income" in the Company's consolidated statements of operations.

Allowance for Doubtful Accounts— As of September 30, 2020 and December 31, 2019, the allowance for doubtful accounts related to real estate tenant receivables was $ 2.1 million and $ 1.0 million, respectively, and the allowance for doubtful accounts related to deferred operating lease income was $ 1.0 million as of December 31, 2019.

These amounts are included in "Accrued interest and operating lease income receivable, net" and "Deferred operating lease income receivable, net," respectively, on the Company's consolidated balance sheets.

Allowance for Doubtful Accounts— As of March 31, 2021 and December 31, 2020, the allowance for doubtful accounts related to real estate tenant receivables was $ 1.0 million and $ 1.7 million, respectively.

These amounts are included in "Accrued interest and operating lease income receivable, net" on the Company's consolidated balance sheets.

Future Minimum Operating Lease Payments — Future minimum operating lease payments to be collected under non-cancelable operating leases, excluding customer reimbursements of expenses, in effect as of March 31, 2021, are as follows by year ($ in thousands):

Lease Operating Properties

2021 (remaining nine months) $ 95,970 $ 10,877

2022 130,077 6,677

2023 121,718 6,421

2024 116,027 6,383

2025 119,483 5,720

Thereafter 1,254,867 8,247

Note 5— Net Investment in Leases

9 unchanged sentences

In May 2019, the Company determined that the seven bowling centers acquired did not qualify as a sale leaseback transaction and recorded $ 44.1 million in "Loans receivable and other lending investments, net" on its consolidated balance sheet (refer to Note 7).

The Company recognized $ 180.4 million in "Selling profit from sales-type leases" in its consolidated statements of operations for the nine months ended September 30, 2019 as a result of the transaction.

For the three and nine months ended September 30, 2020, the Company recognized $ 1.5 million and $ 10.7 million, respectively, of cash interest income and $ 6.9 million and $ 14.3 million, respectively, of non-cash interest income in "Interest income from sales-type leases" in the Company's consolidated statements of operations.

For the three and nine months ended September 30, 2019, the Company recognized $ 6.9 million and $ 10.1 million, respectively, of

For the three months ended March 31, 2021 and 2020, the Company recognized $ 0.1 million and $ 6.9 million, respectively, of cash interest income and $ 8.5 million and $ 1.5 million, respectively, of non-cash interest income in "Interest income from sales-type leases" in the Company's consolidated statements of operations.

Notes to Consolidated Financial Statements (Continued)

cash interest income and $ 1.4 million and $ 2.1 million, respectively, of non-cash interest income in "Interest income from sales-type leases" in the Company's consolidated statements of operations.

The Company's net investment in leases were comprised of the following as of September 30, 2020 and December 31, 2019 ($ in thousands):

September 30, 2020 December 31, 2019

Dispositions— During the three months ended March 31, 2021, the Company sold net lease assets for net proceeds of $ 6.6 million and recognized an aggregate impairment of $ 1.5 million in connection with the sales.

The Company's net investment in leases were comprised of the following as of March 31, 2021 and December 31, 2020 ($ in thousands):

March 31, 2021 December 31, 2020

Total undiscounted cash flows $ 1,020,921 $ 1,020,921

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(1) As of September 30, 2020 and December 31, 2019, all of the Company's net investment in leases were current in their payment status and performing in accordance with the terms of the respective leases.

As of September 30, 2020, the risk rating on the Company's net investment in leases was 2.0 (refer to Note 3).

Future Minimum Lease Payments under Sales-type Leases — Future minimum lease payments to be collected under sales-type leases, excluding lease payments that are not fixed and determinable, in effect as of September 30, 2020, are as follows by year ($ in thousands):

2020 (remaining three months) $ —

(1) As of March 31, 2021 and December 31, 2020, all of the Company's net investment in leases were current in their payment status and performing in accordance with the terms of the respective leases.

As of March 31, 2021, the risk rating on the Company's net investment in leases was 2.0 .

Future Minimum Lease Payments under Sales-type Leases — Future minimum lease payments to be collected under sales-type leases, excluding lease payments that are not fixed and determinable, in effect as of March 31, 2021, are as follows by year ($ in thousands):

2021 (remaining nine months) $ 14,248

Thereafter 862,273

Total undiscounted cash flows $ 1,020,921

Allowance for Losses on Net Investment in Leases — Changes in the Company's allowance for losses on net investment in leases for the three and nine months ended September 30, 2020 were as follows ($ in thousands):

September 30, 2020 Nine Months

September 30, 2020

Reserve for losses on net investment in leases at beginning of period $ 10,937 $ —

Allowance for Losses on Net Investment in Leases — Changes in the Company's allowance for losses on net investment in leases for the three months ended March 31, 2021 and 2020 were as follows ($ in thousands):

Allowance for losses on net investment in leases at beginning of period $ 10,871 $ —

Initial allowance recorded upon adoption of new accounting standard (1)

Provision for losses on net investment in leases (2)

(Recovery of) provision for losses on net investment in leases (2)

( 1,601 ) 1,292

Allowance for losses on net investment in leases at end of period $ 9,270 $ 10,403

_________________________________________________________

(1) The Company recorded an initial allowance for losses on net investment in leases of $ 9.1 million upon the adoption of ASU 2016-13 on January 1, 2020 (refer to Note 3).

(2) During the three and nine months ended September 30, 2020, the Company recorded an allowance for losses on net investment in leases of $ 0.2 million and $ 2.0 million, respectively, primarily resulting from the macroeconomic impact of COVID-19 on commercial real estate markets and the adoption of ASU 2016-13 (refer to Note 3).

(1) The Company recorded an initial allowance for losses on net investment in leases of $ 9.1 million upon the adoption of ASU 2016-13 on January 1, 2020.

(2) During the three months ended March 31, 2021, the Company recorded a recovery of losses on net investment in leases of $ 1.6 million due primarily to an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

During the three months ended March 31, 2020, the Company recorded an allowance for losses on net investment in leases of $ 1.3 million due primarily to the macroeconomic impact of COVID-19 on commercial real estate markets and the adoption of ASU 2016-13.

Notes to Consolidated Financial Statements (Continued)

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The Company's land and development assets were comprised of the following ($ in thousands):

September 30, December 31,

March 31, December 31,

Land and land development, at cost $ 417,537 $ 441,201

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Total land and development, net $ 406,781 $ 430,663

Acquisitions— During the nine months ended September 30, 2019, the Company acquired a land and development asset from an unconsolidated entity in which the Company owned a noncontrolling 50 % equity interest for $ 34.3 million, which consisted of a $ 7.3 million cash payment and the assumption of a $ 27.0 million loan.

Dispositions— During the nine months ended September 30, 2020 and 2019, the Company sold land parcels and residential lots and units and recognized land development revenue of $ 116.3 million and $ 76.7 million, respectively.

During the nine months ended September 30, 2020 and 2019, the Company recognized land development cost of sales of $ 114.7 million and $ 71.8 million, respectively, from its land and development portfolio.

Impairments— During the nine months ended September 30, 2020, the Company recorded an impairment of $ 1.5 million on a land and development asset.

During the nine months ended September 30, 2019, the Company recorded an impairment of $ 1.1 million on a land and development asset due to a change in business strategy.

Dispositions— During the three months ended March 31, 2021 and 2020, the Company sold land parcels and residential lots and units and recognized land development revenue of $ 32.2 million and $ 80.2 million, respectively.

During the three months ended March 31, 2021 and 2020, the Company recognized land development cost of sales of $ 29.3 million and $ 77.1 million, respectively, from its land and development portfolio.

Note 7— Loans Receivable and Other Lending Investments, net

The following is a summary of the Company's loans receivable and other lending investments by class ($ in thousands):

September 30,

2021 December 31,

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(1) As of September 30, 2020, 47 %, or $ 262.1 million, gross carrying value of construction loans had completed construction and 4 %, or $ 22.5 million, gross carrying value of construction loans had substantially completed construction.

(1) As of March 31, 2021, 85 %, or $ 254.4 , gross carrying value of construction loans had completed construction.

Notes to Consolidated Financial Statements (Continued)

Allowance for Loan Losses — Changes in the Company's allowance for loan losses were as follows for the three months ended September 30, 2020 ($ in thousands):

Allowance for Loan Losses — Changes in the Company's allowance for loan losses were as follows for the three months ended March 31, 2021 ($ in thousands):

General Allowance

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(1) During the three months ended September 30, 2020, the Company recorded a recovery of loan losses of $ 2.0 million in its consolidated statement of operations resulting from the reversal of CECL allowances on loans that repaid in full in the third quarter 2020 and a more favorable economic outlook on commercial real estate markets in the third quarter 2020 as compared to the second quarter 2020.

Of this amount, $ 0.7 million related to a recovery of credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities" and $ 0.9 million related to a provision on a non-performing loan that was recorded as a reduction to "Accrued interest and operating lease income receivable, net."

Changes in the Company's allowance for loan losses were as follows for the nine months ended September 30, 2020 ($ in thousands):

(1) During the three months ended March 31, 2021, the Company recorded a recovery of loan losses of $ 3.8 million in its consolidated statement of operations due primarily to the repayment of loans during the three months ended March 31, 2021 and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

Of this amount, $ 0.3 million related to a provision for credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities."

Changes in the Company's allowance for loan losses were as follows for the three months ended March 31, 2020 ($ in thousands):

General Allowance

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(1) On January 1, 2020, the Company recorded an increase to its allowance for loan losses of $ 3.3 million upon the adoption of ASU 2016-13 (refer to Note 3), of which $ 2.5 million related to expected credit losses for unfunded loan commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."

(2) During the nine months ended September 30, 2020, the Company recorded a provision for loan losses of $ 4.1 million in its consolidated statement of operations resulting from the macroeconomic impact of COVID-19 on commercial real estate markets, of which $ 0.9 million related to a recovery of credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities" and $ 0.9 million related to a provision on a non-performing loan that was recorded as a reduction to "Accrued interest and operating lease income receivable, net."

(1) On January 1, 2020, the Company recorded an increase to its allowance for loan losses of $ 3.3 million upon the adoption of ASU 2016-13, of which $ 2.5 million related to expected credit losses for unfunded loan commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."

