Safehold Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are included with respect to, among other things, iStar Inc.’s (the “Company’s”) current business plan, business strategy, portfolio management, prospects and liquidity. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results or outcomes to differ materially from those contained in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-Q and the uncertainties and risks described in Item 1A—"Risk Factors’’ in our 2020 Annual Report, all of which could affect our future results of operations, financial condition and liquidity. For purposes of Management’s Discussion and Analysis of Financial Condition and Results of Operations, the terms “we,” “our” and “us” refer to iStar Inc. and its consolidated subsidiaries, unless the context indicates otherwise. The discussion below should be read in conjunction with our consolidated financial statements and related notes in this quarterly report on Form 10-Q and our 2020 Annual Report. These historical financial statements may not be indicative of our future performance. Executive Overview Our portfolio is well diversified by business, property type and geography. Our portfolio includes investments in the entertainment/leisure (23.0% of gross book value) and hotel (4.2% of gross book value) sectors, both of which have been particularly stressed by the COVID-19 pandemic. We may experience disruptions and collections of rent and interest payments until more normalized business conditions resume. The COVID-19 pandemic adversely affected our strategies of monetizing legacy assets and materially scaling SAFE’s portfolio in 2020 and the first quarter of 2021, primarily because of reduced levels of real estate transactions and constrained conditions for equity and debt financing for real estate transactions. These conditions improved in the second quarter of 2021 and continued into the third quarter 2021, and we expect them to continue to improve as more normalized activity resumes. At this time, however, we cannot predict with certainty the full extent of the impacts of the COVID-19 pandemic on our or SAFE’s business. In addition, other macroeconomic factors such as inflation and the market reaction and response of government policy to inflation may impact our or SAFE’s business. See the Risk Factors section of our 2020 Annual Report for additional discussion of certain potential risks to our business arising from the COVID-19 pandemic and other factors. ​ 43 Table of Contents Portfolio Overview As of September 30, 2021, based on our gross book value, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands): (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Property/Collateral Net Real Estate Operating Land & ​ ​ ​ ​ % of Types ​ Lease ​ Finance ​ Properties ​ Development ​ Corporate ​ Total ​ Total Ground Leases ​ $ 1,229,403 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 1,229,403 27.1 % Entertainment / Leisure ​ ​ 1,030,994 ​ — ​ 16,297 ​ — ​ — ​ 1,047,291 23.0 % Office ​ ​ 820,048 ​ ​ 52,107 ​ ​ — ​ ​ — ​ ​ — ​ ​ 872,155 19.2 % Industrial / Lab ​ ​ 433,783 ​ ​ — ​ ​ — ​ ​ — ​ ​ 98,461 ​ ​ 532,244 11.7 % Land and Development ​ — ​ 11,900 ​ — ​ 235,747 ​ — ​ 247,647 5.4 % Hotel ​ — ​ 107,505 ​ 82,292 ​ — ​ — ​ 189,797 4.2 % Multifamily ​ — ​ 122,906 ​ 59,918 ​ — ​ — ​ 182,824 4.0 % Retail ​ — ​ 61,461 ​ 31,566 ​ 8,340 ​ — ​ 101,367 2.2 % Condominium ​ — ​ 27,257 ​ 1,983 ​ 69,878 ​ — ​ 99,118 2.2 % Other Property Types ​ — ​ 27,536 ​ — ​ — ​ 15,369 ​ 42,905 0.9 % Total ​ $ 3,514,228 ​ $ 410,672 ​ $ 192,056 ​ $ 313,965 ​ $ 113,830 ​ $ 4,544,751 100.0 % Percentage of Total ​ ​ 77% ​ ​ 9% ​ ​ 4% ​ ​ 7% ​ ​ 3% ​ ​ 100% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Real Estate Operating Land & ​ ​ ​ ​ % of Geographic Region ​ Lease ​ Finance ​ Properties ​ Development ​ Corporate ​ Total ​ Total Northeast ​ $ 961,145 ​ $ 101,479 ​ $ 93,624 ​ $ 196,702 ​ $ — ​ $ 1,352,950 29.8 % West ​ 581,022 ​ 143,774 ​ 43,083 ​ 11,847 ​ — ​ 779,726 17.2 % Mid-Atlantic ​ 573,630 ​ — ​ 6,090 ​ 102,063 ​ — ​ 681,783 15.0 % Southwest ​ 498,056 ​ — ​ — ​ 2,200 ​ — ​ 500,256 11.0 % Southeast ​ 461,294 ​ 28,479 ​ 6,647 ​ 1,153 ​ — ​ 497,573 10.9 % Central ​ 429,594 ​ 41,682 ​ 42,612 ​ — ​ — ​ 513,888 11.3 % Various ​ 9,487 ​ 95,258 ​ — ​ — ​ 113,830 ​ 218,575 4.8 % Total ​ $ 3,514,228 ​ $ 410,672 ​ $ 192,056 ​ $ 313,965 ​ $ 113,830 ​ $ 4,544,751 100.0 % (1) For net lease, operating properties and land and development, gross book value is defined as the basis assigned to physical real estate property (land and building), net of any impairments taken after acquisition date and net of basis reductions associated with unit/parcel sales, plus our basis in equity method investments, plus lease related intangibles, capitalized leasing costs and excluding accumulated depreciation and amortization, and for equity method investments, excluding the effect of our share of accumulated depreciation and amortization. For real estate finance, gross book value is defined as principal funded including any deferred capitalized interest receivable, plus protective advances, exit fee receivables and any unamortized origination/modification costs, plus our basis in equity method investments, less purchase discounts and specific allowances. This amount is not reduced for CECL allowances. Real estate finance includes our $48 million pro rata share of loans held within an equity method investment. Net Lease Our net lease business seeks to create stable cash flows through long-term net leases primarily to single tenants on our properties. We target mission-critical facilities leased on a long-term basis to tenants, offering structured solutions that combine our capabilities in underwriting, lease structuring, asset management and build-to-suit construction. Leases typically provide for expenses at the facility to be paid by the tenant on a triple net lease basis. Under a typical net lease agreement, the tenant agrees to pay a base monthly operating lease payment and most or all of the facility operating expenses (including taxes, utilities, maintenance and insurance). The net lease segment includes our Ground Lease investments made primarily through SAFE and our traditional net lease investments. As of September 30, 2021, the gross book value of our consolidated net lease portfolio totaled $2.3 billion. Our net lease portfolio, including the carrying value of our equity method investments in SAFE and Net Lease Venture II gross of accumulated depreciation, totaled $3.5 billion. In July 2021, we announced that we intend to explore market interest for possible sales of our net lease assets. The potential sale would be consistent with our stated corporate strategy which is to grow our Ground Lease and Ground Lease adjacent businesses and simplify our portfolio through 44 Table of Contents sales of other assets. There can be no assurance as to whether we will sell some, all or none of our net lease assets, or as to the timing or terms of any sales. The table below provides certain statistics for our net lease portfolio. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ Wholly- Net Lease Consolidated Net Lease ​ ​ ​ ​ Owned ​ Venture I ​ Real Estate (1) ​ Venture II ​ SAFE Ownership % ​ ​ 100.0 % ​ 51.9 % ​ — ​ 51.9 % ​ 63.6 % Gross book value (millions) (2) ​ $ 1,348 ​ $ 911 ​ $ 2,259 ​ $ 324 ​ $ 3,879 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Leased ​ 98.9 % 100.0 % 99.3 % 100.0 % 100.0 % Square footage (thousands) ​ 9,630 ​ 5,755 ​ 15,385 ​ 3,302 ​ N/A ​ Weighted average lease term (years) (3) ​ 18.8 ​ 16.2 ​ 17.7 ​ 12.3 ​ 89.1 ​ Weighted average yield (4) ​ 7.6 % 8.2 % 7.8 % 9.1 % 4.6 % (1) We own 51.9% of the Net Lease Venture which is consolidated in our GAAP financial statements (refer to Note 4). (2) Consolidated Real Estate includes amounts recorded as net investment in leases (refer to Note 5) and financing receivables in loans and other lending investments (refer to Note 7). SAFE includes its pro rata share of its unconsolidated equity method investments. (3) Weighted average lease term is calculated using GAAP rent and the initial maturity and does not include extension options. SAFE includes its pro rata share of its unconsolidated equity method investments. (4) Yield for SAFE is calculated over the trailing twelve months and excludes management fees earned by us. 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 and gave a right of first refusal to the venture on all new net lease investments that met specified investment criteria (refer to Note 4 in our consolidated financial statements for more information on our Net Lease Venture). The Net Lease Venture’s investment period expired on June 30, 2018 and the remaining term of the venture extends through February 13, 2022, subject to two, one-year extension options at the discretion of us and our partner. We obtained control over the Net Lease Venture when the investment period expired on June 30, 2018 and consolidated the assets and liabilities of the venture, which had previously been accounted for as an equity method investment. Net Lease Venture II —In July 2018, we entered into Net Lease Venture II with similar investment strategies as the Net Lease Venture (refer to Note 8). The Net Lease Venture II has a right of first offer on all new net lease investments (excluding Ground Leases) originated by us. We have an equity interest in the new venture of approximately 51.9%, which is accounted for as an equity method investment, and are responsible for managing the venture in exchange for a management fee and incentive fee. In June 2021, Net Lease Venture II’s investment period was extended to December 31, 2021. SAFE —SAFE is a publicly-traded company that originates and acquires Ground Leases in order to generate attractive long-term risk-adjusted returns from its investments. We believe its business has characteristics comparable to a high-grade fixed income investment business, but with certain unique advantages. Relative to alternative fixed income investments generally, SAFE’s Ground Leases typically benefit from built-in growth derived from contractual rent increases, and the opportunity to realize value from residual rights to acquire the buildings and other improvements on its land at no additional cost. We believe that these features offer us the opportunity through our ownership in SAFE to realize superior risk-adjusted total returns when compared to certain alternative highly-rated investments. As of September 30, 2021, we owned approximately 63.6% of SAFE’s common stock outstanding. We account for our investment in SAFE as an equity method investment (refer to Note 8). We act as SAFE’s external manager pursuant to a management agreement, and we have an exclusivity agreement with SAFE pursuant to which we agreed, subject to certain exceptions, that we will not acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless we have first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity. Real Estate Finance Our real estate finance business targets sophisticated and innovative owner/operators of real estate and real estate related projects by providing one-stop capabilities that encompass financing alternatives ranging from full envelope senior 45 Table of Contents loans to mezzanine and preferred equity capital positions. Our real estate finance portfolio consists of senior mortgage loans that are secured by commercial and residential real estate assets where we are the first lien holder, subordinated mortgage loans that are secured by second lien or junior interests in commercial and residential real estate assets, leasehold loans to Ground Lease tenants, including tenants of SAFE, and corporate/partnership loans, which represent mezzanine or subordinated loans to entities for which we do not have a lien on the underlying asset, but may have a pledge of underlying equity ownership of such assets. Our real estate finance portfolio includes loans on stabilized and transitional properties, Ground Leases and ground-up construction projects. In addition, we have preferred equity investments and debt securities classified as other lending investments. As of September 30, 2021, the gross book value of our consolidated real estate finance portfolio, including securities and other lending investments, totaled $411.2 million, gross of general loan loss allowances. The portfolio, excluding securities and other lending investments, included $181.8 million of performing loans with a weighted average maturity of 2.9 years. The tables below summarize our loans and the allowance for loan losses associated with our loans ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for ​ ​ ​ ​ Gross ​ Allowance ​ ​ ​ ​ ​ ​ Loan Losses as ​ ​ Number ​ Book ​ for Loan ​ Net Book ​ % of ​ a % of Gross ​ of Loans Value Losses Value Total ​ Book Value ​ Performing loans ​ 9 ​ $ 181,764 ​ $ (2,244) ​ $ 179,520 44.3% ​ 1.2% ​ Non-performing