What changed in this filing

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Item 1. Financial Statements

2021-08-03 compared with 2021-04-29 · 426 added, 458 removed, 728 unchanged (55% of the section changed)

2 unchanged sentences

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

2021 December 31,

Real estate, at cost

3 unchanged sentences

Total real estate

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

Net investment in leases ($ 9,005 and $ 10,871 of allowances as of June 30, 2021 and December 31, 2020, respectively)

Land and development, net

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 —

Loans receivable and other lending investments, net ($ 7,135 and $ 13,170 of allowances as of June 30, 2021 and December 31, 2020, respectively)

Loans receivable held for sale

Other investments

Cash and cash equivalents

Finance lease right of use assets

Accrued interest and operating lease income receivable, net

1 unchanged sentence

Deferred expenses and other assets, net

Total assets $ 4,793,591 $ 4,861,808

LIABILITIES AND EQUITY

Accounts payable, accrued expenses and other liabilities

Finance lease liabilities

Liabilities associated with properties held for sale

5 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, 73,440 and 73,967 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Common Stock, $ 0.001 par value, 200,000 shares authorized, 72,419 and 73,967 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

( 2,338,454 )

( 2,316,972 )

Accumulated other comprehensive loss (refer to Note 14)

2 unchanged sentences

Noncontrolling interests

Total equity 1,051,007 1,064,383

Total liabilities and equity

_______________________________________________________________________________

(1) Refer to Note 2 for details on the Company’s consolidated variable interest entities (“VIEs”).

2 unchanged sentences

(In thousands, except per share data)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Operating lease income

1 unchanged sentence

Interest income from sales-type leases

Other income 14,290 20,368

Land development revenue

15 unchanged sentences

Earnings from equity method investments

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

Income tax benefit (expense) 665 ( 60 )

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

Net loss before income taxes

Income tax expense

Net (income) attributable to noncontrolling interests

Net income (loss) attributable to iStar Inc.

5,469 ( 15,576 )

Net loss attributable to iStar Inc.

Preferred dividends

2 unchanged sentences

Net loss allocable to common shareholders:

Basic $ ( 0.01 ) $ ( 0.28 )

Diluted $ ( 0.01 ) $ ( 0.28 )

Weighted average number of common shares:

Basic 73,901 77,444

Diluted 73,901 77,444

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

1 unchanged sentence

(In thousands)

For the Three Months Ended March 31,

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Other comprehensive income (loss):

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

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

Unrealized gains (losses) on available-for-sale securities

Unrealized gains (losses) on cash flow hedges

3 unchanged sentences

Comprehensive income (loss) attributable to iStar Inc.

$ 16,291 $ ( 36,391 )

_______________________________________________________________________________

(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.

(1) Amounts reclassified to “Interest expense” in the Company’s consolidated statements of operations for the three months ended June 30, 2021 and 2020 are $ 2,029 and $ 1,799 , respectively, and amounts reclassified to “Interest expense” in the Company’s consolidated statements of operations for the six months ended June 30, 2021 and 2020 are $ 4,133 and $ 2,887 , respectively.

Amounts reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the three months ended June 30, 2021 and 2020 are $ 457 and $ 307 , respectively, and amounts reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the six months ended June 30, 2021 and 2020 are $ 691 and $ 533 , respectively.

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

2 unchanged sentences

Shareholders' Equity

Par Additional

Capital Retained

(Deficit) Accumulated

Comprehensive

Income (Loss) Noncontrolling

Interests Total

Balance as of December 31, 2020 $ 12 $ 74 $ 3,240,535 $ ( 2,316,972 ) $ ( 52,680 ) $ 193,414 $ 1,064,383

Impact from adoption of new accounting standards (refer to Note 3) — — ( 25,869 ) 15,850 — — ( 10,019 )

Noncontrolling

Income (Loss)

Balance as of March 31, 2021

( 2,309,763 )

Dividends declared—preferred

Dividends declared—common ($ 0.125 per share)

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

Net income (loss)

Change in accumulated other comprehensive income (loss)

Repurchase of stock

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Balance as of June 30, 2021

( 2,338,454 )

Balance as of March 31, 2020

( 2,247,504 )

Dividends declared—preferred

Dividends declared—common ($ 0.11 per share)

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

Net income (loss)

Change in accumulated other comprehensive income (loss)

Repurchase of stock

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Balance as of June 30, 2020

( 2,279,284 )

Net income — — — 5,469 — 2,520 7,989

Shareholders' Equity

Comprehensive

Noncontrolling

Income (Loss)

Balance as of December 31, 2020

( 2,316,972 )

Impact from adoption of new accounting standards (refer to Note 3)

Dividends declared—preferred

Dividends declared—common ($ 0.235 per share)

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

Net income (loss)

Change in accumulated other comprehensive income (loss)

2 unchanged sentences

Distributions to noncontrolling interests

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

Balance as of June 30, 2021

( 2,338,454 )

Balance as of December 31, 2019

( 2,205,838 )

Impact from adoption of new accounting standards

1 unchanged sentence

Dividends declared—common ($ 0.21 per share)

— — — ( 7,834 ) — — ( 7,834 )

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

— 2,222 — — 727 2,949

Net income (loss)

3 unchanged sentences

Distributions to noncontrolling interests

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

Balance as of June 30, 2020

( 2,279,284 )

4 unchanged sentences

(In thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

18 unchanged sentences

Changes in assets and liabilities:

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

Origination and fundings of loans receivable held for sale

Changes in accrued interest and operating lease income receivable

1 unchanged sentence

Changes in accounts payable, accrued expenses and other liabilities

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

Cash flows used in operating activities

Cash flows from investing activities:

2 unchanged sentences

Capital expenditures on land and development assets

Acquisitions of real estate, net investments in leases and land assets

Repayments of and principal collections on loans receivable and other lending investments, net

1 unchanged sentence

Net proceeds from sales of real estate

Net proceeds from net investment in leases 6,575 —

Net proceeds from sales of net investment in leases

Net proceeds from sales of land and development assets

2 unchanged sentences

Other investing activities, net

Cash flows used in investing activities 137,635 ( 62,761 )

Cash flows provided by (used in) investing activities

Cash flows from financing activities:

9 unchanged sentences

Distributions to noncontrolling interests

Cash flows (used in) provided by financing activities ( 36,414 ) 149,479

Cash flows used in financing activities

Effect of exchange rate changes on cash

2 unchanged sentences

Cash, cash equivalents and restricted cash at end of period

Consolidated Statements of Cash Flows

(In thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Supplemental disclosure of non-cash investing and financing activity:

Fundings and (repayments) of loan receivables and loan participations, net

Accounts payable for capital expenditures on land and development and real estate assets

Accrued repurchase of stock

22 unchanged sentences

The Company has provided no financial support to those VIEs that it was not previously contractually required to provide.