(2) During the three months ended March 31, 2020, the Company recorded a provision for loan losses of $ 4.0 million due primarily to the adoption of ASU 2016-13, of which $ 0.1 million related to expected credit losses for unfunded loan commitments and was recorded as a reduction to "Accounts payable, accrued expenses and other liabilities."

Notes to Consolidated Financial Statements (Continued)

The Company's investment in loans and other lending investments and the associated allowance for loan losses were as follows as of September 30, 2020 and December 31, 2019 ($ in thousands):

The Company's investment in loans and other lending investments and the associated allowance for loan losses were as follows as of March 31, 2021 and December 31, 2020 ($ in thousands):

Evaluated for

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Impairment Total

As of September 30, 2020

As of March 31, 2021

Construction loans (2)

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(1) The carrying value of these loans includes an unamortized discount of $ 0.6 million and $ 0.1 million as of September 30, 2020 and December 31, 2019, respectively.

The Company's loans individually evaluated for impairment represents two loans on non-accrual status and the unamortized amounts associated with these loans are not currently being amortized into income.

(2) The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of $ 0.3 million and $ 0.7 million as of September 30, 2020 and December 31, 2019, respectively.

(1) The carrying value of this loan includes an unamortized discount of $ 0.8 million and $ 0.8 million as of March 31, 2021 and December 31, 2020, respectively.

The Company's loans individually evaluated for impairment represent loans on non-accrual status and the unamortized amounts associated with these loans are not currently being amortized into income.

(2) The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of $ 2.2 million and $ 2.3 million as of March 31, 2021 and December 31, 2020, respectively.

(3) Available-for-sale debt securities are evaluated for impairment under ASC 326-30.

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All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt.

The Company's amortized cost basis in performing senior mortgages, corporate/partnership loans, subordinate mortgages and financing receivables, presented by year of origination and by credit quality, as indicated by risk rating, as of September 30, 2020 were as follows ($ in thousands):

Year of Origination

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(1) As of September 30, 2020, excludes $ 87.3 million for two loans on non-accrual status.

(1) As of March 31, 2021, excludes $ 56.3 million for one loan on non-accrual status.

Notes to Consolidated Financial Statements (Continued)

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to 90 Days Greater

90 Days Total

Past Due Total

As of September 30, 2020

As of March 31, 2021

Senior mortgages $ 327,011 $ — $ — — $ 327,011

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Total $ 497,515 $ 85,447 $ — $ 85,447 $ 582,962

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(1) As of September 30, 2020 and December 31, 2019, the Company had one loan which was greater than 90 days delinquent and was in various stages of resolution, including legal and environmental matters, and was 11.3 years and 10.5 years outstanding, respectively.

Impaired Loans — The Company's impaired loans were as follows ($ in thousands):

As of September 30, 2020 As of December 31, 2019

Impaired Loans — The Company's impaired loan was as follows ($ in thousands):

As of March 31, 2021 As of December 31, 2020

Balance Related

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(1) The Company has two non-accrual loans as of September 30, 2020 and one non-accrual loan as of December 31, 2019 that are considered impaired and included in the table above.

The Company did no t record any interest income on impaired loans for the three and nine months ended September 30, 2020 and 2019.

(1) The Company has one non-accrual loan as of March 31, 2021 and December 31, 2020 that is considered impaired and included in the table above.

The Company did no t record any interest income on impaired loans for the three months ended March 31, 2021 and 2020.

Notes to Consolidated Financial Statements (Continued)

Loan receivable held for sale —In March 2021, the Company acquired land and simultaneously structured and entered into with the seller a Ground Lease on which a multi-family project will be constructed.

The Company funded $ 16.1 million at closing and the Ground Lease documents provide for future funding obligations of approximately $ 11.9 million of deferred purchase price and $ 52.0 million of leasehold improvement allowance upon achievement of certain milestones.

At closing, the Company entered into an agreement with SAFE pursuant to which, subject to certain conditions being met, SAFE will acquire the ground lessor from the Company.

The Company determined that the transaction did not qualify as a sale leaseback transaction and recorded the Ground Lease in "Loan receivable held for sale" on the Company's consolidated balance sheet as of March 31, 2021.

The Company received $ 2.7 million of consideration from SAFE in connection with this transaction.

Other lending investments — Other lending investments includes the following securities ($ in thousands):

Face Value Amortized Cost Basis Net Unrealized Gain Estimated Fair Value Net Carrying Value

As of September 30, 2020

As of March 31, 2021

Available-for-Sale Securities

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Total $ 120,680 $ 111,395 $ 4,594 $ 115,989 $ 115,989

Notes to Consolidated Financial Statements (Continued)

As of September 30, 2020, the contractual maturities of the Company's securities were as follows ($ in thousands):

As of March 31, 2021, the contractual maturities of the Company's securities were as follows ($ in thousands):

Held-to-Maturity Debt Securities Available-for-Sale Debt Securities

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Carrying Value

as of For the Three Months Ended September 30, For the Nine Months

Ended September 30,

September 30, 2020 December 31, 2019 2020 2019 2020 2019

as of For the Three Months Ended March 31,

March 31, 2021 December 31, 2020 2021 2020

Real estate equity investments

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(1) For the three months ended September 30, 2020 and 2019, earnings (losses) from equity method investments is net of the Company's pro rata share of $ 4.6 million and $ 3.5 million, respectively, of depreciation expense and $ 14.6 million and $ 8.2 million, respectively, of interest expense.

For the nine months ended September 30, 2020 and 2019, earnings (losses) from equity method investments is net of the Company's pro rata share of $ 13.4 million and $ 10.7 million, respectively, of depreciation expense and $ 44.0 million and $ 21.6 million, respectively, of interest expense.

(2) As of September 30, 2020, the Company owned 33.7 million shares of SAFE common stock which, based on the closing price of $ 62.10 on September 30, 2020, had a market value of $ 2.1 billion.

For the nine months ended September 30, 2020, equity in earnings includes a dilution gain of $ 7.9 million resulting from a SAFE equity offering in March 2020.

(3) During the three and nine months ended September 30, 2020, the Company identified observable price changes in an equity security held by the Company as evidenced by orderly private issuances of similar securities by the same issuer.

In accordance with ASC 321, the Company remeasured its equity investment at fair value and recognized aggregate mark-to-market gains of $ 14.0 million and $ 23.9 million, respectively, in "Other income" in the Company's consolidated statements of operations.

During the three and nine months ended September 30, 2019, equity in earnings (losses) includes $ 8.2 million of income resulting from the sale of a property at one of the Company's equity method investments.

(1) For the three months ended March 31, 2021 and 2020, earnings (losses) from equity method investments is net of the Company's pro rata share of $ 5.6 million and $ 4.0 million, respectively, of depreciation expense and $ 15.5 million and $ 13.7 million, respectively, of interest expense.

(2) As of March 31, 2021, the Company owned 34.8 million shares of SAFE common stock which, based on the closing price of $ 70.10 on March 31, 2021, had a market value of $ 2.4 billion.

For the three months ended March 31, 2021 and 2020, equity in earnings includes dilution gains of $ 0.5 million and $ 7.9 million, respectively, resulting from SAFE equity offerings.

(3) During the three months ended March 31, 2021 and 2020, the Company identified observable price changes in an equity security held by the Company as evidenced by orderly private issuances of similar securities by the same issuer.

In accordance with ASC 321, the Company remeasured its equity investment at fair value and recognized aggregate mark-to-market gains for the three months ended March 31, 2021 and 2020 of $ 5.1 million and $ 9.9 million, respectively, in "Other income" in the Company's consolidated statements of operations.

Safehold Inc.

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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").

As of September 30, 2020, the Company owned approximately 65.8 % of SAFE's common stock outstanding.

As of March 31, 2021, the Company owned approximately 65.4 % of SAFE's common stock outstanding.

In January 2019, the Company purchased 12.5 million newly designated limited partnership units (the "Investor Units") in SAFE's operating partnership ("SAFE OP"), at a purchase price of $ 20.00 per unit, for a total purchase price of $ 250.0 million.

The purpose of the investment was to allow SAFE to fund additional Ground Lease acquisitions and originations.

Each Investor Unit received distributions equivalent to distributions declared and paid on one share of SAFE's common stock.

The Investor Units had no voting rights.

They had limited protective consent rights over certain matters such as amendments to the terms of the Investor Units that would adversely affect the Investor Units.

In May 2019, after the approval of SAFE's stockholders, the Investor Units were exchanged for shares of SAFE's common stock on a one -for-one basis.

Following the exchange, the Investor Units were retired.

Notes to Consolidated Financial Statements (Continued)

In connection with the Company's purchase of the Investor Units, it entered into a Stockholder's Agreement with SAFE on January 2, 2019.

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• requires the Company to cast all of its voting power in favor of three director nominees to SAFE's board who are independent of each of the Company and SAFE for three years ;

• subjects the Company to certain standstill provisions for two years ;

• restricts the Company's ability to transfer shares of SAFE common stock issued in exchange for Investor Units, or "Exchange Shares," for one year after their issuance;

• prohibits the Company from transferring shares of SAFE common stock representing more than 20 % of the outstanding SAFE common stock in one transaction or a series of related transactions to any person or group, other than pursuant to a widely distributed public offering, unless SAFE's other stockholders have participation rights in the transaction;

• subjects the Company to certain standstill provisions;

• provides the Company certain preemptive rights.

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In addition, the Company is also the external manager of a venture in which SAFE is a member.

Following are the key terms of the management agreement:

Following are the key terms of the management agreement with SAFE:

Notes to Consolidated Financial Statements (Continued)

• The Company receives a fee equal to 1.0 % of total SAFE equity (as defined in the management agreement) up to $ 1.5 billion;

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• Automatic annual renewals thereafter, subject to non-renewal upon certain findings by SAFE's independent directors and payment of termination fee equal to three times the prior year's management fee.

During the three months ended September 30, 2020 and 2019, the Company recorded $ 3.2 million and $ 1.9 million, respectively, of management fees pursuant to its management agreement with SAFE.

During the nine months ended September 30, 2020 and 2019, the Company recorded $ 9.3 million and $ 5.0 million, respectively, of management fees pursuant to its management agreement with SAFE.

During the three months ended March 31, 2021 and 2020, the Company recorded $ 3.5 million and $ 2.9 million, respectively, of management fees pursuant to its management agreement with SAFE.