loans ​ 1 ​ 58,819 ​ (640) ​ 58,179 14.3% ​ 1.1% ​ Other lending investments ​ 3 ​ 171,296 ​ (3,486) ​ 167,810 41.4% ​ 2.0% ​ Total ​ 13 ​ $ 411,879 ​ $ (6,370) ​ $ 405,509 100.0% ​ 1.5% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for ​ ​ ​ ​ Gross ​ Allowance ​ ​ ​ ​ ​ ​ Loan Losses as ​ ​ Number ​ Book ​ for Loan ​ Net Book ​ % of ​ a % of Gross ​ ​ of Loans ​ Value ​ Losses ​ Value ​ Total Book Value ​ Performing loans ​ 16 ​ $ 529,657 ​ $ (8,184) ​ $ 521,473 71.2% ​ 1.5% ​ Non-performing loans ​ 1 ​ 53,305 ​ (742) ​ 52,563 7.2% ​ 1.4% ​ Other lending investments ​ 3 ​ 162,538 ​ (4,244) ​ 158,294 21.6% ​ 2.6% ​ Total ​ 20 ​ $ 745,500 ​ $ (13,170) ​ $ 732,330 100.0% ​ 1.8% ​ ​ Performing Loans —The table below summarizes our performing loans exclusive of allowances ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 December 31, 2020 Senior mortgages ​ $ 148,059 ​ $ 432,350 ​ Corporate/Partnership loans ​ 21,457 ​ 85,667 ​ Subordinate mortgages ​ 12,248 ​ 11,640 ​ Total ​ $ 181,764 ​ $ 529,657 ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average LTV ​ 63% ​ 57% ​ Yield - year to date (1) ​ 7.9% ​ 7.9% ​ (1) Yields presented are for the nine months ended September 30, 2021 and 2020 and represent the yields on performing loans and other lending investments. Non-Performing Loans —We designate loans as non-performing at such time as: (1) interest payments become 90 days delinquent; (2) the loan has a maturity default; or (3) management determines it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. All non-performing loans are placed on non-accrual status and income is only recognized in certain cases upon actual cash receipt. As of September 30, 2021 and December 31, 2020, we had one non-performing loan with a carrying value of $58.2 million and $52.6 million, respectively. We expect that our level of non-performing loans will fluctuate from period to period. 46 Table of Contents Allowance for Loan Losses —The allowance for loan losses was $6.4 million as of September 30, 2021, or 1.5% of total loans and other lending investments, compared to $13.2 million, or 1.8%, as of December 31, 2020. We expect that our level of allowance for loan losses will fluctuate from period to period. Due to the volatility of the commercial real estate market, the process of estimating collateral values and allowances requires the use of significant judgment. We currently believe there is adequate collateral and allowances to support the carrying values of the loans and other lending investments. The allowance for loan losses includes an asset-specific component and a formula-based component. An asset-specific allowance is established for an impaired loan when the estimated fair value of the loan’s collateral less costs to sell is lower than the carrying value of the loan. As of September 30, 2021 and December 31, 2020, asset-specific allowances were $0.6 million and $0.7 million, respectively. We estimate the formula-based component based on historical realized losses experienced within our portfolio and take into account current economic conditions affecting the commercial real estate market. In addition, we use third-party market data that includes forecasted economic trends, including unemployment rates. The general allowance decreased to $5.7 million, or 1.6%, of performing loans and other lending investments as of September 30, 2021, compared to $12.4 million, or 1.8%, of performing loans and other lending investments as of December 31, 2020. The decrease was due primarily to the repayment of loans during the nine months ended September 30, 2021 and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020. Operating Properties Our operating properties represent a pool of assets across a broad range of geographies and property types including industrial, hotel, multifamily, retail, condominium and entertainment/leisure properties. As of September 30, 2021, the gross book value of our operating property portfolio, including the carrying value of our equity method investments gross of accumulated depreciation, totaled $192.1 million. Land and Development The following table presents a land and development portfolio rollforward for the nine months ended September 30, 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Land and Development Portfolio Rollforward ​ ​ (in millions) ​ Asbury Ocean ​ ​ ​ ​ ​ ​ ​ ​ Club and ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Asbury Park ​ Magnolia ​ All ​ Total ​ ​ Waterfront ​ Green ​ Others ​ Segment Beginning balance (1) ​ $ 201.1 ​ $ 101.3 ​ $ 128.3 ​ $ 430.7 Asset sales (2) ​ (50.2) ​ (19.1) ​ (72.6) ​ (141.9) Capital expenditures ​ 1.0 ​ 15.6 ​ — ​ 16.6 Other ​ — ​ (2.3) ​ (0.3) ​ (2.6) Ending balance (1) ​ $ 151.9 ​ $ 95.5 ​ $ 55.4 ​ $ 302.8 (1) As of September 30, 2021, and December 31, 2020, Total Segment excludes $0.5 million and $31.2 million, respectively, of equity method investments. (2) Represents gross book value of the assets sold, rather than proceeds received. ​ 47 Table of Contents Results of Operations for the Three Months Ended September 30, 2021 compared to the Three Months Ended September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ ​ ​ ​ ​ September 30, ​ ​ ​ ​ ​ 2021 2020 $ Change ​ ​ ​ (in thousands) ​ Operating lease income ​ $ 44,392 ​ $ 46,370 ​ $ (1,978) ​ Interest income ​ 7,951 ​ 14,270 ​ (6,319) ​ Interest income from sales-type leases ​ 9,578 ​ 8,360 ​ 1,218 ​ Other income ​ 40,195 ​ 25,552 ​ 14,643 ​ Land development revenue ​ 93,369 ​ 20,502 ​ 72,867 ​ Total revenue ​ 195,485 ​ 115,054 ​ 80,431 ​ Interest expense ​ 39,471 ​ 42,407 ​ (2,936) ​ Real estate expenses ​ 18,724 ​ 16,935 ​ 1,789 ​ Land development cost of sales ​ 87,380 ​ 21,358 ​ 66,022 ​ Depreciation and amortization ​ 14,856 ​ 14,621 ​ 235 ​ General and administrative ​ 17,121 ​ 19,868 ​ (2,747) ​ (Recovery of) provision for loan losses ​ (1,556) ​ (1,976) ​ 420 ​ Provision for (recovery of) losses on net investment in leases ​ 131 ​ 175 ​ (44) ​ Impairment of assets ​ 1,179 ​ — ​ 1,179 ​ Other expense ​ 2,011 ​ 73 ​ 1,938 ​ Total costs and expenses ​ 179,317 ​ 113,461 ​ 65,856 ​ Income from sales of real estate ​ 25,611 ​ 6,055 ​ 19,556 ​ Loss on early extinguishment of debt, net ​ — ​ (7,924) ​ 7,924 ​ Earnings from equity method investments ​ 89,209 ​ 6,805 ​ 82,404 ​ Income tax benefit (expense) ​ 6 ​ (78) ​ 84 ​ Net income ​ $ 130,994 ​ $ 6,451 ​ $ 124,543 ​ ​ Revenue —Operating lease income, which primarily includes income from net lease assets and commercial operating properties, decreased $2.0 million to $44.4 million during the three months ended September 30, 2021 from $46.4 million for the same period in 2020. The following table summarizes our operating lease income by segment ($ in millions). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ ​ 2021 2020 Change Net Lease (1) ​ $ 40.7 ​ $ 41.1 ​ $ (0.4) Operating Properties (2) ​ 3.6 ​ 5.2 ​ (1.6) Land and Development ​ 0.1 ​ 0.1 ​ — Total ​ $ 44.4 ​ $ 46.4 ​ $ (2.0) (1) Change primarily due to the sale of assets, partially offset by an increase in rent at certain of our properties. (2) Change primarily due to the sale of assets. ​ 48 Table of Contents The following table shows certain same store statistics for our consolidated Net Lease segment. Same store assets are defined as assets we owned on or prior to July 1, 2020 and were in service through September 30, 2021 (Operating lease income in millions). ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ 2021 2020 Operating lease income (1) ​ $ 50.6 ​ $ 49.4 ​ Rent per square foot ​ $ 13.25 ​ $ 12.77 ​ Occupancy (2) ​ ​ 99.3 % 98.6 % (1) For the three months ended September 30, 2021 and 2020, includes $10.0 million and $9.2 million, respectively, of lease income from one net lease tenant that was recorded to “Interest income from sales-type leases” and “Interest income” in our consolidated statements of operations. (2) Occupancy as of September 30, 2021 and 2020. Interest income decreased to $8.0 million during the three months ended September 30, 2021 from $14.3 million for the same period in 2020. The decrease was due primarily to a decrease in the average balance of our performing loans and other lending investments, which was $323 million for the three months ended September 30, 2021 and $703 million for the three months ended September 30, 2020. The weighted average yield on our performing loans and other lending investments was 7.8% and 7.6%, respectively, for the three months ended September 30, 2021 and 2020. Interest income from sales-type leases increased to $9.6 million for the three months ended September 30, 2021 from $8.4 million for the same period in 2020. The increase was due primarily to sales-type leases originated in 2021. Other income increased to $40.2 million during the three months ended September 30, 2021 from $25.6 million for the same period in 2020. Other income during the three months ended September 30, 2021 consisted primarily of mark-to-market gains on an equity investment, income from our hotel properties, lease termination fees, management fees, other ancillary income from our land and development projects and loan portfolio and interest income on our cash. Other income during the three months ended September 30, 2020 consisted primarily of mark-to-market gains on an equity investment, management fees, other ancillary income from our operating properties, land and development projects and loan portfolio, income from our hotel properties and interest income on our cash. Land development revenue and cost of sales —During the three months ended September 30, 2021, we sold land parcels and residential lots and units and recognized land development revenue of $93.4 million which had associated cost of sales of $87.4 million. During the three months ended September 30, 2020, we sold residential lots and units and recognized land development revenue of $20.5 million which had associated cost of sales of $21.4 million. The increase in 2021 was primarily due to the sale of three land properties. Costs and expenses —Interest expense decreased to $39.5 million during the three months ended September 30, 2021 from $42.4 million for the same period in 2020, due primarily to a decrease in our weighted average cost of debt, which was 4.5% for the three months ended September 30, 2021 compared to 4.8% for the three months ended September 30, 2020. The balance of our average outstanding debt, inclusive of loan participations and lease liabilities associated with finance-type leases, decreased to $3.44 billion for the three months ended September 30, 2021 from $3.47 billion for the same period in 2020. ​ 49 Table of Contents Real estate expense increased $1.8 million to $18.7 million during the three months ended September 30, 2021 from $16.9 million for the same period in 2020. The following table summarizes our real estate expenses by segment ($ in millions). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ ​ 2021 2020 Change Operating Properties (1) ​ $ 9.2 ​ $ 4.4 ​ $ 4.8 Land and Development (2) ​ 4.1 ​ 5.4 ​ (1.3) Net Lease (3) ​ 5.4 ​ 7.1 ​ (1.7) Total ​ $ 18.7 ​ $ 16.9 ​ $ 1.8 (1) Change primarily due to an increase in expenses at certain of our hotel operating properties that have increased operations from the prior year. (2) Change primarily due to asset sales. (3) Change primarily due to a lease amendment at one property that resulted in a change to recoverable expenses. Depreciation and amortization increased to $14.9 million during the three months ended September 30, 2021 from $14.6 million for the same period in 2020. General and administrative expense includes payroll and related costs, performance-based compensation, public company costs and occupancy costs. General and administrative expenses decreased to $17.1 million during the three months ended September 30, 2021 from $19.9 million for the same period in 2020. The decrease in 2021 was due primarily to a $1.8 million decrease in performance-based compensation and a $0.9 million decrease in payroll and related costs from 2020 . Our primary forms of performance-based compensation are our iPIP Plans and our annual bonus pool (refer to Note 15 for more information on the iPIP Plans). In addition, illustrative examples of our iPIP Plans may be found in our 2021 definitive proxy statement which is publicly available on the SEC’s website. The recovery of loan losses was $1.6 million for the three months ended September 30, 2021 as compared to a recovery of loan losses of $2.0 million for the same period in 2020. The recovery of loan losses for the three months ended September 30, 2021 resulted from the reversal of CECL allowances on loans that repaid in full in the quarter. The recovery of loan losses for the three months ended September 30, 2020 resulted from the reversal of CECL allowances on loans that repaid in full in the third quarter 2020 and a more favorable economic outlook on