Notes to Consolidated Financial Statements (Continued)

Consolidated VIEs —The Company consolidates VIEs for which it is considered the primary beneficiary.

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 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):

The Company did not have any unfunded commitments related to consolidated VIEs as of June 30, 2021 and December 31,

Notes to Consolidated Financial Statements (Continued)

The following table presents the assets and liabilities of the Company’s consolidated VIEs as of June 30, 2021 and December 31, 2020 ($ in thousands):

June 30, 2021

December 31, 2020

8 unchanged sentences

Deferred expenses and other assets, net

Total assets $ 1,239,842 $ 1,253,427

Accounts payable, accrued expenses and other liabilities

2 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 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.

As of June 30, 2021, the Company’s maximum exposure to loss from these investments does not exceed the sum of the $ 130.1 million carrying value of the investments, which are classified in “Other investments” on the Company’s consolidated balance sheets, and $ 14.9 million of related unfunded commitments.

Note 3—Summary of Significant Accounting Policies

16 unchanged sentences

The Company’s real estate assets were comprised of the following ($ in thousands):

Net Lease (1)

As of March 31, 2021

As of June 30, 2021

Land, at cost

2 unchanged sentences

Real estate, net (1)

1,283,082 191,311 1,474,393

Real estate available and held for sale (2)

— 2,600 2,600

Total real estate

4 unchanged sentences

Real estate, net (1)

1,291,903 192,378 1,484,281

Real estate available and held for sale (2)

— 5,212 5,212

Total real estate

_______________________________________________________________________________

(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.

(1) As of June 30, 2021 and December 31, 2020, real estate, net included $ 746.1 million and $ 755.5 million, respectively, of real estate of the Net Lease Venture (refer to Net Lease Venture below).

(2) As of June 30, 2021 and December 31, 2020, the Company had $ 2.4 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.

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.

Dispositions— During the six months ended June 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.

Notes to Consolidated Financial Statements (Continued)

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.

Real Estate Available and Held for Sale— During the six months ended June 30, 2021, the Company transferred an operating property with a carrying value of $ 96.8 million to held for sale due to an executed contract with a third party.

The operating property was sold in July 2021 for $ 125.0 million and the Company expects to recognize a gain of approximately $ 25.0 million after selling costs.

Impairments— During the six months ended June 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.

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

Tenant expense reimbursements were $ 5.1 million and $ 12.1 million for the three and six months ended June 30, 2021, respectively, and $ 5.4 million and $ 11.4 million for the three and six months ended June 30, 2020, respectively .

These amounts are included in “Operating lease income” in the Company’s consolidated statements of operations.

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.

Allowance for Doubtful Accounts— As of June 30, 2021 and December 31, 2020, the allowance for doubtful accounts related to real estate tenant receivables was $ 0.7 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

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 June 30, 2021, are as follows by year ($ in thousands):

2021 (remaining six months)

Note 5—Net Investment in Leases

In June 2021, the Company acquired two parcels of land for $ 42.0 million each and simultaneously entered into two Ground Leases with the respective tenants.

Each Ground Lease also provides for a leasehold improvement allowance up to a maximum of $ 83.0 million.

The Company also concurrently entered into an agreement pursuant to which SAFE would acquire the Ground Leases from the Company.

If certain construction conditions are not met within a specified time period, SAFE will have no obligation to acquire the Ground Leases or fund the leasehold improvement allowances.

The Company classified one of the Ground Leases as a sales-type lease and it is recorded in “Net investment in leases” on the Company’s consolidated balance sheets.

One Ground Lease was entered into with the seller of the land and did not qualify for sale leaseback accounting, and as such, is accounted for as a financing transaction and $ 42.2 million is recorded in “Loans receivable held for sale” on the Company’s consolidated balance sheet.

There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the properties and Ground Leases from the Company.

In May 2019, the Company entered into a transaction with an operator of bowling entertainment venues, consisting of the purchase of nine bowling centers for $ 56.7 million, of which seven were acquired from the lessee for $ 44.1 million, and a commitment to invest up to $ 55.0 million in additional bowling centers over the next several years.

2 unchanged sentences

In the second quarter 2020, the Company entered into a transaction with the lessee whereby it would apply $ 10 million of the net proceeds it received from certain sales of the lessee’s facilities to the lessee’s upcoming rent obligations to the Company.

In exchange, the Company's obligation under the lease to acquire an equal amount of new facilities for them or to reduce their rent in the future has been terminated.

In the third quarter 2020, the Company granted the lessee a nine-month rent deferral on its two wholly-owned master leases in exchange for eliminating the Company's commitment to invest up to $ 55.0 million in additional bowling centers over the next several years.

In exchange, the Company’s obligation under the lease to acquire an equal amount of new facilities for them or to reduce their rent in the future was terminated.

In the third quarter

Notes to Consolidated Financial Statements (Continued)

2020, the Company granted the lessee a nine-month rent deferral on its two wholly-owned master leases in exchange for eliminating the Company’s commitment to invest up to $ 55.0 million in additional bowling centers over the next several years.

All deferred amounts are required to be repaid with interest beginning in January 2023.

2 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).

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)

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

For the three and six months ended June 30, 2021 , the Company recognized $ 0.2 million and $ 0.3 million, respectively, of cash interest income and $ 8.5 million and $ 17.0 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 six months ended June 30, 2020, the Company recognized $ 2.3 million and $ 9.2 million, respectively, of cash interest income and $ 6.0 million and $ 7.5 million, respectively, of non-cash interest income in "Interest income from sales-type leases"

in the Company's consolidated statements of operations.

Dispositions— During the six months ended June 30, 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 June 30, 2021 and December 31, 2020 ($ in thousands):

June 30, 2021

December 31, 2020

Total undiscounted cash flows

1 unchanged sentence

Present value discount

( 1,436,847 )

Allowance for losses on net investment in leases

Net investment in leases (1)

$ 431,126 $ 429,101

_______________________________________________________________________________

(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

(1) As of June 30, 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 June 30, 2021, the weighted average risk rating on the Company’s net investment in leases was 1.9 .

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 June 30, 2021, are as follows by year ($ in thousands):

2021 (remaining six months)

Total undiscounted cash flows

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):

Notes to Consolidated Financial Statements (Continued)

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 six months ended June 30, 2021 and 2020 were as follows ($ in thousands):

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Allowance for losses on net investment in leases at beginning of period

1 unchanged sentence

(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

_________________________________________________________

(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)

(2) During the three and six months ended June 30, 2021, the Company recorded a recovery of losses on net investment in leases of $ 0.3 million and $ 1.9 million, respectively, due primarily to an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

During the three and six months ended June 30, 2020, the Company recorded an allowance for losses on net investment in leases of $ 0.5 million and $ 1.8 million, respectively, due primarily to the macroeconomic impact of COVID-19 on commercial real estate markets and the adoption of ASU 2016-13 .