The Company is also entitled to receive certain expense reimbursements, including for the allocable costs of its personnel that perform certain legal, accounting, due diligence tasks and other services that third-party professionals or outside consultants otherwise would perform.

The Company has elected not to charge in full certain of the expense reimbursements while SAFE is growing its portfolio.

During the three months ended September 30, 2020 and 2019, the Company recognized $ 1.3 million and $ 0.5 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

During the nine months ended September 30, 2020 and 2019, the Company recognized $ 3.8 million and $ 1.6 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

During the three months ended March 31, 2021 and 2020, the Company recognized $ 1.9 million and $ 1.3 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

The Company has an exclusivity agreement with SAFE pursuant to which it agreed, subject to certain exceptions, that it will not acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless it has first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity.

Notes to Consolidated Financial Statements (Continued)

Following is a list of investments that the Company has transacted with SAFE, all of which were approved by the Company's and SAFE's independent directors, for the periods presented:

In August 2017, the Company committed to provide a $ 24.0 million loan to the ground lessee of a Ground Lease originated at SAFE.

The loan was for the renovation of a medical office building in Atlanta, GA.

The Company funded $ 18.4 million of the loan, which was fully repaid in August 2019.

During the three and nine months ended September 30, 2019, the Company recorded $ 0.3 million and $ 1.2 million, respectively, of interest income on the loan.

In October 2017, the Company closed on a 99 -year Ground Lease and a $ 80.5 million construction financing commitment to support the ground-up development of a to-be-built luxury multi-family project in San Jose, CA.

The transaction included a combination of:

(i) a newly created Ground Lease and a $ 7.2 million leasehold improvement allowance, which was fully funded as of September 30, 2020;

and (ii) a $ 80.5 million leasehold first mortgage.

As of September 30, 2020, $ 59.1 million of the leasehold first mortgage was funded.

During the three months ended September 30, 2020 and 2019, the Company recorded $ 0.9 million and $ 0.4 million, respectively, of interest income on the loan.

During the nine months ended September 30, 2020 and 2019, the Company recorded $ 2.5 million and $ 0.7 million, respectively, of interest income on the loan.

The Company sold the Ground Lease to SAFE in September 2020 for $ 34.0 million and recognized a gain of $ 6.1 million in "Income from sales of real estate" in connection with the sale.

In May 2018, the Company provided a $ 19.9 million leasehold mortgage loan to the ground lessee of a Ground Lease originated at SAFE.

The loan was for the acquisition of two multi-tenant office buildings in Atlanta, GA.

The loan was repaid in full in November 2019 and during the three and nine months ended September 30, 2019, the Company recorded $ 0.5 million and$ 1.6 million, respectively, of interest income on the loan.

(i) a newly created Ground Lease and a $ 7.2 million leasehold improvement allowance, which was fully funded as of March 31, 2021;

and (ii) an $ 80.5 million leasehold first mortgage.

During the three months ended March 31, 2021 and 2020, the Company recorded $ 0.3 million and $ 0.7 million, respectively, of interest income on the loan.

The Company sold the Ground Lease to SAFE in September 2020 for $ 34.0 million and sold the leasehold first mortgage to an entity in which the Company has a 53 % equity interest (refer to "Other strategic investments" below) in January 2021 for $ 63.3 million.

In January 2019, the Company committed to provide a $ 13.3 million loan to the ground lessee of a Ground Lease originated at SAFE.

The loan is for the conversion of an office building into a multi-family property in Washington, DC.

As of September 30, 2020 the loan was fully funded.

During the three months ended September 30, 2020 and 2019, the Company recorded $ 0.3 million and $ 0.3 million, respectively, of interest income on the loan.

During the nine months ended September 30, 2020 and 2019, the Company recorded $ 0.8 million and $ 0.7 million, respectively, of interest income on the loan.

In February 2019, the Company acquired the leasehold interest in an office property and simultaneously entered into a new 98 -year Ground Lease with SAFE (refer to Note 4).

In August 2019, the Company acquired the leasehold interest in a net lease asset and simultaneously entered into a new 99 -year Ground Lease with SAFE (refer to Note 4).

In June 2020, Net Lease Venture II (see below) acquired the leasehold interest in an office laboratory property in Honolulu, HI and simultaneously entered into a 99 year Ground Lease with SAFE.

The loan was for the conversion of an office building into a multi-family property.

The loan was repaid during the fourth quarter 2020.

During the three months ended March 31, 2020, the Company recorded $ 0.3 million of interest income on the loan.

In February 2021, the Company provided a $ 50.0 million loan to the ground lessee of a Ground Lease originated at SAFE.

The loan was for the Ground Lease tenant's recapitalization of a hotel property.

The Company received $ 1.9 million of consideration from SAFE in connection with this transaction.

As of March 31, 2021, $ 38.4 million of the loan was funded and during the three months ended March 31, 2021, the Company recorded $ 0.9 million of interest income on the loan.

In March 2021, the Company acquired land and simultaneously structured and entered into with the seller a Ground Lease on which a multi-family project will be constructed.

At closing, the Company entered into an agreement with SAFE pursuant to which, subject to certain conditions being met, SAFE will acquire the ground lessor from the Company (refer to Note 7 - Loan receivable held for sale).

The Company also committed to provide a $ 75.0 million construction loan to the Ground Lease tenant.

Net Lease Venture II —In July 2018, the Company entered into a new venture ("Net Lease Venture II") with an investment strategy similar to the Net Lease Venture.

The Net Lease Venture II has a right of first offer on all new net lease investments (excluding Ground Leases) originated by the Company.

Net Lease Venture II's investment period ends in June 2021.

Net Lease Venture II's investment period expires on June 30, 2021.

Net Lease Venture II is a voting interest entity and the Company has an equity interest in the venture of approximately 51.9 %.

The Company does not have a controlling interest in Net Lease Venture II due to the substantive participating rights of its partner.

The Company accounts for its investment in Net Lease Venture II as an equity method investment and is responsible for managing the venture in exchange for a management fee and incentive fee.

During the three months ended September 30, 2020 and 2019, the Company recorded $ 0.4 million and $ 0.4 million, respectively, of management fees from Net Lease Venture II.

During the nine months ended September 30, 2020 and 2019, the Company recorded $ 1.1 million and $ 1.1 million, respectively, of management fees from Net Lease Venture II.

In December 2019, Net Lease Venture II closed on a commitment to provide up to $ 150.0 million in net lease financing for the construction of three industrial centers and entered into a 25 year master lease with the tenant.

As of September 30, 2020, Net Lease Venture II had funded $ 81.6 million of its commitment.

The Company does not have a controlling interest in Net Lease Venture II due to the substantive

Notes to Consolidated Financial Statements (Continued)

In December 2019, Net Lease Venture II closed on the acquisition of two grocery distribution centers for $ 81.8 million, inclusive of assumed debt.

The properties are 100 % leased with two separate coterminous leveraged leases that expire in February 2026.

In December 2018, Net Lease Venture II acquired four buildings comprising 168,636 square feet located in Livermore, CA.

Net Lease Venture II acquired the buildings for $ 31.2 million which are 100 % leased with four separate leases that expire in December 2028.

Other real estate equity investments —As of September 30, 2020, the Company's other real estate equity investments include equity interests in real estate ventures ranging from 31 % to 95 %, comprised of investments of $ 61.3 million in operating properties and $ 30.4 million in land assets.

participating rights of its partner.

The Company accounts for its investment in Net Lease Venture II as an equity method investment and is responsible for managing the venture in exchange for a management fee and incentive fee.

During the three months ended March 31, 2021 and 2020, the Company recorded $ 0.4 million and $ 0.4 million, respectively, of management fees from Net Lease Venture II.

Other real estate equity investments —As of March 31, 2021, the Company's other real estate equity investments include equity interests in real estate ventures ranging from 33 % to 95 %, comprised of investments of $ 57.0 million in operating properties and $ 12.1 million in land assets.

As of December 31, 2020, the Company's other real estate equity investments included $ 58.7 million in operating properties and $ 31.2 million in land assets.

In August 2018, the Company provided a mezzanine loan with a principal balance of $ 33.0 million as of September 30, 2020 and December 31, 2019 to an unconsolidated entity in which the Company owns a 50 % equity interest.

As of September 30, 2020 and December 31, 2019, the loan is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheet.

During the three months ended September 30, 2020 and 2019, the Company recorded $ 0.6 million and $ 0.7 million, respectively, of interest income on the mezzanine loan.

During the nine months ended September 30, 2020 and 2019, the Company recorded $ 1.8 million and $ 2.1 million, respectively, of interest income on the mezzanine loan.

Other strategic investments —As of September 30, 2020 and December 31, 2019, the Company also had investments in real estate related funds and other strategic investments in real estate entities.

Summarized investee financial information — The following table presents the investee level summarized financial information of the Company's equity method investments that were significant as of September 30, 2020 ($ in thousands):

In August 2018, the Company provided a mezzanine loan with a principal balance of $ 33.0 million as of March 31, 2021 and December 31, 2020 to an unconsolidated entity in which the Company owns a 50 % equity interest.

The loan matures in August 2021.

As of March 31, 2021 and December 31, 2020, the loan is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheet.

During the three months ended March 31, 2021 and 2020, the Company recorded $ 0.6 million and $ 0.7 million, respectively, of interest income on the mezzanine loan.

Other strategic investments —As of March 31, 2021 and December 31, 2020, the Company also had investments in real estate related funds and other strategic investments in real estate entities.

In January 2021, the Company sold two loans for $ 83.4 million to a newly formed entity in which the Company has a 53.0 % noncontrolling equity interest.

The Company did no t recognize any gain or loss on the sales.

The Company does not have a controlling interest in this entity due to the substantive participating rights of its partner.

The Company accounts for this investment as an equity method investment and receives a fixed annual fee in exchange for managing the entity.

Summarized investee financial information — The following table presents the investee level summarized financial information for the Company's equity method investment that was significant as of March 31, 2021 ($ in thousands):

Revenues Expenses Net Income Attributable to Parent

For the Nine Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

SAFE $ 43,507 $ 27,174 $ 16,908

For the Nine Months Ended September 30, 2019

For the Three Months Ended March 31, 2020

SAFE $ 40,165 $ 23,587 $ 17,347

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Deferred expenses and other assets, net, consist of the following items ($ in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Intangible assets, net (1)

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(1) Intangible assets, net includes above market and in-place lease assets and lease incentives related to the acquisition of real estate assets.