commercial real estate markets in the third quarter 2020 as compared to the second quarter 2020. The provision for losses on net investment in leases for the three months ended September 30, 2021 resulted from a changing macroeconomic forecast on commercial real estate markets since June 30, 2021. The provision for losses on net investment in leases for the three months ended September 30, 2020 resulted from the macroeconomic impact of COVID-19 on commercial real estate markets. During the three months ended September 30, 2021, we recorded an aggregate impairment of $0.8 million resulting from the sale of net lease assets and a $0.4 million on an operating property held for sale. Other expense was $2.0 million during the three months ended September 30, 2021 and $0.1 million for the same period in 2020. Other expenses for the three months ended September 30, 2021 consisted primarily of legal costs. Income from sales of real estate —During the three months ended September 30, 2021, we recorded $25.6 million of income from sales of real estate primarily from the sale of an operating property. During the three months ended September 30, 2020, we recorded $6.1 million of income from sales of real estate from the sale of a Ground Lease to SAFE . Loss on early extinguishment of debt, net— During the three months ended September 30, 2020, we incurred losses on early extinguishment of debt of $7.9 million resulting from the repayment of senior notes prior to maturity. Earnings from equity method investments —Earnings from equity method investments increased to $89.2 million during the three months ended September 30, 2021 from $6.8 million for the same period in 2020. During the three months ended September 30, 2021, we recognized $73.5 million of income from our equity method investment in SAFE (which included a dilution gain of $60.2 million – refer to Note 8), $1.4 million from our equity method investment in Net Lease 50 Table of Contents Venture II and $14.3 million of net aggregate income from our remaining equity method investments, which included $10.5 million from one of our equity method investments resulting from our share of income from land sales. During the three months ended September 30, 2020, we recognized $9.3 million of income from our equity method investment in SAFE and $0.8 million from our equity method investment in Net Lease Venture II , which was partially offset by $3.3 million of net aggregate losses from our remaining equity method investments. Income tax benefit (expense) —Income tax benefit of $6 thousand was recorded for the three months ended September 30, 2021. Income tax expense of $0.1 million was recorded for the three months ended September 30, 2020 and related primarily to state margins taxes and other minimum state taxes. Results of Operations for the Nine Months Ended September 30, 2021 compared to the Nine Months Ended September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ ​ ​ ​ ​ 2021 2020 $ Change ​ ​ ​ (in thousands) ​ Operating lease income ​ $ 137,381 ​ $ 140,529 ​ $ (3,148) ​ Interest income ​ 27,574 ​ 46,925 ​ (19,351) ​ Interest income from sales-type leases ​ 26,895 ​ 25,010 ​ 1,885 ​ Other income ​ 64,549 ​ 56,212 ​ 8,337 ​ Land development revenue ​ 157,936 ​ 116,254 ​ 41,682 ​ Total revenue ​ 414,335 ​ 384,930 ​ 29,405 ​ Interest expense ​ 118,451 ​ 127,748 ​ (9,297) ​ Real estate expense ​ 53,907 ​ 53,708 ​ 199 ​ Land development cost of sales ​ 147,507 ​ 114,704 ​ 32,803 ​ Depreciation and amortization ​ 44,971 ​ 43,407 ​ 1,564 ​ General and administrative ​ 68,954 ​ 73,138 ​ (4,184) ​ (Recovery of) provision for loan losses ​ (7,613) ​ 4,093 ​ (11,706) ​ (Recovery of) provision for losses on net investment in leases ​ (1,735) ​ 2,001 ​ (3,736) ​ Impairment of assets ​ 2,965 ​ 6,491 ​ (3,526) ​ Other expense ​ 2,475 ​ 351 ​ 2,124 ​ Total costs and expenses ​ 429,882 ​ 425,641 ​ 4,241 ​ Income from sales of real estate ​ 28,433 ​ 6,118 ​ 22,315 ​ Loss on early extinguishment of debt, net ​ — ​ (12,038) ​ 12,038 ​ Earnings from equity method investments ​ 114,675 ​ 26,003 ​ 88,672 ​ Income tax benefit (expense) ​ 6 ​ (165) ​ 171 ​ Net income (loss) ​ $ 127,567 ​ $ (20,793) ​ $ 148,360 ​ ​ Revenue —Operating lease income, which primarily includes income from net lease assets and commercial operating properties, decreased to $137.4 million during the nine months ended September 30, 2021 from $140.5 million for the same period in 2020. The following table summarizes our operating lease income by segment ($ in millions). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ ​ 2021 2020 Change Net Lease (1) ​ $ 123.9 ​ $ 124.0 ​ $ (0.1) Operating Properties (2) ​ 13.2 ​ 16.2 ​ (3.0) Land and Development ​ 0.3 ​ 0.3 ​ — Total ​ $ 137.4 ​ $ 140.5 ​ $ (3.1) (1) Change primarily due to asset sales, partially offset by an increase in rent at certain of our properties. (2) Change primarily due to asset sales and the termination of certain leases at one of our operating properties. 51 Table of Contents The following table shows certain same store statistics for our consolidated Net Lease segment. Same store assets are defined as assets we owned on or prior to January 1, 2020 and were in service through September 30, 2021 (Operating lease income in millions). ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2021 2020 Operating lease income (1) ​ $ 152.7 ​ $ 147.3 ​ Rent per square foot ​ $ 13.32 ​ $ 12.68 ​ Occupancy (2) ​ 99.3 % 98.6 % (1) For the nine months ended September 30, 2021 and 2020, includes $28.9 million and $27.4 million, respectively, of lease income from one net lease tenant that was recorded to “Interest income from sales-type leases” and “Interest income” in our consolidated statements of operations. (2) Occupancy as of September 30, 2021 and 2020. ​ Interest income decreased to $27.6 million during the nine months ended September 30, 2021 from $46.9 million for the same period in 2020. The decrease was due primarily to a decrease in the average balance of our performing loans and other lending investments, which was $403 million for the nine months ended September 30, 2021 and $716 million for the nine months ended September 30, 2020. The weighted average yield on our performing loans and other lending investments for both the nine months ended September 30, 2021 and 2020 was 7.9%. Interest income from sales-type leases increased to $26.9 million for the nine months ended September 30, 2021 from $25.0 million for the same period in 2020. The increase was due primarily to sales-type leases originated in 2021. Other income increased to $64.5 million during the nine months ended September 30, 2021 from $56.2 million for the same period in 2020. Other income during the nine months ended September 30, 2021 consisted primarily of mark-to-market gains on an equity investment, income from our hotel properties, management fees, lease termination fees, other ancillary income from our land and development projects and loan portfolio and interest income on our cash. Other income during the nine months ended September 30, 2020 consisted primarily of mark-to-market gains on an equity investment, management fees, other ancillary income from our operating properties, land and development projects and loan portfolio, income from our hotel properties and interest income on our cash. Land development revenue and cost of sales —During the nine months ended September 30, 2021, we sold residential lots and units and recognized land development revenue of $157.9 million which had associated cost of sales of $147.5 million. During the nine months ended September 30, 2020, we sold residential lots and units and recognized land development revenue of $116.3 million which had associated cost of sales of $114.7 million. The increase in 2021 was primarily due to the sale of three land properties. Costs and expenses —Interest expense decreased to $118.5 million during the nine months ended September 30, 2021 from $127.7 million for the same period in 2020 due primarily to a decrease in our weighted average cost of debt, which was 4.6% for the nine months ended September 30, 2021 compared to 4.8% for the nine months ended September 30, 2020. The balance of our average outstanding debt, inclusive of loan participations and lease liabilities associated with finance-type leases, decreased to $3.45 billion for the nine months ended September 30, 2021 from $3.51 billion for the same period in 2020. Real estate expenses increased to $53.9 million during the nine months ended September 30, 2021 from $53.7 million for the same period in 2020. The following table summarizes our real estate expenses by segment ($ in millions). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ ​ 2021 2020 Change Operating Properties (1) ​ $ 19.2 ​ $ 16.6 ​ $ 2.6 Land and Development (2) ​ 13.6 ​ 17.6 ​ (4.0) Net Lease (3) ​ 21.1 ​ 19.5 ​ 1.6 Total ​ $ 53.9 ​ $ 53.7 ​ $ 0.2 (1) Change primarily due to an increase in expenses at certain of our hotel operating properties that have increased operations from the prior year. (2) Change primarily due to a decrease in real estate taxes and insurance costs at one property and asset sales. 52 Table of Contents (3) Change primarily due to an increase in legal costs and common area expenses at certain properties, partially offset by a lease amendment at one property that resulted in a change to recoverable expenses. Depreciation and amortization increased to $45.0 million during the nine months ended September 30, 2021 from $43.4 million for the same period in 2020, primarily due to the full amortization of intangible assets associated with terminated leases and placing certain assets in service during 2021. ​ General and administrative expense includes payroll and related costs, performance-based compensation, public company costs and occupancy costs. General and administrative expenses decreased to $69.0 million during the nine months ended September 30, 2021 from $73.1 million for the same period in 2020. The decrease in 2021 was due primarily to a $2.1 million decrease in performance-based compensation and a $2.1 million decrease in payroll and related costs from 2020 . Our primary forms of performance-based compensation are our iPIP Plans and our annual bonus pool (refer to Note 15 for more information on the iPIP Plans). In addition, illustrative examples of our iPIP Plans may be found in our 2021 definitive proxy statement which is publicly available on the SEC’s website. The recovery of loan losses was $7.6 million for the nine months ended September 30, 2021 as compared to a provision for loan losses of $4.1 million for the same period in 2020. The recovery of loan losses for the nine months ended September 30, 2021 resulted from the reversal of CECL allowances on loans that repaid in full during the period and from an improving macroeconomic forecast on commercial real estate markets since December 31, 2020. The provision for loan losses for the nine months ended September 30, 2020 resulted from the macroeconomic impact of COVID-19 on commercial real estate markets. The recovery of losses on net investment in leases for the nine months ended September 30, 2021 resulted from asset sales and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020. The provision for losses on net investment in leases for the nine months ended September 30, 2020 included an allowance resulting from the macroeconomic impact of COVID-19 on commercial real estate markets. During the nine months ended September 30, 2021, we recorded an aggregate impairment of $2.5 in connection with the sale of net lease assets and residential condominiums and a $0.4 million impairment on an operating property held for sale . During the nine months ended September 30, 2020, we recorded an aggregate impairment of $6.5 million in connection with the sale of net lease assets and impairments on a real estate asset held for sale and a land and development asset. Other expense increased to $2.5 million during the nine months ended September 30, 2021 from $0.4 million for the same period in 2020. The increase in 2021 was primarily due to an increase in legal costs. Income from sales of real estate —During the nine months ended September 30, 2021, we recorded $28.4 million of income from sales of real estate from the sale of an operating property, net lease assets and residential condominiums. During the nine months ended September 30, 2020, we recorded $6.1 million of income from sales of real estate primarily from the sale of a Ground Lease to SAFE. ​ Loss on early extinguishment of debt, net —During the nine months ended September 30, 2020, we incurred losses on early extinguishment of debt of $12.0 million resulting from the repayment of senior notes prior to maturity. Earnings from equity method investments —Earnings from equity method investments increased to $114.7 million during the nine months ended September 30, 2021 from $26.0 million for the same period in 2020. During the nine months ended September 30, 2021, we recognized $94.6 million of income from our equity method investment in SAFE (which included a dilution gain of $60.7 million – refer to Note 8), $4.0 million from our equity method investment in Net Lease Venture II and $16.1 million of net aggregate income from our remaining equity method investments, which included $13.3 million from one of our equity method investments resulting from our share of income from land sales . During the nine months ended September 30, 2020, we recognized $36.9 million of income from our equity method investment in SAFE, which included a dilution gain of $7.9 million resulting from a SAFE equity offering in March 2020, and $1.6 million from our equity investment in Net Lease Venture II, which were partially offset by $12.5 million of net aggregate losses from our remaining equity method investments. 