Note 6—Land and Development

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

March 31, December 31,

Land and land development, at cost

1 unchanged sentence

Total land and development, net

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.

Dispositions— During the six months ended June 30, 2021 and 2020, the Company sold land parcels and residential lots and units and recognized land development revenue of $ 64.6 million and $ 95.8 million, respectively.

During the six months ended June 30, 2021 and 2020, the Company recognized land development cost of sales of $ 60.1 million and $ 93.3 million, respectively, from its land and development portfolio.

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

Notes to Consolidated Financial Statements (Continued)

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):

June 30, 2021

December 31, 2020

3 unchanged sentences

Subtotal - gross carrying value of construction loans (1)

297,876 514,833

Senior mortgages

10 unchanged sentences

Total loans receivable and other lending investments, net

____________________________________________________________

(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 March 31, 2021 ($ in thousands):

(1) As of June 30, 2021, 91 % of gross carrying value of construction loans had completed construction.

Allowance for Loan Losses —Changes in the Company’s allowance for loan losses were as follows for the three months ended June 30, 2021 and 2020 ($ in thousands):

General Allowance

Construction Loans

Loans Held to

Maturity Debt Securities Financing Receivables Specific

Allowance Total

Maturity Debt

Three Months Ended June 30, 2021

Allowance for loan losses at beginning of period

(Recovery of) provision for loan losses (1)

( 3,648 ) 172 ( 408 ) ( 152 ) ( 76 ) ( 4,112 )

Recovery of loan losses (1)

Allowance for loan losses at end of period

____________________________________________________________

(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):

Three Months Ended June 30, 2020

Allowance for loan losses at beginning of period

Provision for loan losses (1)

Allowance for loan losses at end of period

(1) During the three months ended June 30, 2021 and 2020, the Company recorded a provision for (recovery of) loan losses of ($ 2.3 ) million and $ 2.1 million, respectively, in its consolidated statement of operations.

The recovery in 2021 was due primarily to the repayment of loans during the three months ended June 30, 2021 and an improving macroeconomic forecast on commercial real estate markets since March 31, 2021.

Of this amount, $ 0.4 million related to a provision for loan losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities."

The provision in 2020 was due to the macroeconomic impact of COVID-19 on commercial real estate markets, which was partially offset by a $ 0.3 million reduction in provision for loan losses for unfunded loan commitments that were funded during the three months ended June 30, 2020, and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities."

Notes to Consolidated Financial Statements (Continued)

Changes in the Company’s allowance for loan losses were as follows for the six months ended June 30, 2021 and 2020 ($ in thousands):

General Allowance

Construction Loans

Loans Held to

Maturity Debt Securities Financing Receivables Specific

Allowance Total

Maturity Debt

Six Months Ended June 30, 2021

Allowance for loan losses at beginning of period

Recovery of loan losses (1)

Allowance for loan losses at end of period

Six Months Ended June 30, 2020

Allowance for loan losses at beginning of period

Adoption of new accounting standard (2)

( 353 ) 98 20 964 — 729

Provision for loan losses (1)

3,409 323 33 136 — 3,901

Allowance for loan losses at end of period

____________________________________________________________

(1) During the six months ended June 30, 2021 and 2020, the Company recorded a provision for (recovery of) loan losses of ($ 6.1 ) million and $ 6.1 million, respectively, in its consolidated statements of operations.

The recovery in 2021 was due primarily to the repayment of loans during the six months ended June 30, 2021 and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

The provision for loan losses in 2020 resulted from the macroeconomic impact of COVID-19 on commercial real estate markets and was partially offset by a $ 0.2 million reduction in provision for loan losses for unfunded loan commitments that were funded during the six months ended June 30, 2020 and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities."

(2) 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 March 31, 2021 and December 31, 2020 ($ in thousands):

The Company’s investment in loans and other lending investments and the associated allowance for loan losses were as follows as of June 30, 2021 and December 31, 2020 ($ in thousands):

Evaluated for

Impairment (1)

Evaluated for

Impairment Total

As of March 31, 2021

Impairment (1)

As of June 30, 2021

Construction loans (2)

$ 56,343 $ 241,533 $ 297,876

— 81,250 81,250

Financing receivables

1 unchanged sentence

Available-for-sale debt securities (3)

— 24,043 24,043

Allowance for loan losses

Total $ 55,676 $ 478,040 $ 533,716

As of December 31, 2020

Construction loans (2)

$ 53,305 $ 461,528 $ 514,833

— 68,129 68,129

Financing receivables

1 unchanged sentence

Available-for-sale debt securities (3)

— 25,274 25,274

Allowance for loan losses

Total $ 52,562 $ 679,768 $ 732,330

_______________________________________________________________________________

(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.

(1) The carrying value of this loan includes an unamortized discount of $ 0.8 million and $ 0.8 million as of June 30, 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.

(2) The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs totaling net discounts of $ 1.7 million and $ 2.3 million as of June 30, 2021 and December 31, 2020, respectively.

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

6 unchanged sentences

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 March 31, 2021 were as follows ($ in thousands):

Notes to Consolidated Financial Statements (Continued)

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 June 30, 2021 were as follows ($ in thousands):

Year of Origination

2021 2020 2019 2018 2017 Prior to 2017 Total

Prior to 2017

Senior mortgages

1.0 $ — $ — $ — $ — $ 75,014 $ — $ 75,014

1.5 — — — — — — —

2.0 — — — — — — —

2.5 — — — — — — —

3.0 33,419 — — 113,154 — 3,714 150,287

Notes to Consolidated Financial Statements (Continued)

3.5 — — — — — — —

4.0 — — — 45,366 — — 45,366

4.5 — — — — — — —

5.0 — — — — — — —

$ 33,419 $ — $ — $ 158,520 $ 75,014 $ 3,714 $ 270,667

Corporate/partnership loans

1.0 $ — $ — $ — $ — $ — $ — $ —

1.5 — — — — — — —

2.0 — — — — — — —

2.5 — — — — — — —

3.0 2,525 — — 18,098 — — 20,623

3.5 — — — — — — —

4.0 — — — 19,653 — — 19,653

4.5 — — — — — — —

5.0 — — — — — — —

Subtotal $ 2,525 $ — $ — $ 37,751 $ — $ — $ 40,276

Subordinate mortgages

1.0 $ — $ — $ — $ — $ — $ — $ —

1.5 — — — — — — —

2.0 — — — — — — —

2.5 — — — — — — —

3.0 — — — — — 11,839 11,839

3.5 — — — — — — —

4.0 — — — — — — —

4.5 — — — — — — —

5.0 — — — — — — —

Subtotal $ — $ — $ — $ — $ — $ 11,839 $ 11,839

Financing receivables

1.0 $ — $ — $ — $ — $ — $ — $ —

1.5 — — — — — — —

2.0 — — 47,409 — — — 47,409

2.5 — — — — — — —

3.0 — — — — — — —

3.5 — — — — — — —

4.0 — — — — — — —

4.5 — — — — — — —

5.0 — — — — — — —

Subtotal $ — $ — $ 47,409 $ — $ — $ — $ 47,409

Total $ 35,944 $ — $ 47,409 $ 196,271 $ 75,014 $ 15,553 $ 370,191

____________________________________________________________

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

(1) As of June 30, 2021, excludes $ 56.6 million for one loan on non-accrual status.