Accumulated amortization on intangible assets, net was $ 42.2 million and $ 33.4 million as of September 30, 2020 and December 31, 2019, respectively.

The amortization of above market leases and lease incentive assets decreased operating lease income in the Company's consolidated statements of operations by $ 0.3 million and $ 0.4 million for the three months ended September 30, 2020 and 2019, respectively, and $ 1.0 million and $ 1.4 million for the nine months ended September 30, 2020 and 2019, respectively.

Accumulated amortization on intangible assets, net was $ 47.6 million and $ 44.4 million as of March 31, 2021 and December 31, 2020, respectively.

These intangible lease assets are amortized over the remaining term of the lease.

The amortization expense for in-place leases was $ 2.6 million and $ 2.4 million for the three months ended September 30, 2020 and 2019, respectively, and $ 7.9 million and $ 6.9 million for the nine months ended September 30, 2020 and 2019, respectively.

The amortization expense for in-place leases was $ 3.2 million and $ 2.7 million for the three months ended March 31, 2021 and 2020, respectively.

These amounts are included in "Depreciation and amortization" in the Company's consolidated statements of operations.

As of September 30, 2020, the weighted average amortization period for the Company's intangible assets was approximately 16.9 years.

As of March 31, 2021, the weighted average remaining amortization period for the Company's intangible assets was approximately 16.5 years.

(2) Right-of-use lease assets relate primarily to the Company's leases of office space and certain of its ground leases.

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The lease liability (see table below) equals the present value of the minimum rental payments due under the lease discounted at the rate implicit in the lease or the Company's incremental secured borrowing rate for similar collateral.

For operating leases, lease liabilities were discounted at the Company's weighted average incremental secured borrowing rate for similar collateral estimated to be 5.1 % and the weighted average lease term is 8.5 years.

For finance leases, lease liabilities were discounted at a weighted average rate implicit in the lease of 5.5 % and the weighted average lease term is 97.2 years.

For finance leases, lease liabilities were discounted at a weighted average rate implicit in the lease of 5.5 % and the weighted average remaining lease term is 96.7 years.

Right-of-use assets for finance leases are amortized on a straight-line basis over the term of the lease and are recorded in "Depreciation and amortization" in the Company's consolidated statements of operations.

During the three months ended September 30, 2020 and 2019, the Company recognized $ 2.0 million and $ 1.7 million, respectively, in "Interest expense" and $ 0.4 million and $ 0.3 million, respectively, in "Depreciation and amortization" in its consolidated statement of operations relating to finance leases.

During the nine months ended September 30, 2020 and 2019, the Company recognized $ 6.1 million and $ 3.0 million, respectively, in "Interest expense" and $ 1.1 million and $ 0.5 million, respectively, in "Depreciation and amortization" in its consolidated statement of operations relating to finance leases.

During the three months ended March 31, 2021 and 2020, the Company recognized $ 2.1 million and $ 2.0 million, respectively, in "Interest expense" and $ 0.4 million and $ 0.4 million, respectively, in "Depreciation and amortization" in its consolidated statement of operations relating to finance leases.

For operating leases, rent expense is recognized on a straight-line basis over the term of the lease and is recorded in "General and administrative" and "Real estate expense" in the Company's consolidated statements of operations.

During the three months ended September 30, 2020 and 2019, the Company recognized $ 1.2 million and $ 0.9 million, respectively, in "General and administrative" and $ 0.9 million and $ 0.9 million, respectively, in "Real estate expense" in its consolidated statement of operations relating to operating leases.

During the nine months ended September 30, 2020 and 2019, the Company recognized $ 3.4 million and $ 2.8 million, respectively, in "General and administrative" and $ 2.6 million and $ 2.6 million, respectively, in "Real estate expense" in its consolidated statement of operations relating to operating leases.

During the three months ended March 31, 2021 and 2020, the Company recognized $ 1.2 million and $ 1.0 million, respectively, in "General and administrative" and $ 0.9 million and $ 0.8 million, respectively, in "Real estate expense" in its consolidated statement of operations relating to operating leases.

(3) Other assets primarily includes prepaid expenses and deposits for certain real estate assets.

(4) Accumulated amortization of leasing costs was $ 2.5 million and $ 3.3 million as of September 30, 2020 and December 31, 2019, respectively.

(5) Accumulated depreciation on corporate furniture, fixtures and equipment was $ 14.0 million and $ 13.1 million as of September 30, 2020 and December 31, 2019, respectively.

(4) Accumulated amortization of leasing costs was $ 2.9 million and $ 2.6 million as of March 31, 2021 and December 31, 2020, respectively.

(5) Accumulated depreciation on corporate furniture, fixtures and equipment was $ 14.4 million and $ 14.3 million as of March 31, 2021 and December 31, 2020, respectively.

Notes to Consolidated Financial Statements (Continued)

Accounts payable, accrued expenses and other liabilities consist of the following items ($ in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Other liabilities (1)

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_______________________________________________________________________________

(1) As of September 30, 2020 and December 31, 2019, other liabilities includes $ 26.8 million and $ 27.5 million, respectively, of deferred income.

As of September 30, 2020 and December 31, 2019, other liabilities includes $ 20.8 million and $ 8.7 million, respectively, of derivative liabilities.

As of September 30, 2020, other liabilities includes $ 1.7 million of expected credit losses for unfunded loan commitments.

(1) As of March 31, 2021 and December 31, 2020, other liabilities includes $ 34.5 million and $ 36.9 million, respectively, of deferred income.

As of March 31, 2021 and December 31, 2020, other liabilities includes $ 14.2 million and $ 19.0 million, respectively, of derivative liabilities.

As of March 31, 2021 and December 31, 2020, other liabilities includes $ 1.3 million and $ 1.0 million, respectively, of expected credit losses for unfunded loan commitments.

(2) Intangible liabilities, net includes below market lease liabilities related to the acquisition of real estate assets.

Accumulated amortization on below market lease liabilities was $ 6.9 million and $ 5.0 million as of September 30, 2020 and December 31, 2019, respectively.

The amortization of below market leases increased operating lease income in the Company's consolidated statements of operations by $ 0.6 million and $ 0.7 million for the three months ended September 30, 2020 and 2019, respectively, and $ 1.9 million and $ 1.8 million for the nine months ended September 30, 2020 and 2019, respectively.

Accumulated amortization on below market lease liabilities was $ 8.1 million and $ 7.5 million as of March 31, 2021 and December 31, 2020, respectively.

The amortization of below market leases increased operating lease income in the Company's consolidated statements of operations by $ 0.6 million and $ 0.6 million for the three months ended March 31, 2021 and 2020, respectively.

Note 10— Loan Participations Payable, net

The Company's loan participations payable, net were as follows ($ in thousands):

Carrying Value as of

September 30, 2020 December 31, 2019

Loan participations payable (1)

$ 41,941 $ 35,656

Debt premiums, discounts and deferred financing costs, net ( 10 ) ( 18 )

Total loan participations payable, net $ 41,931 $ 35,638

_______________________________________________________________________________

(1) As of September 30, 2020 and December 31, 2019, the Company had one loan participation payable with an interest rate of 6.0 % and 6.3 %, respectively.

Loan participations represent transfers of financial assets that did not meet the sales criteria established under ASC Topic 860 and are accounted for as loan participations payable, net as of September 30, 2020 and December 31, 2019.

As of September 30, 2020 and December 31, 2019, the corresponding loan receivable balances were $ 41.9 million and $ 35.6 million, respectively, and are included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets.

The principal and interest due on these loan participations payable are paid from cash flows of the corresponding loans receivable, which serve as collateral for the participations.

The Company had one loan participation payable with a carrying value of $ 42.5 million and an interest rate of 6.0 % as of December 31, 2020.

The loan was repaid in the first quarter 2021.

As of December 31, 2020, the corresponding loan receivable balance was $ 42.5 million and is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets.

The principal and interest due on loan participations payable are paid from cash flows of the corresponding loans receivable, which serve as collateral for the participations.

Notes to Consolidated Financial Statements (Continued)

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Maturity Date

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Secured credit facilities and mortgages:

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Total secured credit facilities and mortgages (4)

Unsecured notes:

6.00 % senior notes (4)

1,205,641 1,212,950

5.25 % senior notes (5)

— 400,000 5.25 % —

Unsecured notes:

3.125 % senior convertible notes (5)

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Debt discounts and deferred financing costs, net (9)

( 26,798 ) ( 38,475 )

Total debt obligations, net (10)

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or (ii) LIBOR subject to a margin of 2.75 %.

(3) As of September 30, 2020, the weighted average interest rate of these loans is 4.4 %, inclusive of the effect of interest rate swaps.

(4) The Company repaid these senior notes in January 2020.

(5) The Company repaid these senior notes in September 2020.

(3) As of March 31, 2021, the weighted average interest rate of these loans is 4.4 %, inclusive of the effect of interest rate swaps.

(4) As of March 31, 2021, $ 2.1 billion net carrying value of assets served as collateral for the Company's secured debt obligations.

(5) The Company's 3.125 % senior convertible fixed rate notes due September 2022 (" 3.125 % Convertible Notes") are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding September 15, 2022.

The conversion rate as of September 30, 2020 was 69.7134 shares per $1,000 principal amount of 3.125 % Convertible Notes, which equals a conversion price of $ 14.34 per share.

The conversion rate as of March 31, 2021 was 70.716 shares per $1,000 principal amount of 3.125 % Convertible Notes, which equals a conversion price of $ 14.14 per share.

The conversion rate is subject to adjustment from time to time for specified events.

Upon conversion, the Company will pay or deliver, as the case may be, a combination of cash and shares of its common stock.

At issuance in September 2017, the Company valued the liability component at $ 221.8 million, net of fees, and the equity component of the conversion feature at $ 22.5 million, net of fees, and recorded the equity component in "Additional paid-in capital" on the Company's consolidated balance sheet.

In October 2017, the initial purchasers of the 3.125 % Convertible Notes exercised their option to purchase an additional $ 37.5 million aggregate principal amount of the 3.125 % Convertible Notes.