53 Table of Contents Income tax expense — Income tax benefit of $6 thousand was recorded during the nine months ended September 30, 2021. Income tax expense of $0.2 million was recorded during the nine months ended September 30, 2020 and was due primarily to state margins taxes and other minimum state taxes. Adjusted Earnings In 2019, we announced a new business strategy that would focus our management personnel and our investment resources primarily on scaling our Ground Lease platform. As part of this strategy, we accelerated the monetization of legacy assets, reducing our legacy portfolio to approximately 10% of our overall portfolio as of September 30, 2021, and deployed a substantial portion of the proceeds into additional investments in SAFE and new loan and net lease originations relating to the Ground Lease business. Adjusted earnings is a non-GAAP metric management uses to assess our execution of this strategy and the performance of our operations. Adjusted earnings is used internally as a supplemental performance measure adjusting for certain items to give management a view of income more directly derived from operating activities in the period in which they occur. Adjusted earnings is calculated as net income (loss) allocable to common shareholders, prior to the effect of depreciation and amortization, including our proportionate share of depreciation and amortization from equity method investments and excluding depreciation and amortization allocable to noncontrolling interests, stock-based compensation expense, the non-cash portion of loss on early extinguishment of debt and the liquidation preference recorded as a premium above book value on the redemption of preferred stock (“Adjusted Earnings”). Adjusted Earnings should be examined in conjunction with net income (loss) as shown in our consolidated statements of operations. Adjusted Earnings should not be considered as an alternative to net income (loss) (determined in accordance with generally accepted accounting principles in the United States of America (“GAAP”)), or to cash flows from operating activities (determined in accordance with GAAP), as a measure of our liquidity, nor is Adjusted Earnings indicative of funds available to fund our cash needs or available for distribution to shareholders. Rather, Adjusted Earnings is an additional measure we use to analyze our business performance because it excludes the effects of certain non-cash charges that we believe are not necessarily indicative of our operating performance. It should be noted that our manner of calculating Adjusted Earnings may differ from the calculations of similarly-titled measures by other companies. ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended September 30, ​ ​ 2021 2020 ​ ​ ​ (in thousands) ​ Adjusted Earnings ​ ​ ​ ​ Net income (loss) allocable to common shareholders ​ $ 121,856 ​ $ (2,069) ​ Add: Depreciation and amortization ​ 16,449 ​ 15,795 ​ Add: Stock-based compensation expense ​ 3,001 ​ 5,661 ​ Add: Non-cash portion of loss on early extinguishment of debt ​ — ​ 2,672 ​ Adjusted earnings allocable to common shareholders ​ $ 141,306 ​ $ 22,059 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ ​ 2021 2020 ​ ​ ​ (in thousands) ​ Adjusted Earnings ​ ​ ​ ​ Net income (loss) allocable to common shareholders ​ $ 101,908 ​ $ (46,850) ​ Add: Depreciation and amortization ​ 50,790 ​ 46,526 ​ Add: Stock-based compensation expense ​ 23,300 ​ 26,675 ​ Add: Non-cash portion of loss on early extinguishment of debt ​ — ​ 3,470 ​ Adjusted earnings allocable to common shareholders ​ $ 175,998 ​ $ 29,821 ​ ​ Liquidity and Capital Resources During the three months ended September 30, 2021, we invested an aggregate $175 million in new investments, prior financing commitments and real estate development. Investments included $107 million in net lease (including $53 million 54 Table of Contents in shares of SAFE common stock), loan, and strategic investments, $60 million in the repurchase of our common stock and $8 million of capital expenditures on legacy assets. These amounts are inclusive of fundings from our consolidated investments and our pro rata share from equity method investments. The following table outlines our capital expenditures on operating properties, net lease and land and development assets as reflected in our consolidated statements of cash flows, by segment ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ ​ 2021 2020 ​ Operating Properties ​ $ 560 ​ $ 2,037 ​ Net Lease ​ 5,275 ​ 9,624 ​ Total capital expenditures on real estate assets ​ $ 5,835 ​ $ 11,661 ​ ​ ​ ​ ​ ​ ​ ​ ​ Land and Development ​ $ 15,603 ​ $ 33,488 ​ Total capital expenditures on land and development assets ​ $ 15,603 ​ $ 33,488 ​ ​ As of September 30, 2021, we had unrestricted cash of $299 million and $340 million of borrowing capacity available under the Revolving Credit Facility. The COVID-19 pandemic adversely affected our strategies of monetizing legacy assets and materially scaling SAFE’s portfolio in 2020 and the first quarter of 2021. These conditions improved in the second quarter and third quarter of 2021 and we expect them to continue to improve as more normalized activity resumes. Our primary cash uses over the next 12 months are expected to be funding of investments, capital expenditures, distributions to shareholders through dividends and share repurchases and funding ongoing business operations. The amount we actually invest will depend on the full impact of the COVID-19 pandemic on our business and the pace of the economic recovery. Our $287.5 million aggregate principal amount of convertible notes mature in September 2022, and we must repay them in a combination of cash and shares of our common stock. We also had approximately $118.4 million of maximum unfunded commitments associated with our investments as of September 30, 2021, of which we expect to fund the majority over the next two years, assuming borrowers and tenants meet all milestones, performance hurdles and all other conditions to fundings (see “Unfunded Commitments” below). We also have approximately $166.2 million principal amount of scheduled real estate finance asset maturities over the next 12 months, exclusive of any extension options that can be exercised by our borrowers. We expect that we will be able to meet our liquidity requirements over the next 12 months and for the reasonably foreseeable future. Our capital sources to meet such cash requirements are expected to include cash on hand, Revolving Credit Facility borrowings, income from our portfolio, loan repayments from borrowers and proceeds from asset sales. We cannot predict with certainty the specific transactions we will undertake to generate sufficient liquidity to meet our obligations as they come due. We will adjust our plans as appropriate in response to changes in our expectations and changes in market conditions. Debt Covenants —Our outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness, as such terms are defined in the indentures governing the debt securities, of at least 1.2x and a covenant restricting certain incurrences of debt based on a fixed charge coverage ratio. If any of our covenants are breached and not cured within applicable cure periods, the breach could result in acceleration of our debt securities unless a waiver or modification is agreed upon with the requisite percentage of the bondholders. The Senior Term Loan and the Revolving Credit Facility contain certain covenants, including covenants relating to collateral coverage, restrictions on fundamental changes, transactions with affiliates, matters relating to the liens granted to the lenders and the delivery of information to the lenders. In particular, the Senior Term Loan requires us to maintain collateral coverage of at least 1.25x outstanding borrowings on the facility. The Revolving Credit Facility is secured by a borrowing base of assets and requires us to maintain both borrowing base asset value of at least 1.5x outstanding borrowings on the facility and a consolidated ratio of cash flow to fixed charges of at least 1.5x. The Revolving Credit Facility does not require that proceeds from the borrowing base be used to pay down outstanding borrowings provided the 55 Table of Contents borrowing base asset value remains at least 1.5x outstanding borrowings on the facility. To satisfy this covenant, we have the option to pay down outstanding borrowings or substitute assets in the borrowing base. Under both the Senior Term Loan and the Revolving Credit Facility we are permitted to pay dividends provided that no material default (as defined in the relevant agreement) has occurred and is continuing or would result therefrom and we remain in compliance with our financial covenants after giving effect to the dividend. We declared common stock dividends of $26.3 million, or $0.36 per share, for the nine months ended September 30, 2021. Derivatives —Our use of derivative financial instruments, if necessary, has primarily been limited to the utilization of interest rate swaps, interest rate caps or other instruments to manage interest rate risk exposure and foreign exchange contracts to manage our risk to changes in foreign currencies. Refer to Note 13 to the consolidated financial statements. Unfunded Commitments —We generally fund construction and development loans and build-outs of space in net lease assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria. We refer to these arrangements as Performance-Based Commitments. In addition, we have committed to invest capital in several real estate funds and other ventures. These arrangements are referred to as Strategic Investments. As of September 30, 2021, the maximum amount of fundings we may be obligated to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments and assuming that 100% of our capital committed to Strategic Investments is drawn down, are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans and Other ​ ​ ​ ​ ​ ​ ​ ​ Lending ​ ​ ​ ​ Other ​ ​ ​ ​ Investments ​ Real Estate Investments Total Performance-Based Commitments ​ $ 7,860 ​ $ 29,716 ​ $ 71,319 ​ $ 108,895 Strategic Investments ​ — ​ 1,900 ​ 7,592 ​ 9,492 Total ​ $ 7,860 ​ $ 31,616 ​ $ 78,911 ​ $ 118,387 ​ Stock Repurchase Program —We may repurchase shares in negotiated transactions or open market transactions, including through one or more trading plans. During the nine months ended September 30, 2021, we repurchased 4.2 million shares of our outstanding common stock for $91.9 million, for an average cost of $21.70 per share. During the nine months ended September 30, 2020, we repurchased 3.7 million shares of our outstanding common stock for $41.4 million, for an average cost of $11.32 per share. We are generally authorized to repurchase up to $50.0 million in shares of our common stock. As of September 30, 2021, we had remaining authorization to repurchase up to $30.9 million of common stock under our stock repurchase program. Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments in certain circumstances that affect amounts reported as assets, liabilities, revenues and expenses. We have established detailed policies and control procedures intended to ensure that valuation methods, including any judgments made as part of such methods, are well controlled, reviewed and applied consistently from period to period. We base our estimates on historical corporate and industry experience and various other assumptions that we believe to be appropriate under the circumstances. For all of these estimates, we caution that future events rarely develop exactly as forecasted, and, therefore, routinely require adjustment. For a discussion of our critical accounting policies, refer to Note 3 to the consolidated financial statements and our 2020 Annual Report. New Accounting Pronouncements —For a discussion of the impact of new accounting pronouncements on our financial condition or results of operations, refer to Note 3 to the consolidated financial statements. ​ 56 Table of Contents