Notes to Consolidated Financial Statements (Continued)

The Company’s amortized cost basis in loans, aged by payment status and presented by class, was as follows ($ in thousands):

Current Less Than

to 90 Days Greater

90 Days Total

Past Due Total

As of March 31, 2021

As of June 30, 2021

Senior mortgages

1 unchanged sentence

Subordinate mortgages

Total $ 379,126 $ — $ — $ — $ 379,126

As of December 31, 2020

2 unchanged sentences

Subordinate mortgages

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

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

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

Balance Related

Allowance Amortized

Balance Related

As of June 30, 2021

As of December 31, 2020

With an allowance recorded:

Senior mortgages (1)

$ 56,343 $ 55,592 $ ( 667 ) $ 53,305 $ 52,552 $ ( 743 )

Total $ 56,343 $ 55,592 $ ( 667 ) $ 53,305 $ 52,552 $ ( 743 )

____________________________________________________________

(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.

(1) The Company has one non-accrual loan as of June 30, 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 six months ended June 30, 2021 and 2020.

Loans 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 determined that the transaction did not qualify as a sale leaseback transaction and recorded the Ground Lease in “Loans receivable held for sale” on the Company’s consolidated balance sheet as of June 30, 2021.

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

In June 2021, the Company acquired a parcel of land for $ 42.0 million and simultaneously entered into a Ground Lease (refer to Note 5).

The Company also concurrently entered into an agreement pursuant to which SAFE would acquire the Ground Lease from the Company.

The Ground Lease was entered into with the seller of the land and did not qualify for sale leaseback accounting, and as such, is accounted for as a financing transaction and $ 42.2 million is recorded in “Loans receivable held for sale” on the Company’s consolidated balance sheets.

Notes to Consolidated Financial Statements (Continued)

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 March 31, 2021

As of June 30, 2021

Available-for-Sale Securities

2 unchanged sentences

Debt securities

Total $ 120,480 $ 112,676 $ 3,563 $ 116,239 $ 116,239

As of December 31, 2020

3 unchanged sentences

Debt securities

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

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

Amortized Cost Basis Estimated Fair Value Amortized Cost Basis Estimated Fair Value

As of June 30, 2021, the contractual maturities of the Company’s securities were as follows ($ in thousands):

Held-to-Maturity Debt Securities

Available-for-Sale Debt Securities

Within one year

2 unchanged sentences

After 10 years

Total $ 92,196 $ 92,196 $ 20,480 $ 24,043

Notes to Consolidated Financial Statements (Continued)

1 unchanged sentence

The Company’s other investments and its proportionate share of earnings (losses) from equity method investments were as follows ($ in thousands):

Earnings (Losses) from Equity Method Investments (1)

Earnings (Losses) from

Carrying Value

as of For the Three Months Ended March 31,

March 31, 2021 December 31, 2020 2021 2020

Equity Method Investments (1)

For the Three Months Ended

For the Six Months Ended

Real estate equity investments

Safehold Inc.

$ 955,758 $ 937,712 $ 11,412 $ 19,338

iStar Net Lease II LLC ("Net Lease Venture II") 84,481 78,998 1,001 193

("SAFE") (2)

iStar Net Lease II LLC ("Net Lease Venture II")

Other real estate equity investments

Subtotal 1,109,323 1,106,649 11,811 17,449

Other strategic investments (3)

127,972 69,911 958 ( 837 )

Total $ 1,237,295 $ 1,176,560 $ 12,769 $ 16,612

____________________________________________________________

(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.

(1) For the three months ended June 30, 2021 and 2020, earnings (losses) from equity method investments is net of the Company’s pro rata share of $ 5.5 million and $ 4.8 million, respectively, of depreciation expense and $ 17.7 million and $ 15.7 million, respectively, of interest expense.

For the six months ended June 30, 2021 and 2020, earnings (losses) from equity method investments is net of the Company’s pro rata share of $ 11.1 million and $ 8.8 million, respectively, of depreciation expense and $ 33.2 million and $ 29.4 million, respectively, of interest expense.

(2) As of June 30, 2021, the Company owned 35.2 million shares of SAFE common stock which, based on the closing price of $ 78.50 on June 30, 2021, had a market value of $ 2.8 billion.

For the six months ended June 30, 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 six months ended June 30, 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 six months ended June 30, 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.

2 unchanged sentences

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

As of June 30, 2021, the Company owned approximately 66.0 % 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.

7 unchanged sentences

● provides the Company certain preemptive rights.

Notes to Consolidated Financial Statements (Continued)

In March 2020, the Company acquired 1.7 million shares of SAFE’s common stock in a private placement for $ 80.0 million.

2 unchanged sentences

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;

7 unchanged sentences

● 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 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.

During the three months ended June 30, 2021 and 2020, the Company recorded $ 3.5 million and $ 3.2 million, respectively, of management fees pursuant to its management agreement with SAFE.

During the six months ended June 30, 2021 and 2020, the Company recorded $ 7.0 million and $ 6.0 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 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.

During the three months ended June 30, 2021 and 2020, the Company recognized $ 1.9 million and $ 1.3 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

During the six months ended June 30, 2021 and 2020, the Company recognized $ 3.8 million and $ 2.5 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.

2 unchanged sentences

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 March 31, 2021;

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

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.

During the three months ended June 30, 2020, the Company recorded $ 0.8 million of interest income on the loan.

During the six months ended June 30, 2021 and 2020, the Company recorded $ 0.3 million and $ 1.5 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.

Notes to Consolidated Financial Statements (Continued)

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

1 unchanged sentence

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.

During the three and six months ended June 30, 2020, the Company recorded $ 0.3 million and $ 0.5 million, respectively, of interest income on the loan.

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.

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

1 unchanged sentence

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.

As of June 30, 2021, $ 42.7 million of the loan was funded and during the three and six months ended June 30, 2021, the Company recorded $ 1.5 million and $ 2.4 million, respectively, 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.

In June 2021, the Company sold to SAFE its rights under a purchase option agreement for $ 1.2 million.

The Company had previously acquired such purchase option agreement from a third-party property owner for $ 1.0 million and incurred $ 0.2 million of expenses.