At issuance, the Company valued the liability component at $ 34.0 million, net of fees, and the equity component of the conversion feature at $ 3.4 million, net of fees, and recorded the equity component in "Additional paid-in capital" on the Company's consolidated balance sheet.

As of September 30, 2020, the carrying value of the 3.125 % Convertible Notes was $ 273.5 million, net of fees, and the unamortized discount of the 3.125 % Convertible Notes was $ 11.6 million, net of fees.

As of December 31, 2020, the carrying value of the 3.125 % Convertible Notes was $ 275.1 million, net of fees, and the unamortized discount of the 3.125 % Convertible Notes was $ 10.2 million, net of fees.

During the three months ended September 30, 2020 and 2019, the Company recognized $ 2.2 million and $ 2.2 million, respectively, of contractual interest and $ 1.3 million and $ 1.3 million, respectively, of discount amortization on the 3.125 % Convertible Notes.

During the nine months ended September 30, 2020 and 2019, the Company recognized $ 6.7 million and $ 6.7 million, respectively, of contractual interest and $ 3.9 million and $ 3.7 million, respectively, of discount amortization on the 3.125 % Convertible Notes.

The effective interest rate was 5.2 %.

Upon the adoption of ASU 2020-06 on January 1, 2021, the Company reclassed the unamortized discount to shareholders equity (refer to Note 3).

During the three months ended March 31, 2021, the Company recognized $ 2.2 million of contractual interest.

During the three months ended March 31, 2020, the Company recognized $ 2.2 million of contractual interest and $ 1.3 million of discount amortization on the 3.125 % Convertible Notes.

The effective interest rate for the three months ended March 31, 2020 was 5.2 %.

(6) The Company can prepay these senior notes without penalty beginning July 1, 2024.

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(8) The Company can prepay these senior notes without penalty beginning August 15, 2024.

(10) The Company capitalized interest relating to development activities of $ 0.5 million and $ 0.5 million during the three months ended September 30, 2020 and 2019, respectively, and $ 1.6 million and $ 6.9 million during the nine months ended September 30, 2020 and 2019, respectively.

(9) On January 1, 2021, the Company adopted ASU 2020-06 and reclassed $ 10.0 million of debt discount and unamortized fees from the 3.125 % Convertible Notes to shareholders' equity on the Company's consolidated balance sheet (refer to Note 3).

(10) The Company capitalized interest relating to development activities of $ 0.3 million and $ 0.5 million during the three months ended March 31, 2021 and 2020, respectively.

Notes to Consolidated Financial Statements (Continued)

Future Scheduled Maturities — As of September 30, 2020, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):

Future Scheduled Maturities — As of March 31, 2021, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):

Unsecured Debt Secured Debt Total

2020 (remaining three months) $ — $ — $ —

2021 (remaining nine months) — $ 101,519 $ 101,519

2022 287,500 96,406 383,906

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Total debt obligations, net $ 2,091,378 $ 1,199,965 $ 3,291,343

Senior Term Loan —In June 2018, the Company amended its senior term loan (the "Senior Term Loan") to increase the amount of the loan to $ 650.0 million, reduce the interest rate to LIBOR plus 2.75 % and extend its maturity to June 2023.

Senior Term Loan —The Company has a $ 650.0 million senior term loan (the "Senior Term Loan") that bears interest at LIBOR plus 2.75 % per annum and matures in June 2023.

The Senior Term Loan is secured by pledges of equity of certain subsidiaries that own a defined pool of assets.

The Senior Term Loan permits substitution of collateral, subject to overall collateral pool coverage and concentration limits, over the life of the facility.

The Company may make optional prepayments, subject to prepayment fees, and is required to repay 0.25 % of the principal amount each quarter.

Revolving Credit Facility —In September 2019, the Company amended its secured revolving credit facility (the "Revolving Credit Facility") to increase the maximum capacity to $ 350.0 million, extend the maturity date to September 2022 and make certain other changes.

Outstanding borrowings under the Revolving Credit Facility are secured by a pledge of the equity interests in the Company's subsidiaries that own a defined pool of assets.

The Company may make optional prepayments, subject to prepayment fees.

As of March 31, 2021, the outstanding balance on the Company's Senior Term Loan was $ 491.9 million.

Revolving Credit Facility —The Company has a secured revolving credit facility (the "Revolving Credit Facility") with a maximum capacity of $ 350.0 million that matures in September 2022.

Outstanding borrowings under the Revolving Credit Facility are secured by pledges of the equity interests in the Company's subsidiaries that own a defined pool of assets.

Borrowings under this credit facility bear interest at a floating rate indexed to one of several base rates plus a margin which adjusts upward or downward based upon the Company's corporate credit rating, ranging from 1.0 % to 1.5 % in the case of base rate loans and from 2.0 % to 2.5 % in the case of LIBOR loans.

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At maturity, the Company may convert outstanding borrowings to a one year term loan which matures in quarterly installments through September 2023.

As of September 30, 2020, based on the Company's borrowing base of assets, had the ability to draw $ 330.0 million without pledging any additional assets to the facility.

Unsecured Notes —In August 2020, the Company issued $ 400.0 million principal amount of 5.50 % senior unsecured notes due February 2026.

Proceeds from the offering, together with cash on hand, were used to repay in full the $ 400.0 million principal amount outstanding of the 5.25 % senior unsecured notes due September 2022.

In September 2019, the Company issued $ 675.0 million principal amount of 4.75 % senior unsecured notes due October 2024.

Proceeds from the offering, together with cash on hand, were used to repay in full the $ 400.0 million principal amount outstanding of the 4.625 % senior unsecured notes due September 2020 and the $ 275.0 million principal amount outstanding of the 6.50 % senior unsecured notes due July 2021.

In November 2019, the Company issued an additional $ 100.0 million principal amount of 4.75 % senior unsecured notes due October 2024 at 102 % of par, representing a yield to maturity of 4.29 %.

In December 2019, the Company issued $ 550.0 million principal amount of 4.25 % senior unsecured notes due August 2025.

Proceeds from the offering were used to redeem the $ 375.0 million principal amount outstanding ($ 110.5 million was redeemed in January 2020) of the 6.00 % senior unsecured notes due April 2022, repay a portion of the borrowings outstanding under the Senior Term Loan and pay related premiums and expenses in connection with the transaction.

During the nine months ended September 30, 2020 and 2019, repayments of unsecured notes prior to maturity resulted in losses on early extinguishment of debt of $ 12.0 million and $ 0.5 million, respectively.

Notes to Consolidated Financial Statements (Continued)

As of March 31, 2021, based on the Company's borrowing base of assets, had the ability to draw $ 350.0 million without pledging any additional assets to the facility.

Unsecured Notes —As of March 31, 2021, the Company has senior unsecured notes outstanding with varying fixed-rates and maturities ranging from September 2022 to February 2026.

The Company's senior unsecured notes are interest only, are generally redeemable at the option of the Company and contain certain financial covenants (see below).

During the three months ended March 31, 2020, repayments of unsecured notes prior to maturity resulted in losses on early extinguishment of debt of $ 4.1 million.

This amount is included in "Loss on early extinguishment of debt, net" in the Company's consolidated statements of operations.

Debt Covenants —The Company's outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness, as such terms are defined in the indentures governing the debt securities, of at least 1.2 x and a covenant restricting certain incurrences of debt based on a fixed charge coverage ratio.

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The Revolving Credit Facility is secured by a borrowing base of assets and requires the Company to maintain both borrowing base asset value of at least 1.5 x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least 1.5 x.

The Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the borrowing base asset value remains at least 1.5 x outstanding borrowings on the facility.

The Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided

Notes to Consolidated Financial Statements (Continued)

the borrowing base asset value remains at least 1.5 x outstanding borrowings on the facility.

To satisfy this covenant, the Company has the option to pay down outstanding borrowings or substitute assets in the borrowing base.

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These arrangements are referred to as Strategic Investments.

As of September 30, 2020, the maximum amount of fundings the Company may be required to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and that 100 % of its capital committed to Strategic Investments is drawn down, are as follows ($ in thousands):

Loans and Other Lending Investments (1)

Real Estate Other

As of March 31, 2021, the maximum amount of fundings the Company may be required to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and that 100 % of its capital committed to Strategic Investments is drawn down, are as follows ($ in thousands):

Loans and Other Lending Investments Real Estate Other

Investments Total

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Total $ 110,398 $ 69,734 $ 52,059 $ 232,191

_______________________________________________________________________________

(1) Excludes $ 8.0 million of commitments on loan participations sold that are not the obligation of the Company.

Notes to Consolidated Financial Statements (Continued)

Other Commitments — Future minimum lease obligations under operating and finance leases as of September 30, 2020 are as follows ($ in thousands):

Other Commitments — Future minimum lease obligations under operating and finance leases as of March 31, 2021 are as follows ($ in thousands):

Operating (1)(2)

2020 (remaining three months) $ 1,065 $ 1,357

2021 (remaining nine months) $ 2,975 $ 4,133

2022 6,756 5,604

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_______________________________________________________________________________

(1) During the three months ended September 30, 2020 and 2019, the Company made payments of $ 1.0 million and $ 1.0 million, respectively, related to its operating leases and $ 1.4 million and $ 1.1 million, respectively, related to its finance leases.

During the nine months ended September 30, 2020 and 2019, the Company made payments of $ 3.2 million and $ 3.0 million, respectively, related to its operating leases and $ 4.0 million and $ 2.0 million, respectively, related to its finance leases.

The weighted average lease term for the Company's operating leases, excluding operating leases for which the Company's tenants pay rent on its behalf, was 5.8 years and the weighted average discount rate was 5.0 %.

The weighted average lease term for the Company's finance leases was 97.2 years and the weighted average discount rate was 5.5 %.

(1) During the three months ended March 31, 2021 and 2020, the Company made payments of $ 0.8 million and $ 1.1 million, respectively, related to its operating leases and $ 1.4 million and $ 1.3 million, respectively, related to its finance leases with SAFE.

The weighted average remaining lease term for the Company's operating leases, excluding operating leases for which the Company's tenants pay rent on its behalf, was 5.3 years and the weighted average discount rate was 5.0 %.

The weighted average remaining lease term for the Company's finance leases was 96.7 years and the weighted average discount rate was 5.5 %.

(2) The Company is obligated to pay ground rent under certain operating leases;

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The amount shown above is the net present value of the payments to be made by the Company's tenants on its behalf.

Notes to Consolidated Financial Statements (Continued)

Future minimum lease obligations under non-cancelable operating and finance leases as of December 31, 2020 are as follows ($ in thousands):

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_______________________________________________________________________________

(1) The weighted average lease term for the Company's operating leases, excluding operating leases for which the Company's tenants pay rent on its behalf, was 4.2 years and the weighted average discount rate was 5.6 %.

The weighted average lease term for the Company's finance leases was 93 years and the weighted average discount rate was 5.4 %.

(1) The weighted average remaining lease term for the Company's operating leases, excluding operating leases for which the Company's tenants pay rent on its behalf, was 5.6 years and the weighted average discount rate was 5.0 %.

The weighted average remaining lease term for the Company's finance leases was 97 years and the weighted average discount rate was 5.5 %.

(2) The Company is obligated to pay ground rent under certain operating leases;

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Although not designated as hedges, such derivatives are entered into to manage the Company's exposure to interest rate movements and other identified risks.

Notes to Consolidated Financial Statements (Continued)

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2020 and December 31, 2019 ($ in thousands):

Derivative Assets Derivative Liabilities

As of September 30, 2020 Balance Sheet

Location Fair

Value Balance Sheet

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2021 and December 31, 2020 ($ in thousands):

Derivative Liabilities

As of March 31, 2021 Balance Sheet

Location Fair

Derivatives Designated in Hedging Relationships

Interest rate swaps Deferred expenses and other assets, net $ — Accounts payable, accrued expenses and other liabilities $ 20,818

Interest rate swaps Accounts payable, accrued expenses and other liabilities $ 14,178

Total $ 14,178

Derivative Assets Derivative Liabilities

Derivative Liabilities

As of December 31, 2020 Balance Sheet

Location Fair

Value Balance Sheet

Location Fair

Derivatives Designated in Hedging Relationships

Interest rate swaps Deferred expenses and other assets, net $ 114 Accounts payable, accrued expenses and other liabilities $ 8,680

Interest rate swaps Accounts payable, accrued expenses and other liabilities $ 18,926

Total $ 18,926

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When Recognized in Income Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings

For the Three Months Ended September 30, 2020

Interest rate swaps Earnings from equity method investments $ 598 $ ( 333 )

Interest rate swaps Interest expense ( 401 ) ( 2,038 )

For the Three Months Ended September 30, 2019

Interest rate swaps Interest Expense ( 3,009 ) ( 539 )

Interest rate swaps Earnings from equity method investments ( 6,082 ) ( 126 )

For the Nine Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

Interest rate swaps Earnings from equity method investments $ 8,656 $ ( 234 )

Interest rate swaps Interest expense 3,317 ( 2,104 )

For the Nine Months Ended September 30, 2019

For the Three Months Ended March 31, 2020

Interest rate swaps Interest Expense ( 12,604 ) ( 1,088 )

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Note 14— Equity

Preferred Stock —In December 2019, the Company issued an aggregate 16.5 million shares of its common stock upon conversion of its outstanding Series J Preferred Stock at a conversion rate of 4.125 shares of common stock per each share of Series J Preferred Stock.

The total carrying value of the Series J Preferred Stock prior to redemption was $ 193.5 million, net of discounts and fees, and was recorded in "Additional paid-in-capital" and "Convertible Preferred Stock Series J, liquidation preference $ 50.00 per share" on the Company's consolidated balance sheet prior to the conversion.

The Company had the following series of Cumulative Redeemable Preferred Stock outstanding as of September 30, 2020 and December 31, 2019:

Preferred Stock — The Company had the following series of Cumulative Redeemable Preferred Stock outstanding as of March 31, 2021 and December 31, 2020:

Cumulative Preferential Cash

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Dividends will be payable to holders of record as of the close of business on the first day of the calendar month in which the applicable dividend payment date falls or on another date designated by the Company's Board of Directors for the payment of dividends that is not more than 30 nor less than 10 days prior to the dividend payment date.

(2) The Company declared and paid dividends of $ 6.0 million, $ 4.6 million and $ 7.0 million on its Series D, G and I Cumulative Redeemable Preferred Stock during both the nine months ended September 30, 2020 and 2019.

The Company declared and paid dividends of $ 6.8 million on its Series J Convertible Perpetual Preferred Stock during the nine months ended September 30, 2019.

The character of the 2019 dividends was 100 % capital gain distribution, of which 34.01 % represented unrecaptured section 1250 gain.

(2) The Company declared and paid dividends of $ 2.0 million, $ 1.5 million and $ 2.3 million on its Series D, G and I Cumulative Redeemable Preferred Stock during both the three months ended March 31, 2021 and 2020.

The character of the 2020 dividends was 100 % return of capital.

There are no dividend arrearages on any of the preferred shares currently outstanding.

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The NOL carryforwards will begin to expire in 2032 and will fully expire in 2036 if unused.

The amount of NOL carryforwards as of December 31, 2020 will be determined upon finalization of the Company's 2020 tax return.

Because taxable income differs from cash flow from operations due to non-cash revenues and expenses (such as depreciation and certain asset impairments), in certain circumstances, the Company may generate operating cash flow in excess of its dividends, or alternatively, may need to make dividend payments in excess of operating cash flows.

The Senior Term Loan and the Revolving Credit Facility permit the Company to pay common dividends with no restrictions so long as the Company is not in default on any of its debt obligations.

The Company declared common stock dividends of $ 24.6 million, or $ 0.32 per share, for the nine months ended September 30, 2020 and $ 19.0 million, or $ 0.29 per share, for the nine months ended September 30, 2019.

The Company declared common stock dividends of $ 8.2 million, or $ 0.11 per share, for the three months ended March 31, 2021 and $ 7.8 million, or $ 0.10 per share, for the three months ended March 31, 2020.

The character of the 2020 dividends was 100 % return of capital.

Stock Repurchase Program —The Company may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans.

During the nine months ended September 30, 2020, the Company repurchased 3.7 million shares of its outstanding common stock for $ 41.4 million, for an average cost of $ 11.32 per share.

During the nine months ended September 30, 2019, the Company repurchased 6.2 million shares of its outstanding common stock for $ 58.8 million, for an average cost of $ 9.44 per share.

In August 2020, the Company's Board of Directors authorized an

During the three months ended March 31, 2021, the Company repurchased 0.7 million shares of its outstanding common stock for $ 12.4 million, for an average cost of $ 17.20 per share.

During the three months ended March 31, 2020, the Company repurchased 1.0 million shares of its outstanding common stock for $ 12.0 million, for an average cost of $ 12.51 per share.

In February 2021, the Company's Board of Directors authorized an increase to the stock repurchase program to $ 50.0 million.

As of March 31, 2021, the Company had remaining authorization to repurchase up to $ 40.1 million of common stock under its stock repurchase program.

Notes to Consolidated Financial Statements (Continued)

increase to the stock repurchase program to $ 50.0 million.

As of September 30, 2020, the Company had remaining authorization to repurchase up to $ 40.8 million of common stock under its stock repurchase program.

Accumulated Other Comprehensive Income (Loss) — "Accumulated other comprehensive income (loss)" reflected in the Company's shareholders' equity is comprised of the following ($ in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Unrealized gains on available-for-sale securities $ 3,563 $ 4,594

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Note 15— Stock-Based Compensation Plans and Employee Benefits

Stock-Based Compensation —The Company recorded stock-based compensation expense, including the expense related to performance incentive plans (see below), of $ 5.7 million and $ 26.7 million for the three and nine months ended September 30, 2020, respectively, and $ 6.7 million and $ 20.7 million for the three and nine months ended September 30, 2019, respectively, in "General and administrative" in the Company's consolidated statements of operations.

Stock-Based Compensation —The Company recorded stock-based compensation expense, including the expense related to performance incentive plans (see below), of $ 5.5 million and $ 16.3 million for the three months ended March 31, 2021 and 2020, respectively, in "General and administrative" in the Company's consolidated statements of operations.

Performance Incentive Plans —The Company's Performance Incentive Plans ("iPIP") are designed to provide, primarily to senior executives and select professionals engaged in the Company's investment activities, long-term compensation which has a direct relationship to the realized returns on investments included in the plans.

Awards vest over six years , with 40 % being vested at the end of the second year and 15 % each year thereafter.

2019-2020 iPIP Plan —The Company's 2019-2020 iPIP plan is an equity-classified award which is measured at the grant date fair value and recognized as compensation cost in "General and administrative" in the Company's consolidated statements of operations and "Noncontrolling interests" in the Company's consolidated statements of changes in equity over the requisite service period.

Investments in the 2019-2020 iPIP plan will be held by a consolidated subsidiary of the Company that has two ownership classes, class A units and class B units.

2019-2022 iPIP Plans —The Company's 2019-2020 and 2021-2022 iPIP plans are equity-classified awards which are measured at the grant date fair value and recognized as compensation cost in "General and administrative" in the Company's consolidated statements of operations and "Noncontrolling interests" in the Company's consolidated statements of changes in equity over the requisite service period.

Investments in the 2019-2022 iPIP plans are held by consolidated subsidiaries of the Company and have two ownership classes, class A units and class B units.

The Company owns 100 % of the class A units and the class B units were issued to employees as long-term compensation.

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The fair value of the class B units was determined using a model that forecasts the underlying cash flows from the investments within the entity to which the class B units have ownership rights.

During the nine months ended September 30, 2020 and 2019, the Company recorded $ 2.5 million and $ 2.0 million, respectively, of expense related to the 2019-2020 iPIP plan.

During the three months ended March 31, 2021 and 2020, the Company recorded $ 1.4 million and $ 0.7 million, respectively, of expense related to the 2019-2022 iPIP plans.

Distributions on the class B units will be 50 % in cash and 50 % in shares of the Company's common stock or in shares of SAFE's common stock owned by the Company.