Under the option agreement, upon certain conditions being met by an outside developer who may become the Ground Lease tenant, SAFE has the right to acquire for $ 215.0 million a property and hold a Ground Lease under approximately 1.1 million square feet of office space that may be developed on the property.

No gain or loss was recognized by the Company as a result of the sale.

In June 2021, the Company and SAFE entered into two agreements pursuant to each of which SAFE would acquire land and a related Ground Lease originated by the Company when certain construction related conditions are met by a specified time period.

The purchase price to be paid for each is $ 42.0 million, plus an amount necessary for the Company to achieve the greater of a 1.25 x multiple and a 9 % return on its investment.

In addition, each Ground Lease provides for a leasehold improvement allowance up to a maximum of $ 83.0 million, which obligation would be assumed by SAFE upon acquisition.

If certain construction conditions are not met within a specified time period, SAFE will have no obligation to acquire the Ground Leases or fund the leasehold improvement allowances.

There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the properties and Ground Leases from the Company.

Notes to Consolidated Financial Statements (Continued)

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 expires on June 30, 2021.

In June 2021, Net Lease Venture II’s investment period was extended to December 31, 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

Notes to Consolidated Financial Statements (Continued)

participating rights of its partner.

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 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.

During the three months ended June 30, 2021 and 2020, the Company recorded $ 0.4 million and $ 0.4 million, respectively, of management fees from Net Lease Venture II.

During the six months ended June 30, 2021 and 2020, the Company recorded $ 0.8 million and $ 0.8 million, respectively, of management fees from Net Lease Venture II.

Other real estate equity investments —As of June 30, 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 $ 55.3 million in operating properties and $ 13.6 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 March 31, 2021 and December 31, 2020 to an unconsolidated entity in which the Company owns a 50 % equity interest.

In August 2018, the Company provided a mezzanine loan with a principal balance of $ 33.0 million as of June 30, 2021 and December 31, 2020 to an unconsolidated entity in which the Company owns a 50 % equity interest.

The loan matures in August 2022.

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.

As of June 30, 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 June 30, 2021 and 2020, the Company recorded $ 0.6 million and $ 0.6 million, respectively, of interest income on the mezzanine loan.

During the six months ended June 30, 2021 and 2020, the Company recorded $ 1.1 million and $ 1.2 million, respectively, of interest income on the mezzanine loan.

Other strategic investments —As of June 30, 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.

2 unchanged sentences

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 Three Months Ended March 31, 2021

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

For the Three Months Ended March 31, 2020

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

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 June 30, 2021 ($ in thousands):

Net Income Attributable to Parent

For the Six Months Ended June 30, 2021

For the Six Months Ended June 30, 2020

Notes to Consolidated Financial Statements (Continued)

1 unchanged sentence

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

March 31, 2021 December 31, 2020

June 30, 2021

December 31, 2020

Intangible assets, net (1)

$ 152,553 $ 156,041

Restricted cash

Finance lease right-of-use assets (2)

143,356 143,727

Operating lease right-of-use assets (2)

47,397 48,891

Other assets (3)

19,751 19,453

Other receivables

3 unchanged sentences

Deferred expenses and other assets, net

_______________________________________________________________________________

(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 $ 47.6 million and $ 44.4 million as of March 31, 2021 and December 31, 2020, 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 March 31, 2021 and 2020, respectively.

Accumulated amortization on intangible assets, net was $ 50.6 million and $ 44.4 million as of June 30, 2021 and December 31, 2020, 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 $ 0.3 million for the three months ended June 30, 2021 and 2020, respectively, and $ 0.7 million and $ 0.7 million for the six months ended June 30, 2021 and 2020, respectively.

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

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.

The amortization expense for in-place leases was $ 2.6 million and $ 2.6 million for the three months ended June 30, 2021 and 2020, respectively, and $ 5.8 million and $ 5.3 million for the six months ended June 30, 2021 and 2020, respectively.

These amounts are included in “Depreciation and amortization” in the Company’s consolidated statements of operations.

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.

As of June 30, 2021, the weighted average remaining amortization period for the Company’s intangible assets was approximately 16.4 years.

(2) Right-of-use lease assets relate primarily to the Company’s leases of office space.

Right-of use lease assets initially equal the lease liability.

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 remaining lease term is 8.0 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 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 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 $ 2.9 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)

During the three months ended June 30, 2021 and 2020, the Company recognized $ 1.2 million and $ 1.2 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 six months ended June 30, 2021 and 2020, the Company recognized $ 2.5 million and $ 2.2 million, respectively, in "General and administrative"

and $ 1.8 million and $ 1.7 million, respectively, in "Real estate expense"

in its consolidated statement of operations relating to operating leases.

(3) Other assets primarily includes prepaid expenses, deposits for certain real estate assets and management fees and expense reimbursements due from SAFE (refer to Note 8).

(4) Accumulated amortization of leasing costs was $ 2.2 million and $ 2.6 million as of June 30, 2021 and December 31, 2020, respectively.

(5) Accumulated depreciation on corporate furniture, fixtures and equipment was $ 14.6 million and $ 14.3 million as of June 30, 2021 and December 31, 2020, respectively.

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

March 31, 2021 December 31, 2020

June 30, 2021

December 31, 2020

Other liabilities (1)

$ 87,516 91,513

Accrued expenses

Finance lease liabilities (see table above) 151,222 150,520

Intangible liabilities, net (2)

48,115 48,738

Operating lease liabilities (see table above)

1 unchanged sentence

Accounts payable, accrued expenses and other liabilities

_______________________________________________________________________________

(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.

(1) As of June 30, 2021 and December 31, 2020, other liabilities includes $ 33.0 million and $ 36.9 million, respectively, of deferred income.

As of June 30, 2021 and December 31, 2020, other liabilities includes $ 13.5 million and $ 19.0 million, respectively, of derivative liabilities.

As of June 30, 2021 and December 31, 2020, other liabilities includes $ 1.0 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 $ 8.1 million and $ 7.5 million as of March 31, 2021 and December 31, 2020, respectively.

Accumulated amortization on below market lease liabilities was $ 8.8 million and $ 7.5 million as of June 30, 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 June 30, 2021 and 2020, respectively, and $ 1.2 million and $ 1.2 million for the six months ended June 30, 2021 and 2020, respectively.