The following is a summary of the status of the Company’s equity-classified iPIP plans and changes during the three months ended March 31, 2021.

iPIP Investment Pool

2019-2020 2021-2022

Points at beginning of period 97.40 —

Granted — 94.00

Forfeited ( 0.20 ) —

Points at end of period 97.20 94.00

2013-2018 iPIP Plans —The remainder of the Company's iPIP plans, as shown in the table below, are liability-classified awards and are remeasured each reporting period at fair value until the awards are settled.

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Settlement of the awards will be 50 % in cash and 50 % in shares of the Company's common stock or in shares of SAFE's common stock owned by the Company.

The following is a summary of the status of the Company’s liability-classified iPIP plans and changes during the nine months ended September 30, 2020.

Notes to Consolidated Financial Statements (Continued)

The following is a summary of the status of the Company’s liability-classified iPIP plans and changes during the three months ended March 31, 2021.

iPIP Investment Pool

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Points at end of period 80.17 70.40 73.34

Notes to Consolidated Financial Statements (Continued)

During the nine months ended September 30, 2020 and 2019, the Company recorded $ 20.2 million and $ 14.1 million, respectively, of expense related to the 2013-2018 iPIP plans.

During the nine months ended September 30, 2020, the Company made distributions to participants in the 2015-2016 investment pool.

During the three months ended March 31, 2021 and 2020, the Company recorded $ 2.4 million and $ 14.3 million, respectively, of expense related to the 2013-2018 iPIP plans.

During the three months ended March 31, 2021, the Company made distributions to participants in the 2015-2016 investment pool.

The iPIP participants received total distributions in the amount of $ 2.8 million as compensation, comprised of cash and 86,807 shares of the Company's common stock with a fair value of $ 17.72 per share, which are fully-vested and issued under the 2009 LTIP (see below).

After deducting statutory minimum tax withholdings, a total of 51,854 shares of the Company's common stock were issued.

During the nine months ended September 30, 2019, the Company made distributions to participants in the 2013-2014 investment pool.

The iPIP participants received total distributions in the amount of $ 7.4 million as compensation, comprised of cash and 389,545 shares of the Company's common stock, with a fair value of $ 9.21 per share, which are fully-vested and issued under the 2009 LTIP (see below).

During the three months ended March 31, 2020, the Company made distributions to participants in the 2015-2016 investment pool.

The iPIP participants received total distributions in the amount of $ 1.5 million as compensation, comprised of cash and 54,245 shares of the Company's common stock with a fair value of $ 14.51 per share, which are fully-vested and issued under the 2009 LTIP.

After deducting statutory minimum tax withholdings, a total of 32,825 shares of the Company's common stock were issued.

As of September 30, 2020 and December 31, 2019, the Company had accrued compensation costs relating to iPIP of $ 58.6 million and $ 41.9 million, respectively, which are included in "Accounts payable, accrued expenses and other liabilities" on the Company's consolidated balance sheets.

As of March 31, 2021 and December 31, 2020, the Company had accrued compensation costs relating to iPIP of $ 68.6 million and $ 69.1 million, respectively, which are included in "Accounts payable, accrued expenses and other liabilities" on the Company's consolidated balance sheets.

Long-Term Incentive Plan —The Company's 2009 Long-Term Incentive Plan (the "2009 LTIP") is designed to provide incentive compensation for officers, key employees, directors and advisors of the Company.

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In May 2019, the Company's shareholders approved an increase in the number of shares available for issuance under the 2009 LTIP from a maximum of 8.0 million to 8.9 million and extended the expiration date of the 2009 LTIP from May 2019 to May 2029.

As of September 30, 2020, an aggregate of 2.4 million shares remain available for issuance pursuant to future awards under the Company's 2009 LTIP.

Restricted Stock Unit Activity — A summary of the Company’s stock-based compensation awards to certain employees in the form of long-term incentive awards for the nine months ended September 30, 2020, is as follows (in thousands):

As of March 31, 2021, an aggregate of 2.1 million shares remain available for issuance pursuant to future awards under the Company's 2009 LTIP.

Restricted Stock Unit Activity — A summary of the Company’s stock-based compensation awards to certain employees in the form of long-term incentive awards for the three months ended March 31, 2021, is as follows (in thousands):

Nonvested at beginning of period 531

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Nonvested at end of period 751

As of September 30, 2020, there was $ 3.3 million of total unrecognized compensation cost related to all unvested restricted stock units that are expected to be recognized over a weighted average remaining vesting/service period of 1.2 years.

Directors' Awards —During the nine months ended September 30, 2020, the Company granted 79,138 restricted shares of common stock to non-employee Directors at a fair value of $ 9.75 at the time of grant for their annual equity awards, 10,710 restricted shares of common stock to a non-employee Director at a fair value of $ 11.52 at the time of grant for their annual equity awards and also issued 2,438 common stock equivalents ("CSEs") at a fair value of $ 11.48 per CSE in respect of dividend equivalents on outstanding CSEs.

As of September 30, 2020, a combined total of 178,864 CSEs and restricted shares of common stock granted to members of the Company's Board of Directors remained outstanding under the Company's Non-Employee Directors Deferral Plan, with an aggregate intrinsic value of $ 2.1 million.

401(k) Plan —The Company made contributions of $ 0.2 million and $ 0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $ 1.0 million and $ 0.8 million for the nine months ended September 30, 2020 and 2019, respectively.

As of March 31, 2021, there was $ 8.0 million of total unrecognized compensation cost related to all unvested restricted stock units that are expected to be recognized over a weighted average remaining vesting/service period of 1.9 years.

Directors' Awards —During the three months ended March 31, 2021, the Company issued 545 common stock equivalents ("CSEs") at a fair value of $ 18.10 per CSE in respect of dividend equivalents on outstanding CSEs.

As of March 31, 2021, a combined total of 180,067 CSEs and restricted shares of common stock granted to members of the Company's Board of Directors remained outstanding under the Company's Non-Employee Directors Deferral Plan, with an aggregate intrinsic value of $ 3.2 million.

Notes to Consolidated Financial Statements (Continued)

401(k) Plan —The Company made contributions of $ 0.5 million and $ 0.7 million for the three months ended March 31, 2021 and 2020, respectively.

Note 16— Earnings Per Share

The following table presents a reconciliation of income from operations used in the basic and diluted earnings per share ("EPS") calculations ($ in thousands, except for per share data):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2019 2020 2019

For the Three Months Ended March 31,

Net income (loss) $ 7,989 $ ( 12,885 )

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Preferred dividends ( 5,874 ) ( 5,874 )

Net income (loss) allocable to common shareholders for basic earnings per common share $ ( 2,069 ) $ ( 7,343 ) $ ( 46,850 ) $ 337,807

Effect of Series J convertible perpetual preferred stock — — — 6,750

Net income (loss) allocable to common shareholders for diluted earnings per common share $ ( 2,069 ) $ ( 7,343 ) $ ( 46,850 ) $ 344,557

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2019 2020 2019

Net loss allocable to common shareholders for basic and diluted earnings per common share $ ( 405 ) $ ( 21,450 )

For the Three Months Ended March 31,

Earnings allocable to common shares:

Numerator for basic earnings per share:

Net income (loss) attributable to iStar Inc.

and allocable to common shareholders $ ( 2,069 ) $ ( 7,343 ) $ ( 46,850 ) $ 337,807

Numerator for diluted earnings per share:

Net income (loss) attributable to iStar Inc.

Numerator for basic and diluted earnings per share:

Net loss attributable to iStar Inc.

and allocable to common shareholders $ ( 405 ) $ ( 21,450 )

Denominator for basic and diluted earnings per share:

Weighted average common shares outstanding for basic earnings per common share 75,033 62,168 76,232 64,624

Effect of assumed shares issued under treasury stock method for restricted stock units — — — 114

Effect of series J convertible perpetual preferred stock — — — 16,138

Weighted average common shares outstanding for diluted earnings per common share 75,033 62,168 76,232 80,876

Basic earnings per common share:

Net income (loss) allocable to common shareholders $ ( 0.03 ) $ ( 0.12 ) $ ( 0.61 ) $ 5.23

Diluted earnings per common share:

Net income (loss) allocable to common shareholders $ ( 0.03 ) $ ( 0.12 ) $ ( 0.61 ) $ 4.26

Weighted average common shares outstanding for basic and diluted earnings per common share 73,901 77,444

Basic and diluted earnings per common share:

Net loss allocable to common shareholders $ ( 0.01 ) $ ( 0.28 )

____________________________________________________________

(1) For the three months ended September 30, 2019, 16,306 of Series J convertible perpetual preferred stock was anti-dilutive.

For the three and nine months ended September 30, 2019, the effect of certain of the Company's restricted stock awards were anti-dilutive.

The Company will settle conversions of the 3.125 % Convertible Notes (refer to Note 11) by paying the conversion value in cash up to the original principal amount of the notes being converted and shares of common stock to the extent of any conversion premium.

The amount of cash and shares of common stock, if any, due upon conversion will be based on a daily conversion value calculated for each trading day in a 40 consecutive day observation period.

Based upon the conversion price of the 3.125 % Convertible Notes, no shares of common stock would have been issuable upon conversion of the 3.125 % Convertible Notes for the three and nine months ended September 30, 2020 and 2019 and therefore the 3.125 % Convertible Notes had no effect on diluted EPS for such period.

Notes to Consolidated Financial Statements (Continued)

(1) For the three months ended March 31, 2021 and 2020, the effect of the Company's restricted stock awards were anti-dilutive.

For the three months ended March 31, 2021, 2,893,787 shares of the 3.125 % Convertible Notes (refer to Note 11) were anti-dilutive based upon the conversion price for such period.

For the three months ended March 31, 2020, no shares of common stock would have been issuable upon conversion of the 3.125 % Convertible Notes, and therefore the 3.125 % Convertible Notes had no effect on diluted EPS for such period.

Note 17— Fair Values

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(Level 2) Significant

As of September 30, 2020

As of March 31, 2021

Recurring basis:

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24,043 — — 24,043

Loan receivable held for sale (refer to Note 7) 16,086 — — 16,086

Non-recurring basis:

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Recurring basis:

Derivative assets (1)

$ 114 $ — $ 114 $ —

Derivative liabilities (1)

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The fair value of the Company's available-for-sale securities are based upon unadjusted third-party broker quotes and are classified as Level 3.

(2) During the three months ended September 30, 2020, the Company identified an observable price change in an equity security held by the Company as evidenced by an orderly private issuance of similar securities by the same issuer and, as such, classified such observable price change as Level 2.