Notes to Consolidated Financial Statements (Continued)

Note 10—Loan Participations Payable, net

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The Company’s debt obligations were as follows ($ in thousands):

Carrying Value as of Stated

Interest Rates Scheduled

Carrying Value as of

June 30, 2021

December 31, 2020

Interest Rates

Maturity Date

March 31, 2021 December 31, 2020

Secured credit facilities and mortgages:

Revolving Credit Facility $ — $ — LIBOR + 2.00 %

Revolving Credit Facility

September 2022

Senior Term Loan 491,875 491,875 LIBOR + 2.75 %

Senior Term Loan

Mortgages collateralized by net lease assets

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Total secured credit facilities and mortgages (4)

1,205,641 1,212,950

Unsecured notes:

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4.75 % senior notes (6)

775,000 775,000 4.75 % October 2024

4.25 % senior notes (7)

550,000 550,000 4.25 % August 2025

5.50 % senior notes (8)

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Other debt obligations:

Trust preferred securities 100,000 100,000 LIBOR + 1.50 %

Trust preferred securities

Total debt obligations

Debt discounts and deferred financing costs, net (9)

( 26,798 ) ( 38,475 )

Total debt obligations, net (10)

$ 3,291,343 $ 3,286,975

_______________________________________________________________________________

(1) The Revolving Credit Facility bears interest at the Company’s election of either:

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

(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.

(3) As of June 30, 2021, the weighted average interest rate of these loans is 4.4 % , inclusive of the effect of interest rate swaps.

(4) As of June 30, 2021, $ 2.0 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 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 as of June 30, 2021 was 71.2325 shares per $1,000 principal amount of 3.125 % Convertible Notes, which equals a conversion price of $ 14.04 per share.

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

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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 %.

During the three months ended June 30, 2021 and 2020, the Company recognized $ 2.2 million and $ 2.2 million, respectively, of contractual interest and during the three months ended June 30, 2020, the Company recognized $ 1.3 million of discount amortization on the 3.125 % Convertible Notes.

During the six months ended June 30, 2021 and 2020, the Company recognized $ 4.5 million and $ 4.5 million, respectively, of contractual interest and during the six months ended June 30, 2020, the Company recognized $ 2.6 million of discount amortization on the 3.125 % Convertible Notes.

The effective interest rate for the three and six months ended June 30, 2020 was 5.2 % .

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

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(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.

(10) The Company capitalized interest relating to development activities of $ 0.2 million and $ 0.6 million during the three months ended June 30, 2021 and 2020, respectively, and $ 0.5 million and $ 1.1 million during the six months ended June 30, 2021 and 2020, respectively.

Notes to Consolidated Financial Statements (Continued)

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

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

2022 287,500 96,406 383,906

2023 — 491,875 491,875

2024 775,000 — 775,000

2025 550,000 271,985 821,985

Thereafter 500,000 243,856 743,856

Future Scheduled Maturities —As of June 30, 2021, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):

Unsecured Debt

2021 (remaining six months)

Total principal maturities

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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.

As of June 30, 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.

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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 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.

As of June 30, 2021, based on the Company’s borrowing base of assets, the Company had the ability to draw $ 341.7 million without pledging any additional assets to the facility.

Unsecured Notes —As of June 30, 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.

During the six months ended June 30, 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.

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In particular, the Senior Term Loan requires the Company to maintain collateral coverage of at least 1.25 x outstanding borrowings on the facility.

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 Revolving Credit Facility is secured by a borrowing base of assets and requires the Company to maintain both borrowing base asset value

Notes to Consolidated Financial Statements (Continued)

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

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.

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 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

As of June 30, 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

Performance-Based Commitments

Strategic Investments

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

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

Notes to Consolidated Financial Statements (Continued)

Other Commitments —Future minimum lease obligations under non-cancelable operating and finance leases as of June 30, 2021 are as follows ($ in thousands):

Operating (1)(2)

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

2022 6,756 5,604

2023 6,393 5,716

2024 6,309 5,830

2025 6,297 5,946

Thereafter 496 1,567,826

2021 (remaining six months)

Total undiscounted cash flows

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Lease liabilities

_______________________________________________________________________________

(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.

(1) The lease liability 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 remaining lease term is 7.8 years.

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 5.1 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 %.

For finance leases, which relate primarily to the Company’s Ground Leases with SAFE, lease liabilities were discounted at a weighted average rate implicit in the lease of 5.5 % and the weighted average remaining lease term is 96.5 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 June 30, 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.

During the six months ended June 30, 2021 and 2020, the Company recognized $ 4.1 million and $ 4.1 million, respectively, in "Interest expense"

and $ 0.7 million and $ 0.7 million, respectively, in "Depreciation and amortization"

in its consolidated statement of operations relating to finance leases.

During the three months ended June 30, 2021 and 2020, the Company made payments of $ 0.4 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 .

During the six months ended June 30, 2021 and 2020, the Company made payments of $ 1.2 million and $ 2.1 million, respectively, related to its operating leases and $ 2.7 million and $ 2.7 million, respectively, related to its finance leases with SAFE .

(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):

Operating (1)(2)

2021 $ 3,797 $ 5,494

2022 6,756 5,604

2023 6,393 5,716

2024 6,309 5,830

2025 6,297 5,946

Thereafter 496 1,567,826

Total undiscounted cash flows

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Lease liabilities

_______________________________________________________________________________

(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 5.5 % .

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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)

Legal Proceedings —The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to the Company’s business as a finance and investment company focused on the commercial real estate industry, including foreclosure-related proceedings.

The Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding that would have a material adverse effect on the Company’s consolidated financial statements.

Notes to Consolidated Financial Statements (Continued)

Note 13—Derivatives

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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.

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):

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 June 30, 2021 and December 31, 2020 ($ in thousands):

Derivative Liabilities

As of March 31, 2021 Balance Sheet

Location Fair

Balance Sheet

As of June 30, 2021

Derivatives Designated in Hedging Relationships

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

Total $ 14,178

Derivative Liabilities

As of December 31, 2020 Balance Sheet

Location Fair

Interest rate swaps

Accounts payable, accrued expenses and other liabilities

As of December 31, 2020

Derivatives Designated in Hedging Relationships

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

Total $ 18,926

_________________________________________________________

Interest rate swaps

Accounts payable, accrued expenses and other liabilities

(1) Over the next 12 months, the Company expects that $ 9.8 million related to cash flow hedges will be reclassified from “Accumulated other comprehensive income (loss)” as an increase to interest expense.

The tables below present the effect of the Company's derivative financial instruments, including the Company's share of derivative financial instruments at certain of its equity method investments, in the consolidated statements of operations and the consolidated statements of comprehensive income (loss) ($ in thousands):

Derivatives Designated in Hedging Relationships Location of Gain (Loss)

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 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 Three Months Ended March 31, 2020

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

Interest rate swaps Earnings from equity method investments ( 15,172 ) ( 226 )

Notes to Consolidated Financial Statements (Continued)

The table below presents the effect of the Company’s derivative financial instruments, including the Company’s share of derivative financial instruments at certain of its equity method investments, in the consolidated statements of operations and the consolidated statements of comprehensive income (loss) ($ in thousands):

Amount of Gain

Location of Gain

(Loss) Recognized in

(Loss) Reclassified

Accumulated Other

from Accumulated

Derivatives Designated in

When Recognized in

Comprehensive

Other Comprehensive

Hedging Relationships

Income into Earnings

For the Three Months Ended June 30, 2021

Interest rate swaps

Interest expense

Interest rate swaps

Earnings from equity method investments

For the Three Months Ended June 30, 2020

Interest rate swaps

Interest expense

Interest rate swaps

Earnings from equity method investments

For the Six Months Ended June 30, 2021

Interest rate swaps

Interest expense

Interest rate swaps

Earnings from equity method investments

For the Six Months Ended June 30, 2020

Interest rate swaps

Interest Expense

Interest rate swaps

Earnings from equity method investments

Notes to Consolidated Financial Statements (Continued)

Note 14—Equity

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

Preferred Stock —The Company had the following series of Cumulative Redeemable Preferred Stock outstanding as of June 30, 2021 and December 31, 2020:

Cumulative Preferential Cash

Dividends (1)(2)

Series Shares Issued and

(in thousands) Par Value Liquidation Preference (3)

Rate per Annum Annual

Dividend Per Share Carrying Value

Shares Issued

(in thousands)

D 4,000 $ 0.001 $ 25.00 8.00 % $ 2.00 $ 89,041

G 3,200 0.001 25.00 7.65 % 1.91 72,664

I 5,000 0.001 25.00 7.50 % 1.88 120,785

Total 12,200 $ 282,490

________________________________________

Preference (3)

(in thousands)

(1) Holders of shares of the Series D, G and I preferred stock are entitled to receive dividends, when and as declared by the Company’s Board of Directors, out of funds legally available for the payment of dividends.

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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 $ 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.

(2) The Company declared and paid dividends of $ 4.0 million, $ 3.1 million and $ 4.7 million on its Series D, G and I Cumulative Redeemable Preferred Stock during both the six months ended June 30, 2021 and 2020.

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

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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 $ 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 Company declared common stock dividends of $ 17.4 million, or $ 0.235 per share, for the six months ended June 30, 2021 and $ 16.3 million, or $ 0.21 per share, for the six months ended June 30, 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 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.

During the six months ended June 30, 2021, the Company repurchased 1.8 million shares of its outstanding common stock for $ 32.4 million, for an average cost of $ 17.57 per share.

During the six months ended June 30, 2020, the Company repurchased 2.5 million shares of its outstanding common stock for $ 27.8 million, for an average cost of $ 10.98 per share.

The Company is generally authorized to repurchase up to $ 50.0 million in shares of its common stock.

As of July 31, 2021, the Company had remaining authorization to repurchase up to $ 33.0 million of common stock under its stock repurchase program.

The Company’s Board of Directors subsequently authorized an increase to the stock repurchase program to $ 50.0 million effective after the date of the filing of this report on Form 10-Q.

Notes to Consolidated Financial Statements (Continued)

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

March 31, 2021 December 31, 2020

June 30, 2021

December 31, 2020

Unrealized gains on available-for-sale securities

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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 $ 5.5 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.

Stock-Based Compensation —The Company recorded stock-based compensation expense, including the expense related to performance incentive plans (see below), of $ 14.8 million and $ 20.3 million for the three and six months ended June 30, 2021, respectively, and $ 4.7 million and $ 21.0 million for the three and six months ended June 30, 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.

As of June 30, 2021, there are five iPIP Plans, each covering a two-year investment period beginning with the 2013-2014 Plan through the 2021-2022 Plan.

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.

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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 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.

During the six months ended June 30, 2021 and 2020, the Company recorded $ 1.5 million and $ 1.6 million, respectively, of expense related to the 2019-2022 iPIP plans.

Distributions on the class B units are expected to be 50 % in cash and 50 % in shares of the Company’s common stock;

provided, however, that (a) the cash portion will be increased if the Company does not have sufficient shares available under shareholder approved equity plans;

and (b) if the principal remaining material asset in a plan is unsold SAFE shares, the Company may elect to distribute SAFE shares in lieu of cash and Company stock.

The following is a summary of the status of the Company’s equity-classified iPIP plans and changes during the six months ended June 30, 2021.

iPIP Investment Pool

2019-2020 2021-2022

Points at beginning of period

Granted — 94.00

Forfeited ( 0.20 ) —

Points at end of period

Notes to Consolidated Financial Statements (Continued)

As of June 30, 2021, investments with an aggregate gross book value of $ 1.1 billion, including 26.7 million shares of SAFE common stock acquired by the Company, were attributable to the 2019-2020 Plan and investments with an aggregate gross book value of $ 109 million, including 0.3 million shares of SAFE common stock acquired by the Company, were attributable to the 2021-2022 Plan.

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.

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.

The following is a summary of the status of the Company’s liability-classified iPIP plans and changes during the six months ended June 30, 2021.

iPIP Investment Pool

2013-2014 2015-2016 2017-2018

Points at beginning of period

Forfeited — — —

Points at end of period

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.

During the six months ended June 30, 2021 and 2020, the Company recorded $ 15.1 million and $ 16.8 million, respectively, of expense related to the 2013-2018 iPIP plans.

As of June 30, 2021, investments with an aggregate gross book value of $ 387 million were attributable to the 2013-2014 Plan, investments with an aggregate gross book value of $ 434 million were attributable to the 2015-2016 Plan and investments with an aggregate gross book value of $ 496 million, including 7.6 million shares of SAFE common stock acquired by the Company, were attributable to the 2017-2018 Plan.

During the six months ended June 30, 2021, the Company made distributions to participants in the 2015-2016 investment pool.

The iPIP participants received total distributions in the amount of $ 3.2 million as compensation, comprised of cash and 97,881 shares of the Company’s common stock with a fair value of $ 17.65 per share, which are fully-vested and issued under the 2009 LTIP (see below).

After deducting statutory minimum tax withholdings, a total of 57,920 shares of the Company’s common stock were issued.

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

During the six months ended June 30, 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 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.

As of June 30, 2021 and December 31, 2020, the Company had accrued compensation costs relating to iPIP of $ 81.0 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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The Company’s shareholders approved the 2009 LTIP in 2009 and approved the performance-based provisions of the 2009 LTIP, as amended, in 2014.

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 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):

In May 2021, the

Notes to Consolidated Financial Statements (Continued)

Company’s shareholders approved an increase in the number of shares available for issuance under the 2009 LTIP from a maximum of 8.9 million to 9.9 million and extended the expiration date of the 2009 LTIP from May 2029 to May 2031.

As of June 30, 2021, an aggregate of 3.1 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 six months ended June 30, 2021, is as follows (in thousands):

Nonvested at beginning of period

Vested ( 107 )

Nonvested at end of period

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.

As of June 30, 2021, there was $ 6.7 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 1.85 years.

Directors’ Awards —During the six months ended June 30, 2021, the Company granted 38,186 restricted shares of common stock to non-employee Directors at a fair value of $ 17.51 at the time of grant for their annual equity awards and also issued 1,159 common stock equivalents (“CSEs”) at a fair value of $ 18.24 per CSE in respect of dividend equivalents on outstanding CSEs.

As of June 30, 2021, a combined total of 129,019 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 $ 2.7 million.

401(k) Plan — The Company made contributions of $ 0.1 million and $ 0.1 million for the three months ended June 30, 2021 and 2020, respectively, and $ 0.7 million and $ 0.7 million for the six months ended June 30, 2021 and 2020, respectively, to the Company’s 401(k) Plan.

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 March 31,

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Net income attributable to noncontrolling interests

1 unchanged sentence

Net loss allocable to common shareholders for basic and diluted earnings per common share

For the Three Months Ended March 31,

Notes to Consolidated Financial Statements (Continued)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Earnings allocable to common shares:

6 unchanged sentences

Net loss allocable to common shareholders

____________________________________________________________

(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.

(1) For the three and six months ended June 30, 2021, the effect of the Company’s restricted stock awards were anti-dilutive.

For the three and six months ended June 30, 2021, 4,700,805 shares and 3,797,296 shares, respectively, of the 3.125 % Convertible Notes (refer to Note 11) were anti-dilutive based upon the conversion price for such period.

For the three and six months ended June 30, 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 periods.

Note 17—Fair Values

11 unchanged sentences

Fair Value Using

Total Quoted market

active markets

(Level 1) Significant other

(Level 2) Significant

As of March 31, 2021

As of June 30, 2021

Recurring basis:

Derivative liabilities (1)

$ 14,178 $ — $ 14,178 $ —

Available-for-sale securities (1)

24,043 — — 24,043

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

Non-recurring basis:

Other investments (2)

75,402 — 75,402 —

As of December 31, 2020

1 unchanged sentence

Derivative liabilities (1)

18,926 — 18,926 —

Available-for-sale securities (1)

25,274 — — 25,274

Non-recurring basis:

Impaired land and development (3)

6,078 — — 6,078

____________________________________________________________

(1) The fair value of the Company’s derivatives are based upon widely accepted valuation techniques utilized by a third-party specialist using observable inputs such as interest rates and contractual cash flow and are classified as Level 2.

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 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.

(2) During the six months ended June 30, 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):

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 six months ended June 30, 2021 and 2020 ($ in thousands):

Beginning balance

Repayments ( 200 ) ( 459 )

Unrealized gains (losses) recorded in other comprehensive income

2 unchanged sentences

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

As of June 30, 2021

As of December 31, 2020

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)

1 unchanged sentence

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 unchanged sentences

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.

(3) As of June 30, 2021 and December 31, 2020, the fair value of the Company’s 3.125 % Senior Convertible Notes was $ 435.9 million and $ 338.8 million, respectively.

Note 18—Segment Reporting

6 unchanged sentences

The Land and Development segment includes the Company’s activities related to its developable land portfolio.

Notes to Consolidated Financial Statements (Continued)

The Company evaluates performance-based on the following financial measures for each segment.

The Company’s segment information is as follows ($ in thousands):

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

Company Total

Three Months Ended March 31, 2021:

Three Months Ended June 30, 2021

Operating lease income

1 unchanged sentence

Interest income from sales-type leases

Other income 4,751 99 2,337 1,389 5,714 14,290

Land development revenue

7 unchanged sentences

Allocated general and administrative (2)

( 5,937 ) ( 1,459 ) ( 660 ) ( 2,428 ) ( 5,447 ) ( 15,931 )

Segment profit (loss) (3)

$ 29,533 $ 4,236 $ ( 2,463 ) $ ( 3,273 ) $ ( 3,356 ) $ 24,677

Other significant items:

1 unchanged sentence

Recovery of losses on net investment in leases

Depreciation and amortization

Capitalized expenditures

Three Months Ended June 30, 2020

Operating lease income

Notes to Consolidated Financial Statements (Continued)

Interest income

Interest income from sales-type leases

Land development revenue

Earnings (losses) from equity method investments

Income from sales of real estate

Total revenue and other earnings

Real estate expense

Land development cost of sales

Other expense

Allocated interest expense

Allocated general and administrative (2)

Segment profit (loss) (3)

Other significant non-cash items:

Provision for loan losses

Provision for losses on net investment in leases

Impairment of assets

1 unchanged sentence

Capitalized expenditures

Three Months Ended March 31, 2020:

Six Months Ended June 30, 2021

Operating lease income

1 unchanged sentence

Interest income from sales-type leases

Other income 4,293 306 3,157 624 11,988 20,368

Land development revenue

Earnings (losses) from equity method investments

Income from sales of real estate

Total revenue and other earnings

4 unchanged sentences

Allocated general and administrative (2)

( 6,989 ) ( 2,097 ) ( 789 ) ( 2,819 ) ( 5,307 ) ( 18,001 )

Segment profit (loss) (3)

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

Other significant items:

Recovery of loan losses

Recovery of losses on net investment in leases

Impairment of assets

Depreciation and amortization

Capitalized expenditures

Six Months Ended June 30, 2020

Operating lease income

Interest income

Interest income from sales-type leases

Land development revenue

Earnings (losses) from equity method investments

Income from sales of real estate

Total revenue and other earnings

Real estate expense

Land development cost of sales

Other expense

Allocated interest expense

Allocated general and administrative (2)

Segment profit (loss) (3)

Other significant items:

Provision for loan losses

1 unchanged sentence

Impairment of assets

Notes to Consolidated Financial Statements (Continued)

Depreciation and amortization

Capitalized expenditures

Notes to Consolidated Financial Statements (Continued)

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

Company Total

As of March 31, 2021

As of June 30, 2021

Real estate, net

$ 1,283,082 $ — $ 191,311 $ — $ — $ 1,474,393

Real estate available and held for sale

— — 2,600 — — 2,600

Total real estate

6 unchanged sentences

Cash and other assets

Total assets $ 4,793,591

As of December 31, 2020

Real estate, net

$ 1,291,903 $ — $ 192,378 $ — $ — $ 1,484,281

Real estate available and held for sale

— — 5,212 — — 5,212

Total real estate

5 unchanged sentences

Cash and other assets

Total assets $ 4,861,808

_______________________________________________________________________________

(1) Corporate/Other represents all corporate level and unallocated items including any intercompany eliminations necessary to reconcile to consolidated Company totals.

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 $ 5.5 million and $ 16.3 million for the three months ended March 31, 2021 and 2020, respectively.

(2) General and administrative excludes stock-based compensation expense of $ 14.8 million and $ 20.3 million for the three and six months ended June 30, 2021, respectively, and $ 4.7 million and $ 21.0 million for the three and six months ended June 30, 2020, respectively.

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Segment profit

4 unchanged sentences

Depreciation and amortization

Income tax benefit (expense) 665 ( 60 )

Income tax expense

Loss on early extinguishment of debt, net

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

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