(3) The Company recorded aggregate impairments of $ 5.3 million on two land and development assets with an estimated aggregate fair value of $ 40.0 million.

The estimated fair values are based on expected sales proceeds.

The following table summarizes changes in Level 3 available-for-sale securities reported at fair value on the Company's consolidated balance sheets for the nine months ended September 30, 2020 and 2019 ($ in thousands):

(2) During the three months ended March 31, 2021, the Company identified an observable price change in an equity security held by the Company as evidenced by an orderly private issuance of similar securities by the same issuer and, as such, classified such observable price change as Level 2.

(3) The Company recorded a $ 1.3 million impairment on a land and development asset with an estimated fair value of $ 6.1 million.

The estimated fair value is based on future cash flows expected to be received.

The following table summarizes changes in Level 3 available-for-sale securities reported at fair value on the Company's consolidated balance sheets for the three months ended March 31, 2021 and 2020 ($ in thousands):

Beginning balance $ 25,274 $ 23,896

Repayments ( 200 ) ( 459 )

Unrealized gains recorded in other comprehensive income 1,195 2,486

Unrealized gains (losses) recorded in other comprehensive income ( 1,031 ) 203

Ending balance $ 24,043 $ 23,640

Fair values of financial instruments— The Company's estimated fair values of its loans receivable and other lending investments and outstanding debt was $ 0.8 billion and $ 3.3 billion, respectively, as of September 30, 2020 and $ 0.9 billion and $ 3.6 billion, respectively, as of December 31, 2019.

The Company determined that the significant inputs used to value its loans receivable and other lending investments and debt obligations fall within Level 3 of the fair value hierarchy.

The carrying value of other financial instruments including cash and cash equivalents, restricted cash and net investment in leases, approximate the fair values of the instruments.

Cash and cash equivalents and restricted cash values are considered Level 1 on the fair value hierarchy.

The fair value of other financial instruments, including derivative assets and liabilities, are included in the fair value hierarchy table above.

Notes to Consolidated Financial Statements (Continued)

Fair values of financial instruments— The following table presents the carrying value and fair value for the Company's financial instruments ($ in millions):

As of March 31, 2021 As of December 31, 2020

Value Carrying

Net investment in leases (1)

$ 431 $ 440 $ 429 $ 431

Loans receivable and other lending investments, net (1)

534 578 732 772

Cash and cash equivalents (2)

194 194 99 99

Restricted cash (2)

Loan participations payable, net (1)

Debt obligations, net (1)(3)

3,291 3,449 3,287 3,414

_______________________________________________________________________________

(1) The fair value of the Company's net investment in leases, loans receivable and other lending investments, net, loan participations payable, net and debt obligations, net are classified as Level 3 within the fair value hierarchy.

(2) The Company determined the carrying values of its cash and cash equivalents and restricted cash approximated their fair values.

Restricted cash is recorded in "Deferred expenses and other assets, net" on the Company's balance sheet.

The fair value of the Company's cash and cash equivalents and restricted cash are classified as Level 1 within the fair value hierarchy.

(3) As of March 31, 2021 and December 31, 2020, the fair value of the Company's 3.125 % Senior Convertible Notes was $ 377.8 million and $ 338.8 million, respectively.

Note 18— Segment Reporting

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Net Lease, Real Estate Finance, Operating Properties and Land and Development.

The Net Lease segment includes the Company's activities and operations related to the ownership of properties generally leased to single corporate tenants and its investment in SAFE (refer to Note 8).

The Net Lease segment includes the Company's activities and operations related to the ownership of properties generally leased to single corporate tenants and its investments in SAFE and Net Lease Venture II (refer to Note 8).

The Real Estate Finance segment includes all of the Company's activities related to senior and mezzanine real estate loans and real estate related securities.

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Company Total

Three Months Ended September 30, 2020:

Operating lease income $ 41,144 $ — $ 5,137 $ 89 $ — $ 46,370

Interest income 911 13,359 — — — 14,270

Interest income from sales-type leases 8,360 — — — — 8,360

Other income 4,554 104 2,956 3,831 14,107 25,552

Land development revenue — — — 20,502 — 20,502

Earnings (losses) from equity method investments 10,141 — ( 4,134 ) 592 206 6,805

Income from sales of real estate 6,055 — — — — 6,055

Total revenue and other earnings 71,165 13,463 3,959 25,014 14,313 127,914

Real estate expense ( 7,136 ) — ( 4,428 ) ( 5,371 ) — ( 16,935 )

Land development cost of sales — — — ( 21,358 ) — ( 21,358 )

Other expense — ( 37 ) — — ( 36 ) ( 73 )

Allocated interest expense ( 26,049 ) ( 5,831 ) ( 2,289 ) ( 4,606 ) ( 3,632 ) ( 42,407 )

Allocated general and administrative (2)

( 5,161 ) ( 1,451 ) ( 582 ) ( 2,320 ) ( 4,693 ) ( 14,207 )

Segment profit (loss) (3)

$ 32,819 $ 6,144 $ ( 3,340 ) $ ( 8,641 ) $ 5,952 $ 32,934

Other significant items:

Provision for (recovery of) loan losses $ 19 $ ( 1,995 ) $ — $ — $ — $ ( 1,976 )

Provision for losses on net investment in leases 175 — — — — 175

Depreciation and amortization 12,781 — 1,287 243 310 14,621

Capitalized expenditures 1,896 — 84 5,170 — 7,150

Three Months Ended September 30, 2019:

Three Months Ended March 31, 2021:

Operating lease income $ 42,513 $ — $ 4,837 $ 94 $ — $ 47,444

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Recovery of loan losses $ ( 152 ) $ ( 3,642 ) $ — $ — $ — $ ( 3,794 )

Recovery of losses on net investment in leases ( 1,601 ) — — — — ( 1,601 )

Impairment of assets 1,528 — 257 — — 1,785

Depreciation and amortization 13,054 — 1,988 218 195 15,455

Capitalized expenditures 1,268 — 57 4,739 — 6,064

Notes to Consolidated Financial Statements (Continued)

Lease Real Estate Finance Operating Properties Land and Development Corporate/Other (1)

Company Total

Nine Months Ended September 30, 2020:

Three Months Ended March 31, 2020:

Operating lease income $ 41,464 $ — $ 5,774 $ 108 $ — $ 47,346

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Earnings (losses) from equity method investments 19,531 — ( 2,667 ) 584 ( 836 ) 16,612

Income from sales of real estate 6,056 — 62 — — 6,118

Total revenue and other earnings 74,466 16,699 6,264 81,492 11,152 190,073

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$ 36,770 $ 8,384 $ ( 4,447 ) $ ( 11,562 ) $ ( 96 ) $ 29,049

Other significant non-cash items:

Other significant items:

Provision for loan losses $ 137 $ 3,866 $ — $ — $ — $ 4,003

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Capitalized expenditures 1,846 — 917 12,027 — 14,790

Nine Months Ended September 30, 2019:

Operating lease income $ 136,150 $ — $ 21,844 $ 216 $ — $ 158,210

Interest income 1,197 59,220 — — — 60,417

Interest income from sales-type leases 12,157 — — — — 12,157

Other income 12,705 2,836 13,960 6,877 6,755 43,133

Land development revenue — — — 76,691 — 76,691

Earnings (losses) from equity method investments 13,660 — ( 166 ) 2,910 162 16,566

Selling profit from sales-type leases 180,416 — — — — 180,416

Income from sales of real estate 223,200 — 10,206 — — 233,406

Total revenue and other earnings 579,485 62,056 45,844 86,694 6,917 780,996

Real estate expense ( 18,335 ) — ( 28,646 ) ( 24,184 ) — ( 71,165 )

Land development cost of sales — — — ( 71,785 ) — ( 71,785 )

Other expense — ( 359 ) — — ( 12,439 ) ( 12,798 )

Allocated interest expense ( 70,548 ) ( 23,251 ) ( 7,859 ) ( 15,888 ) ( 19,305 ) ( 136,851 )

Allocated general and administrative (2)

( 19,299 ) ( 6,523 ) ( 2,214 ) ( 9,199 ) ( 14,583 ) ( 51,818 )

Segment profit (loss) (3)

$ 471,303 $ 31,923 $ 7,125 $ ( 34,362 ) $ ( 39,410 ) $ 436,579

Other significant non-cash items:

Recovery of loan losses $ — $ ( 3,792 ) $ — $ — $ — $ ( 3,792 )

Impairment of assets — — 3,853 1,100 — 4,953

Depreciation and amortization 38,242 — 3,701 733 910 43,586

Capitalized expenditures 12,707 — 4,878 86,029 — 103,614

Notes to Consolidated Financial Statements (Continued)

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Company Total

As of September 30, 2020

As of March 31, 2021

Real estate, net

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Loans receivable and other lending investments, net 46,411 487,305 — — — 533,716

Loan receivable held for sale 16,086 — — — — 16,086

Other investments 1,040,238 44,672 56,977 12,107 83,301 1,237,295

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This caption also includes the Company's joint venture investments and strategic investments that are not included in the other reportable segments above.

(2) General and administrative excludes stock-based compensation expense of $ 5.7 million and $ 26.7 million for the three and nine months ended September 30, 2020, respectively, and $ 6.7 million and $ 20.7 million for the three and nine months ended September 30, 2019, respectively.

(2) General and administrative excludes stock-based compensation expense of $ 5.5 million and $ 16.3 million for the three months ended March 31, 2021 and 2020, respectively.

(3) The following is a reconciliation of segment profit to net income (loss) ($ in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2020 2019 2020 2019

For the Three Months Ended March 31,

Segment profit $ 24,677 $ 29,049

Recovery of (provision for) loan losses 3,794 ( 4,003 )

Provision for losses on net investment in leases ( 175 ) — ( 2,001 ) —

Recovery of (provision for) losses on net investment in leases 1,601 ( 1,292 )

Impairment of assets ( 1,785 ) ( 1,708 )

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Depreciation and amortization ( 15,455 ) ( 14,486 )

Income tax expense ( 78 ) ( 84 ) ( 165 ) ( 323 )

Income tax benefit (expense) 665 ( 60 )

Loss on early extinguishment of debt, net — ( 4,115 )

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements