What changed in this filing

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Item 1. Financial Statements

2022-05-04 compared with 2021-11-02 · 388 added, 525 removed, 673 unchanged (58% of the section changed)

2 unchanged sentences

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

September 30,

Real estate, at cost

3 unchanged sentences

Total real estate

Net investment in leases ($ 9,136 and $ 10,871 of allowances as of September 30, 2021 and December 31, 2020, respectively)

Real estate and other assets available and held for sale and classified as discontinued operations (2)

Net investment in leases ($ 281 and $ 0 of allowances as of March 31, 2022 and December 31, 2021, respectively)

Land and development, net

Loans receivable and other lending investments, net ($ 6,370 and $ 13,170 of allowances as of September 30, 2021 and December 31, 2020, respectively)

Loans receivable and other lending investments, net ($ 4,932 and $ 4,769 of allowances as of March 31, 2022 and December 31, 2021, respectively)

Loans receivable held for sale

1 unchanged sentence

Cash and cash equivalents

Finance lease right of use assets

Accrued interest and operating lease income receivable, net

3 unchanged sentences

Accounts payable, accrued expenses and other liabilities

Finance lease liabilities

Liabilities associated with real estate held for sale and classified as discontinued operations (2)

Liabilities associated with properties held for sale

Loan participations payable, net

Debt obligations, net

2 unchanged sentences

shareholders' equity:

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, 70,031 and 73,967 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Preferred Stock Series D, G and I, liquidation preference $ 25.00 per share

Common Stock, $ 0.001 par value, 200,000 shares authorized, 69,096 and 68,870 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

2 unchanged sentences

( 2,227,213 )

Accumulated other comprehensive loss (refer to Note 14)

Accumulated other comprehensive loss

Total iStar Inc.

3 unchanged sentences

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

(2) Refer to Note 3 - Net Lease Sale and Discontinued Operations.

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

1 unchanged sentence

(In thousands, except per share data)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Operating lease income

9 unchanged sentences

General and administrative

(Recovery of) provision for loan losses

Provision for (recovery of) losses on net investment in leases

Provision for (recovery of) loan losses

Provision for losses on net investment in leases

Impairment of assets

2 unchanged sentences

Income from sales of real estate

Income (loss) from operations before earnings from equity method investments and other items

Loss from operations before earnings from equity method investments and other items

Loss on early extinguishment of debt, net

Earnings from equity method investments

Net income (loss) before income taxes

Income tax benefit (expense)

Net income (loss)

Net (income) attributable to noncontrolling interests

Net income (loss) attributable to iStar Inc.

Net loss from continuing operations before income taxes

Income tax (expense) benefit

Net loss from continuing operations

Net income from discontinued operations (1)

Net loss from continuing operations attributable to noncontrolling interests

Net (income) from discontinued operations attributable to noncontrolling interests

Net income attributable to iStar Inc.

Preferred dividends

2 unchanged sentences

Net income (loss) allocable to common shareholders

Basic and diluted

Net loss from continuing operations and allocable to common shareholders:

Basic and diluted

Net income from discontinued operations and allocable to common shareholders:

Basic and diluted

Weighted average number of common shares:

Basic and diluted

(1) Refer to Note 3 - Net Lease Sale and Discontinued Operations.

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

1 unchanged sentence

(In thousands)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Net income (loss)

For the Three Months Ended March 31,

Other comprehensive income (loss):

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

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

Unrealized gains (losses) on cash flow hedges

Other comprehensive income (loss)

Comprehensive income (loss)

Unrealized losses on available-for-sale securities

Unrealized gains on cash flow hedges

Other comprehensive income

Comprehensive income

Comprehensive (income) attributable to noncontrolling interests (2)

Comprehensive income (loss) attributable to iStar Inc.

(1) Amounts reclassified to “Interest expense” in the Company’s consolidated statements of operations for the three months ended September 30, 2021 and 2020 are $ 2,050 and $ 2,038 , respectively, and amounts reclassified to “Interest expense” in the Company’s consolidated statements of operations for the nine months ended September 30, 2021 and 2020 are $ 6,183 and $ 4,926 , respectively.

Amounts reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the three months ended September 30, 2021 and 2020 are $ 633 and $ 333 , respectively, and amounts reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the nine months ended September 30, 2021 and 2020 are $ 1,324 and $ 866 , respectively.

Comprehensive income attributable to iStar Inc.

(1) Reclassified to “Net income from discontinued operations” in the Company’s consolidated statements of operations for the three months ended March 31, 2021 is $ 2,104 .

Reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the three months ended March 31, 2022 and 2021 are $ 621 and $ 234 , respectively.

(2) For the three months ended March 31, 2022 and 2021, $ 179.1 million and $ 5.0 million, respectively, of comprehensive income attributable to noncontrolling interests was from discontinued operations .

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

5 unchanged sentences

Income (Loss)

Balance as of June 30, 2021

( 2,338,454 )

Dividends declared—preferred

Dividends declared—common ($ 0.125 per share)

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

Change in accumulated other comprehensive income (loss)

Repurchase of stock

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Change to noncontrolling interest

Balance as of September 30, 2021

( 2,225,552 )

Balance as of June 30, 2020

( 2,279,284 )

Dividends declared—preferred

Dividends declared—common ($ 0.11 per share)

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

Change in accumulated other comprehensive income (loss)

Repurchase of stock

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Balance as of September 30, 2020

( 2,289,668 )

Shareholders' Equity

Comprehensive

Noncontrolling

Income (Loss)

Balance as of December 31, 2021

( 2,227,213 )

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

Dividends declared—preferred

2 unchanged sentences

Change in accumulated other comprehensive income (loss)

Repurchase of stock

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Change to noncontrolling interest

Balance as of September 30, 2021

Balance as of March 31, 2022

( 1,625,086 )

5 unchanged sentences

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 September 30, 2020

Balance as of March 31, 2021

( 2,309,763 )

4 unchanged sentences

(In thousands)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash flows from operating activities:

1 unchanged sentence

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

(Recovery of) provision for loan losses

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

Provision for (recovery of) loan losses

Provision for losses on net investment in leases

Impairment of assets

1 unchanged sentence

Non-cash interest income from sales-type leases

Stock-based compensation expense

Stock-based compensation (income) expense

Amortization of discounts/premiums and deferred financing costs on debt obligations, net

23 unchanged sentences

Net proceeds from sales of land and development assets

Net proceeds from sales of other investments

Net proceeds from sales of net investment in leases

Net proceeds from net investment in leases

Distributions from other investments

1 unchanged sentence

Other investing activities, net

Cash flows provided by (used in) investing activities

Cash flows provided by investing activities

Cash flows from financing activities:

1 unchanged sentence

Repayments and repurchases of debt obligations

Purchase of marketable securities in connection with the defeasance of mortgage notes payable

Preferred dividends paid

1 unchanged sentence

Repurchase of stock

Payments for debt prepayment or extinguishment costs

Payments for deferred financing costs

2 unchanged sentences

Distributions to noncontrolling interests

Payments for debt prepayment or extinguishment costs

Cash flows used in financing activities

( 1,229,992 )

Effect of exchange rate changes on cash

2 unchanged sentences

Cash, cash equivalents and restricted cash at end of period

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Reconciliation of cash and cash equivalents and restricted cash presented on the consolidated statements of cash flows

4 unchanged sentences

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

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

Contributions to other investments

Accrued repurchase of stock

Distributions to noncontrolling interests

Defeasance of mortgage notes payable

Marketable securities transferred in connection with the defeasance of mortgage notes payable

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

Assumption of mortgage by third party

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

3 unchanged sentences

(the “Company”) finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform.

The Company also manages entities focused on ground lease and net lease investments (refer to Note 8).

The Company has invested over $ 40 billion of capital over the past two decades and is structured as a real estate investment trust (“REIT”) with a diversified portfolio focused on larger assets located in major metropolitan markets.

The Company’s primary reportable business segments are net lease, real estate finance, operating properties and land and development (refer to Note 18).

The Company also manages entities focused on ground lease investments (refer to Note 8).

The Company has invested capital over the past two decades and is structured as a real estate investment trust (“REIT”) with a diversified portfolio focused on larger assets located in major metropolitan markets.

The Company’s primary reportable business segments are net lease (refer to Note 3 - Net Lease Sale and Discontinued Operations), real estate finance, operating properties and land and development (refer to Note 17).

Organization —The Company began its business in 1993 through the management of private investment funds and became publicly traded in 1998.

8 unchanged sentences

Such operating results may not be indicative of the expected results for any other interim periods or the entire year.

Certain prior year amounts have been reclassified in the Company’s consolidated financial statements and the related notes to conform to the current period presentation.

Certain prior year amounts have been reclassified in the Company’s consolidated financial statements and the related notes (refer to Note 3 – Net Lease Sale and Discontinued Operations) to conform to the current period presentation.

Principles of Consolidation —The consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries, controlled partnerships and VIEs for which the Company is the primary beneficiary.

All intercompany balances and transactions have been eliminated in consolidation.

The Company’s involvement with VIEs affects its financial performance and cash flows primarily through amounts recorded in “Operating lease income,” “Interest income,” “Earnings from equity method investments,” “Real estate expense” and “Interest expense” in the Company’s consolidated statements of operations.

The Company’s involvement with VIEs affects its financial performance and cash flows primarily through amounts recorded in “Net income from discontinued operations,” “Operating lease income,” “Interest income,” “Earnings from equity method investments,” “Real estate expense” and “Interest expense” in the Company’s consolidated statements of operations.

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

1 unchanged sentence

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

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

The Company did not have any unfunded commitments related to consolidated VIEs as of March 31, 2022 and December 31,

Notes to Consolidated Financial Statements (Continued)

December 31, 2020.

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

September 30, 2021

The following table presents the assets and liabilities of the Company’s consolidated VIEs as of March 31, 2022 and December 31, 2021 ($ in thousands):

March 31, 2022

December 31, 2021

2 unchanged sentences

Real estate, net

Real estate and other assets available and held for sale and classified as discontinued operations

Land and development, net

Other investments

Cash and cash equivalents

3 unchanged sentences

Accounts payable, accrued expenses and other liabilities

Debt obligations, net

Liabilities associated with real estate held for sale and classified as discontinued operations

Total liabilities

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

As of September 30, 2021, the Company’s maximum exposure to loss from these investments does not exceed the sum of the $ 149.4 million carrying value of the investments, which are classified in “Other investments” on the Company’s consolidated balance sheets, and $ 7.6 million of related unfunded commitments.

As of March 31, 2022, the Company’s maximum exposure to loss from these investments does not exceed the sum of the $ 58.7 million carrying value of the investments, which are classified in “Other investments” on the Company’s consolidated balance sheets, and $ 2.3 million of related unfunded commitments.

Note 3—Summary of Significant Accounting Policies

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

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

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

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

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

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

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

For the remainder of the Company’s significant accounting policies, refer to the Company’s 2020 Annual Report.

Net Lease Sale and Discontinued Operations — A discontinued operation represents:

(i) a component of the Company or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or will have a major effect on the Company’s operations and financial results or (ii) an acquired business that is classified as held for sale on the date of acquisition.

Net Lease Sale — In March 2022, the Company, through certain subsidiaries of and entities managed by the Company, closed on a definitive purchase and sale agreement to sell a portfolio of net lease properties owned and managed by such subsidiaries and entities to a third party for an aggregate gross sales price of approximately $ 3.07 billion and recognized a gain of $ 663.7 million in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

The Company refers to this transaction as the "Net Lease Sale"

in this report.

The Net Lease Sale is consistent with the Company’s stated corporate strategy which is to grow its Ground Lease and Ground Lease adjacent businesses (refer to Note 8) and simplify its portfolio through sales of other assets.

The portfolio sold consisted of office, entertainment and industrial properties located in the United States comprising approximately 18.3 million square feet.

It included assets wholly-owned by the Company and assets owned by two joint ventures (see Net Lease Venture and Net Lease Venture II below) managed by the Company and in which it owned 51.9 % interests.

At the time of closing, the portfolio was encumbered by an aggregate of $ 702 million of mortgage indebtedness, including indebtedness from equity method investments, which was repaid with proceeds from the sale.

After repayment of the mortgage indebtedness and prepayment penalties, a senior term loan secured by certain of the assets (refer to Note 10), payments to terminate derivative contracts, payments to joint venture partners, and payments of promotes, transaction expenses and amounts due under employee incentive plans, the Company retained net cash proceeds

Notes to Consolidated Financial Statements (Continued)

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

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

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

In March 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

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

of $ 1.2 billion from the transaction.

In addition, as part of the transaction, the buyer sold three of the properties to Safehold Inc.

(“SAFE”) for $ 122.0 million and entered into three Ground Leases with SAFE.

Two net lease properties were sold to different third parties in the first quarter of 2022 and the Company’s net lease assets associated with its Ground Lease businesses were not included in the sale.

The Company received net cash proceeds of $ 33.9 million from the sale of the two net lease properties and recognized a gain of $ 23.9 million in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

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.

The Company was responsible for sourcing new opportunities and managing the venture and its assets in exchange for a management fee and incentive fee.

Several of the Company’s senior executives whose time was substantially devoted to the Net Lease Venture owned a total of 0.6 % equity ownership in the venture via co-investment.

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

Net Lease Venture was part of the Net Lease Sale.

As of March 31, 2022, $ 316.6 million of “Noncontrolling interests” was attributable to the Net Lease Venture and represented proceeds from the Net Lease Sale that were not yet distributed to the Company’s partners in the venture as of March 31, 2022.

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

The Company was responsible for managing the venture in exchange for a management fee and incentive fee.

During the three months ended March 31, 2022 and 2021, the Company recorded $ 0.4 million and $ 0.4 million, respectively, of management fees from Net Lease Venture II in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

Net Lease Venture II was part of the Net Lease Sale.

As of March 31, 2022, $ 216.3 million of “Real estate and other assets available and held for sale and classified as discontinued operations” was attributable to the Net Lease Venture II and represented proceeds from the Net Lease Sale that were not yet distributed to the Company as of March 31, 2022.

Discontinued Operations — The Company’s net lease assets and liabilities included in the Net Lease Sale and the Company’s other two net lease assets are classified as “Real estate and other assets available and held for sale and classified as discontinued operations” and “Liabilities associated with real estate held for sale and classified as discontinued operations,” respectively, on the Company’s consolidated balance sheets as of December 31, 2021.

For the three months ended March 31, 2022 and 2021, the operations of such assets are classified in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

Notes to Consolidated Financial Statements (Continued)

The following table presents the Company’s consolidated assets and liabilities recorded in “Real estate and other assets available and held for sale and classified as discontinued operations” and “Liabilities associated with real estate held for sale and classified as discontinued operations,” respectively, on the Company’s consolidated balance sheets as of March 31, 2022 and December 31, 2021 ($ in thousands).

Real estate, at cost

accumulated depreciation

Total real estate, net

Net investment in leases

Loans receivable held for sale

Other investments

Finance lease right of use assets

Accrued interest and operating lease income receivable, net

Deferred operating lease income receivable, net

Deferred expenses and other assets, net

Total real estate and other assets available and held for sale and classified as discontinued operations

Accounts payable, accrued expenses and other liabilities

Finance lease liabilities

Debt obligations, net

Total liabilities associated with real estate held for sale and classified as discontinued operations

Notes to Consolidated Financial Statements (Continued)

The transaction described above involving the Company's net lease business qualified for discontinued operations and the following table summarizes net income from discontinued operations for the three months ended March 31, 2022 and 2021 ($ in thousands):

For the Three Months Ended March 31,

Operating lease income

Interest income

Interest income from sales-type leases

Total revenues

Costs and expenses:

Interest expense (1)

Real estate expense

Depreciation and amortization (1)

Recovery of loan losses

Recovery of losses on net investment in leases

Impairment of assets

Other expense (2)

Total costs and expenses

Income from sales of real estate

Income from discontinued operations before earnings from equity method investments and other items

Earnings from equity method investments

Loss on early extinguishment of debt, net

Net income from discontinued operations before income taxes

Income tax expense

Net income from discontinued operations

Net (income) from discontinued operations attributable to noncontrolling interests

Net income from discontinued operations attributable to iStar Inc.

(1) For the three months ended March 31, 2022, the Company recorded $ 1.3 million of “Interest expense” in its consolidated statements of operations from its Ground Leases with SAFE.

For the three months ended March 31, 2021, the Company recorded $ 2.1 million and $ 0.4 million, respectively, of “Interest expense” and “Depreciation and amortization” in its consolidated statements of operations from its Ground Leases with SAFE.

(2) Represents the reversal of other expenses recognized in connection with the settlement of interest rate hedges during the three months ended March 31, 2022.

The following table presents cash flows provided by operating activities and cash flows used in investing activities from discontinued operations for the three months ended March 31, 2022 and 2021 ($ in thousands).

For the Three Months Ended March 31,

Cash flows provided by operating activities

Cash flows provided by investing activities

Notes to Consolidated Financial Statements (Continued)

Note 4—Real Estate

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

As of September 30, 2021

As of March 31, 2022

Land, at cost

11 unchanged sentences

Total real estate

(1) As of September 30, 2021 and December 31, 2020, real estate, net included $ 741.6 million and $ 755.5 million, respectively, of real estate of the Net Lease Venture (refer to Net Lease Venture below).

(2) As of September 30, 2021 and December 31, 2020, the Company had $ 2.0 million and $ 5.2 million, respectively, of residential condominiums available for sale in its operating properties portfolio.

The Company and its partner had joint decision making rights pertaining to the acquisition of new investments.

Upon the expiration of the investment period on June 30, 2018, the Company obtained control of the venture through its unilateral rights of management and disposition of the assets.

As a result, the expiration of the investment period resulted in a reconsideration event under GAAP and the Company determined that the Net Lease Venture is a VIE for which the Company is the primary beneficiary.

Effective June 30, 2018, the Company consolidated the Net Lease Venture as an asset acquisition under ASC 810.

The Net Lease Venture had previously been accounted for as an equity method investment.

The Company has an equity interest in the Net Lease Venture of approximately 51.9 %.

The Company is responsible for sourcing new opportunities and managing the venture and its assets in exchange for a management fee and incentive fee.

Several of the Company’s senior executives whose time is substantially devoted to the Net Lease Venture own a total of 0.6 % equity ownership in the venture via co-investment.

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 nine months ended September 30, 2021, the Company sold an operating property with a carrying value of $ 96.8 million for $ 125.0 million and recognized a gain of $ 25.6 million after selling costs.

Notes to Consolidated Financial Statements (Continued)

recorded in “Income from sales of real estate” in the Company’s consolidated statements of operations.

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

Impairments— During the three and nine months ended September 30, 2021, the Company recorded an impairment of $ 0.4 million on an operating property.

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

(1) As of March 31, 2022 and December 31, 2021, the Company had $ 0.3 million and $ 0.3 million, respectively, of residential condominiums available for sale in its operating properties portfolio.

Dispositions— Refer to Note 3 - Net Lease Sale and Discontinued Operations.

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

Tenant expense reimbursements were $ 5.3 million and $ 17.4 million for the three and nine months ended September 30, 2021, respectively, and $ 5.8 million and $ 17.1 million for the three and nine months ended September 30, 2020, respectively .

Tenant expense reimbursements were $ 0.7 million and $ 0.7 million for the three months ended March 31, 2022 and 2021, respectively .

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

Allowance for Doubtful Accounts— As of September 30, 2021 and December 31, 2020, the allowance for doubtful accounts related to real estate tenant receivables was $ 0.4 million and $ 1.7 million, respectively.

Allowance for Doubtful Accounts— As of March 31, 2022 and December 31, 2021, the allowance for doubtful accounts related to real estate tenant receivables was $ 0.1 million and $ 0.1 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 September 30, 2021, are as follows by year ($ in thousands):

2021 (remaining three months)

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, 2022, are as follows by year ($ in thousands):

2022 (remaining nine months)

Note 5—Net Investment in Leases

1 unchanged sentence

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.

The Company also concurrently entered into an agreement pursuant to which SAFE would

Notes to Consolidated Financial Statements (Continued)

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, was accounted for as a financing transaction and $ 42.0 million was 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.

The new centers were added to the Company’s existing master leases with the tenant.

In connection with this transaction, the maturities of the master leases were extended by 15 years to 2047.

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

Notes to Consolidated Financial Statements (Continued)

acquire an equal amount of new facilities for them or to reduce their rent in the future was 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.

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

As a result of the May 2019 modifications to the leases, the Company classified the leases as sales-type leases and recorded $ 424.1 million in “Net investment in leases” on its consolidated balance sheet.

As a result of the modifications in the second and third quarter 2020, the Company reassessed this classification as required by ASC 842, and concluded that the leases should continue to be classified as sales-type leases.

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 and nine months ended September 30, 2021 , the Company recognized $ 7.0 million and $ 7.3 million, respectively, of cash interest income and $ 2.5 million and $ 19.6 million, respectively, of non-cash interest income in “Interest income from sales-type leases” in the Company’s consolidated statements of operations.

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

For the three months ended March 31, 2022, the Company recognized $ 0.2 million of non-cash interest income in "Interest income from sales-type leases"

in the Company’s consolidated statements of operations.

Dispositions— During the nine months ended September 30, 2021, the Company sold net lease assets for net proceeds of $ 8.7 million and recognized an aggregate impairment of $ 2.3 million in connection with the sales.

The Company’s net investment in leases were comprised of the following as of September 30, 2021 and December 31, 2020 ($ in thousands):

September 30, 2021

In January 2022, the Company sold the Ground Lease to an investment fund in which the Company owns a 53 % noncontrolling interest (refer to Note 8 – Ground Lease Plus Fund).

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 January 2022, the Company sold the Ground Lease to the Ground Lease Plus Fund (refer to Note 8).

In January 2022, the Company entered into a commitment to acquire land for $ 36.0 million and simultaneously structured and entered into a Ground Lease as part of the Ground Lease tenant’s recapitalization of an existing multifamily property.

As of March 31, 2022, the Company had funded $ 28.2 million of this commitment.

SAFE (refer to Note 8) waived its right of first refusal on this investment but entered into an agreement with the Company pursuant to which SAFE would acquire the land and related Ground Lease when certain construction related conditions are met.

The Company’s net investment in leases were comprised of the following as of March 31, 2022 and December 31, 2021 ($ in thousands):

March 31, 2022

December 31, 2021

2 unchanged sentences

Present value discount

( 1,420,066 )

Allowance for losses on net investment in leases

Net investment in leases (1)

(1) As of September 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 September 30, 2021, the weighted average 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 September 30, 2021, are as follows by year ($ in thousands):

2021 (remaining three months)

(1) As of March 31, 2022 and December 31, 2021, the Company’s net investment in lease was current in its payment status and performing in accordance with the terms of the lease.

As of March 31, 2022, the risk rating on the Company’s net investment in leases was 1.0 .

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 which is recorded in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

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, 2022, are as follows by year ($ in thousands):

2022 (remaining nine months)

Total undiscounted cash flows

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

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, 2022 and 2021 were as follows ($ in thousands):

Three Months Ended

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Allowance for losses on net investment in leases at beginning of period (1)

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

Provision for (recovery of) losses on net investment in leases (2)

Allowance for losses on net investment in leases at end of period (1)

(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 and nine months ended September 30, 2021, the Company recorded a provision for (recovery of) losses on net investment in leases of $ 0.1 million and ($ 1.7 ) million, respectively.

The provision for losses for the three months ended September 30, 2021 resulted from market changes since June 30, 2021 and the recovery of losses for the nine months ended September 30, 2021 was due primarily to asset sales and an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

During the three and nine months ended September 30, 2020, the Company recorded a provision for losses on net investment in leases of $ 0.2 million and $ 2.0 million, respectively, due primarily to the macroeconomic impact of COVID-19 on commercial real estate markets and the adoption of ASU 2016-13 .

(1) All 2021 amounts were for net investment in leases included in the Net Lease Sale (refer to Note 3 – Net Lease Sale and Discontinued Operations).

(2) During the three months ended March 31, 2022, the Company recorded a provision for losses on net investment in leases of $ 0.3 million due primarily to the macroeconomic forecast on commercial real estate markets.

During the three months ended March 31, 2021, the Company recorded a recovery of losses on net investment in leases of $ 1.6 million (which is included in “Net income from discontinued operations’) due primarily to an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

Note 6—Land and Development

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

September 30,

Land and land development, at cost

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Total land and development, net

Dispositions— During the nine months ended September 30, 2021 and 2020, the Company sold land parcels and residential lots and units and recognized land development revenue of $ 157.9 million and $ 116.3 million, respectively.

During the nine months ended September 30, 2021 and 2020, the Company recognized land development cost of sales of $ 147.5 million and $ 114.7 million, respectively, from its land and development portfolio.

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

Dispositions— During the three months ended March 31, 2022 and 2021, the Company sold land parcels and residential lots and units and recognized land development revenue of $ 14.9 million and $ 32.2 million, respectively.

During the three months ended March 31, 2022 and 2021, the Company recognized land development cost of sales of $ 14.5 million and $ 29.3 million, respectively, from its land and development portfolio.

Notes to Consolidated Financial Statements (Continued)

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

September 30, 2021

March 31, 2022

December 31, 2021

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Senior mortgages

Corporate/Partnership loans

Subordinate mortgages

1 unchanged sentence

Other lending investments

Financing receivables (refer to Note 5)

Held-to-maturity debt securities

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Total loans receivable and other lending investments, net

(1) As of September 30, 2021, 98 % of gross carrying value of construction loans had completed construction.

Notes to Consolidated Financial Statements (Continued)

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

(1) As of March 31, 2022, 100 % 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 March 31, 2022 and 2021 ($ in thousands):

General Allowance

Maturity Debt

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

Allowance for loan losses at beginning of period

(Recovery of) provision for loan losses (1)

Provision for (recovery of) loan losses (1)

Allowance for loan losses at end of period

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

Allowance for loan losses at beginning of period

1 unchanged sentence

Allowance for loan losses at end of period

(1) During the three months ended September 30, 2021 and 2020, the Company recorded a provision for (recovery of) loan losses of ($ 1.6 ) million and ( $ 2.0 ) million, respectively, in its consolidated statements of operations.

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

Of this amount, $ 0.9 million related to a recovery of loan losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities."

The recovery in 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 .

Of this amount, $ 0.7 million related to a recovery of loan losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities"

and $ 0.9 million related to a provision on a non-performing loan that was recorded as a reduction to "Accrued interest and operating lease income receivable, net."

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

General Allowance

Maturity Debt

Nine Months Ended September 30, 2021

Allowance for loan losses at beginning of period

Recovery of loan losses (1)

Allowance for loan losses at end of period

Nine Months Ended September 30, 2020

Allowance for loan losses at beginning of period

Adoption of new accounting standard (2)

Provision for loan losses (1)

Allowance for loan losses at end of period

(1) During the nine months ended September 30, 2021 and 2020, the Company recorded a provision for (recovery of) loan losses of ($ 7.6 ) million and $ 4.1 million, respectively, in its consolidated statements of operations.

The recovery in 2021 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.

Of this amount, $ 0.9 million related to a recovery of credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities .” The provision for loan losses in 2020 resulted from the macroeconomic impact of COVID-19 on commercial real estate markets, of which $ 0.9 million related to a recovery of credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities"

and $ 0.9 million related to a provision on a non-performing loan that was recorded as a reduction to "Accrued interest and operating lease income receivable, net."

(1) During the three months ended March 31, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of $ 0.1 million and ( $ 3.6 ) million, respectively, in its consolidated statements of operations.

The provision in 2022 was due primarily to accretion on the Company’s held-to-maturity debt security.

The recovery in 2021 was d ue 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 loan losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities .”

Notes to Consolidated Financial Statements (Continued)

(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.”

The Company’s investment in loans and other lending investments and the associated allowance for loan losses were as follows as of September 30, 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 March 31, 2022 and December 31, 2021 ($ in thousands):

Evaluated for

1 unchanged sentence

Impairment (1)

As of September 30, 2021

As of March 31, 2022

Construction loans (2)

Financing receivables

Held-to-maturity debt securities

3 unchanged sentences

Construction loans (2)

Financing receivables

Held-to-maturity debt securities

1 unchanged sentence

Allowance for loan losses

(1) The carrying value of this loan includes an unamortized discount of $ 0.8 million and $ 0.8 million as of September 30, 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 March 31, 2022 and December 31, 2021, 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 $ 0.2 million and $ 2.3 million as of September 30, 2021 and December 31, 2020, respectively.

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

(2) The carrying value of these loans includes unamortized discounts, premiums, deferred fees and costs totaling net discounts of $ 0.2 million and $ 0.2 million as of March 31, 2022 and December 31, 2021, respectively.

(3) Available-for-sale debt securities are evaluated for impairment under ASC 326-30 – Financial Instruments-Credit Losses .

Credit Characteristics —As part of the Company’s process for monitoring the credit quality of its loans, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its performing loans.

6 unchanged sentences

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

The Company’s amortized cost basis in performing senior mortgages, corporate/partnership loans and subordinate mortgages, presented by year of origination and by credit quality, as indicated by risk rating, as of March 31, 2022 were as follows ($ in thousands):

Year of Origination

1 unchanged sentence

Senior mortgages

Corporate/partnership loans

Subordinate mortgages

Financing receivables

(1) As of September 30, 2021, excludes $ 58.8 million for one loan on non-accrual status.

Notes to Consolidated Financial Statements (Continued)

(1) As of March 31, 2022, excludes $ 59.6 million for one loan on non-accrual status.

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

As of September 30, 2021

As of March 31, 2022

Senior mortgages

Corporate/Partnership loans

Subordinate mortgages

3 unchanged sentences

Subordinate mortgages

Notes to Consolidated Financial Statements (Continued)

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

As of September 30, 2021

As of March 31, 2022

As of December 31, 2021

1 unchanged sentence

Senior mortgages (1)

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

(1) The Company has one non-accrual loan as of March 31, 2022 and December 31, 2021 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, 2022 and 2021.

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.

6 unchanged sentences

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, was accounted for as a financing transaction and $ 42.0 million was recorded in “Loans receivable held for sale” on the Company’s consolidated balance sheets.

Notes to Consolidated Financial Statements (Continued)

In January 2022, the Company sold its loan receivable held for sale to the Ground Lease Plus Fund (refer to Note 8).

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

As of September 30, 2021

As of March 31, 2022

Available-for-Sale Securities

7 unchanged sentences

Debt securities

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

Notes to Consolidated Financial Statements (Continued)

As of March 31, 2022, the contractual maturities of the Company’s securities were as follows ($ in thousands):

Held-to-Maturity Debt Securities

4 unchanged sentences

After 10 years

Notes to Consolidated Financial Statements (Continued)

Note 8—Other Investments

1 unchanged sentence

Earnings (Losses) from

Carrying Value

Equity Method Investments

Equity Method Investments (1)

For the Three Months Ended

For the Nine Months Ended

September 30,

Real estate equity investments

1 unchanged sentence

("SAFE") (1)

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

Ground Lease Plus Fund

Other real estate equity investments

Other strategic investments (2)

(1) For the three months ended September 30, 2021 and 2020, earnings (losses) from equity method investments is net of the Company’s pro rata share of $ 5.1 million and $ 4.6 million, respectively, of depreciation expense and $ 18.5 million and $ 14.6 million, respectively, of interest expense.

For the nine months ended September 30, 2021 and 2020, earnings (losses) from equity method investments is net of the Company’s pro rata share of $ 16.2 million and $ 13.4 million, respectively, of depreciation expense and $ 51.7 million and $ 44.0 million, respectively, of interest expense.

(2) As of September 30, 2021, the Company owned 36.0 million shares of SAFE common stock which, based on the closing price of $ 71.89 on September 30, 2021, had a market value of $ 2.6 billion.

(1) As of March 31, 2022, the Company owned 40.1 million shares of SAFE common stock which, based on the closing price of $ 55.45 on March 31, 2022, had a market value of $ 2.2 billion.

Pursuant to ASC 323-10-40-1, an equity method investor shall account for a share issuance by an investee as if the investor had sold a proportionate share of its investment.

Any gain or loss to the investor resulting from an investee’s share issuance shall be recognized in earnings.

For the three months ended September 30, 2021, equity in earnings includes a dilution gain of $ 60.2 million resulting from a SAFE equity offering.

For the nine months ended September 30, 2021 and 2020, equity in earnings includes dilution gains of $ 60.7 million and $ 7.9 million, respectively, resulting from SAFE equity offerings.

(3) During the three and nine months ended September 30, 2021 and the three and nine months ended September 30, 2020, the Company identified observable price changes in an equity security held by the Company as evidenced by orderly private issuances of similar securities by the same issuer.

In accordance with ASC 321, the Company remeasured its equity investment at fair value and recognized aggregate mark-to-market gains of $ 14.0 million and $ 19.1 million for the three and nine months ended September 30, 2021, respectively, and aggregate mark-to-market gains of $ 14.0 million and $ 23.9 million for the three and nine months ended September30, 2020, respectively, in “Other income” in the Company’s consolidated statements of operations.

Safehold Inc.

For the three months ended March 31, 2022 and 2021, equity in earnings includes dilution gains of $ 0.9 million and $ 0.5 million, respectively, resulting from SAFE equity offerings.

(2) During the three months ended March 31, 2021, 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 – Investments – Equity Securities, the Company remeasured its equity investment at fair value and recognized a mark-to-market gain of $ 5.1 million in “Other income” in the Company’s consolidated statements of operations.

The Company’s equity security was redeemed at its carrying value in the fourth quarter of 2021.

Safehold Inc.

1 unchanged sentence

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”).

During the nine months ended September 30, 2021, the Company purchased 0.4 million shares of SAFE's common stock for $ 27.9 million, for an average cost of $ 71.68 per share, in open market purchases made in accordance with Rules 10b5-1 and 10b-18 under the Securities and Exchange Act of 1934, as amended.

As of September 30, 2021, the Company owned approximately 63.6 % of SAFE’s common stock outstanding.

During the three months ended March 31, 2022, the Company purchased 0.2 million shares of SAFE's common stock for $ 10.5 million, for an average cost of $ 66.83 per share, in open market purchases made in accordance with Rules 10b5-1 and 10b-18 under the Securities and Exchange Act of 1934, as amended.

In March 2022, the Company acquired 3,240,000 shares of SAFE’s common stock in a private placement for $ 191.2 million.

As of March 31, 2022, the Company owned approximately 64.7 % 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.

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

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

Following the exchange, the Investor Units were retired.

Notes to Consolidated Financial Statements (Continued)

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

1 unchanged sentence

● limits the Company’s discretionary voting power to 41.9 % of the outstanding voting power of SAFE’s common stock until its aggregate ownership of SAFE common stock is less than 41.9 % ;

Notes to Consolidated Financial Statements (Continued)

● requires the Company to cast all of its voting power in favor of three director nominees to SAFE’s board who are independent of each of the Company and SAFE until January 2022;

● subjects the Company to certain standstill provisions;

● provides the Company certain preemptive rights.

In September 2021, the Company acquired 657,894 shares of SAFE’s common stock in a private placement for $ 50.0 million.

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

A wholly-owned subsidiary of the Company is the external manager of SAFE and is entitled to a management fee.

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

During the three months ended September 30, 2021 and 2020, the Company recorded $ 3.6 million and $ 3.2 million, respectively, of management fees pursuant to its management agreement with SAFE.

During the nine months ended September 30, 2021 and 2020, the Company recorded $ 10.6 million and $ 9.3 million, respectively, of management fees pursuant to its management agreement with SAFE.

During the three months ended March 31, 2022 and 2021, the Company recorded $ 4.5 million and $ 3.5 million, respectively, of management fees pursuant to its management agreement with SAFE.

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

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

During the three months ended September 30, 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 nine months ended September 30, 2021 and 2020, the Company recognized $ 5.6 million and $ 3.8 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

Historically, pursuant to the Company’s option under the management agreement, the Company has elected to not seek reimbursement for certain expenses.

This historical election is not a waiver of reimbursement for similar expenses in future periods and the Company has started to elect to seek, and may further seek in the future, reimbursement of such additional expenses that it has not previously sought, including, without limitation, rent, overhead and certain personnel costs.

During the three months ended March 31, 2022 and 2021, the Company recognized $ 3.1 million and $ 1.9 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

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

Notes to Consolidated Financial Statements (Continued)

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

Notes to Consolidated Financial Statements (Continued)

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

2 unchanged sentences

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

During the three and nine months ended September 30, 2020, the Company recorded $ 0.9 million and $ 2.5 million, respectively, of interest income on the loan.

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

in connection with the sale and sold the leasehold first mortgage to an entity in which the Company has a 53 % equity interest (refer to “Other strategic investments” below) in January 2021 for $ 63.3 million.

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

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

The loan was repaid during the fourth quarter 2020.

During the three and nine months ended September 30, 2020, the Company recorded $ 0.3 million and $ 0.8 million, respectively, of interest income on the loan.

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

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 November 2021, the Company acquired the property from Net Lease Venture II.

The Company paid $ 0.6 million to its partner to acquire its equity interest in the property and assumed a $ 44.4 million mortgage on the property.

The Company sold the property in the first quarter of 2022.

Prior to the sale, SAFE paid $ 0.3 million to terminate a purchase option that allowed the Company to purchase the land at the expiration of the Ground Lease.

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

2 unchanged sentences

The Company sold the loan in July 2021 and recorded no gain or loss on the sale.

During the three and nine months ended September 30, 2021, the Company recorded $ 0.4 million and $ 2.9 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.

3 unchanged sentences

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

In September 2021, the construction loan commitment and the $ 2.7 million of consideration was transferred to an entity in which the Company has a 53.0 % noncontrolling equity interest (refer to “Other strategic investments” below).

In September 2021, the construction loan commitment and the $ 2.7 million of consideration was transferred to the Loan Fund (refer to “Other strategic investments” below).

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

6 unchanged sentences

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.

In January 2022, the Company sold the Ground Leases to the Ground Lease Plus Fund (see below).

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 Ground Lease Plus Fund.

In November 2021, the Company and SAFE entered into an agreement pursuant to 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 is $ 33.3 million, plus an amount necessary for the Company to achieve the greater of a 1.25 x multiple and a 12 % return on its investment.

In addition, the Ground Lease provides for a leasehold improvement allowance up to a maximum of $ 51.8 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 Lease or fund the leasehold improvement allowance.

There can be no assurance that the conditions to

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.

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 participating rights of its partner.

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

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

During the nine months ended September 30, 2021 and 2020, the Company recorded $ 1.2 million and $ 1.1 million, respectively, of management fees from Net Lease Venture II.

Other real estate equity investments —As of September 30, 2021, the Company’s other real estate equity investments include equity interests in real estate ventures ranging from 48 % to 95 %, comprised of investments of $ 43.7 million in operating properties and $ 0.5 million in land assets.

closing will be satisfied and that SAFE will acquire the land and Ground Lease from the Ground Lease Plus Fund (refer to Ground Lease Plus Fund below).

In December 2021, the Company’s partner in a venture recapitalized an existing multifamily property, which included a Ground Lease provided by SAFE.

As part of the recapitalization, the Company’s partner acquired its 50 % equity interest in the entity and the mezzanine loan held by the Company was repaid in full.

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

In January 2022, the Company and SAFE entered into an agreement pursuant to which SAFE would acquire land and a related Ground Lease originated by the Company when certain construction related conditions are met.

The purchase price to be paid is a maximum of $ 36.0 million (refer to Note 5), plus an amount necessary for the Company to achieve the greater of a 1.05 x multiple and a 10 % return on its investment.

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

In February 2022, the Loan Fund (refer to Other Strategic Investments below) committed to provide a $ 130.0 million loan to the ground lessee of a Ground Lease originated at SAFE.

The loan is for the Ground Lease tenant’s recapitalization of a life science office property.

The Loan Fund received $ 9.0 million of consideration from SAFE in connection with this transaction.

Ground Lease Plus Fund —The Company formed and manages an investment fund that targets the origination and acquisition of Ground Leases for commercial real estate projects that are in a pre-development phase (the “Ground Lease Plus Fund”).

The Company owns a 53 % noncontrolling equity interest in the Ground Lease Plus Fund.

The Company does not have a controlling interest in the Ground Lease Plus Fund due to the substantive participating rights of its partner and accounts for this investment as an equity method investment.

In addition, the Ground Lease Plus Fund has first look rights through December 2023 on qualifying pre-development projects that SAFE has elected to not originate.

In January 2022, the Company sold two Ground Leases to the Ground Lease Plus Fund (refer to Note 5) and recognized an aggregate $ 0.5 million of gains in “Income from sales of real estate” on the sale.

The Company and SAFE entered into an agreement pursuant to which SAFE would acquire the land properties and related Ground Leases from the Ground Lease Plus Fund when certain construction related conditions are met by a specified time period (refer to “Safehold Inc.” above).

In November 2021, the Company acquired land for $ 33.3 million and simultaneously structured and entered into a Ground Lease on which a multi-family project will be constructed.

In December 2021, the Company sold the Ground Lease to the Ground Lease Plus Fund and recognized no gain or loss on the sale.

The Company and SAFE entered into an agreement pursuant to which SAFE would acquire the land and related Ground Lease from the Ground Lease Plus Fund when certain construction related conditions are met by a specified time period (refer to “Safehold Inc.” above).

Other real estate equity investments —As of March 31, 2022, the Company’s other real estate equity investments include equity interests in real estate ventures ranging from 48 % to 95 %, comprised of investments of $ 43.2 million in operating properties and $ 0.2 million in land assets.

As of December 31, 2021, the Company’s other real estate equity investments included $ 43.3 million in operating properties and $ 1.1 million in land assets.

In August 2018, the Company provided a mezzanine loan with a principal balance of $ 33.0 million as of September 30, 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 September 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 September 30, 2021 and 2020, the Company recorded $ 0.6 million and $ 0.6 million, respectively, of interest income on the mezzanine loan.

During the nine months ended September 30, 2021 and 2020, the Company recorded $ 1.7 million and $ 1.8 million, respectively, of interest income on the mezzanine loan.

Other strategic investments —As of September 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.

Other strategic investments —As of March 31, 2022 and December 31, 2021, 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 owns a 53.0 % noncontrolling equity interest (the “Loan Fund”).

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

In September 2021, the Company transferred a $ 75.0 million construction loan commitment to this entity.

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

In September 2021, the Company transferred a $ 75.0 million construction loan commitment to the Loan Fund.

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

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

Summarized investee financial information — The following table presents the investee level summarized financial information for the Company’s equity method investment that was significant as of September 30, 2021 ($ in thousands):

Net Income Attributable to Parent

For the Nine Months Ended September 30, 2021

For the Nine Months Ended September 30, 2020

Notes to Consolidated Financial Statements (Continued)

In February 2022, the Loan Fund committed to provide a $ 130.0 million loan to the ground lessee of a Ground Lease originated at SAFE.

The loan was for the Ground Lease tenant’s recapitalization of a life science office property.

Net Income Attributable to Parent

For the Three Months Ended March 31, 2022

For the Three Months Ended March 31, 2021

Note 9—Other Assets and Other Liabilities

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

September 30, 2021

March 31, 2022

December 31, 2021

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Deferred expenses and other assets, net

(1) Certain items have been reclassified to “Real estate and other assets available and held for sale and classified as discontinued operations” (refer to Note 3).

(2) 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 $ 50.8 million and $ 44.4 million as of September 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 $ 0.5 million and $ 0.3 million for the three months ended September 30, 2021 and 2020, respectively, and $ 1.1 million and $ 1.0 million for the nine months ended September 30, 2021 and 2020, respectively.

Accumulated amortization on intangible assets, net was $ 9.2 million and $ 10.2 million as of March 31, 2022 and December 31, 2021, respectively.

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

The amortization expense for in-place leases was $ 2.8 million and $ 2.6 million for the three months ended September 30, 2021 and 2020, respectively, and $ 8.6 million and $ 7.9 million for the nine months ended September 30, 2021 and 2020, respectively.

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

As of September 30, 2021, the weighted average remaining amortization period for the Company’s intangible assets was approximately 16.2 years.

The amortization expense for in-place leases was $ 0.6 million for the three months ended March 31, 2021.

This amount is included in “Depreciation and amortization” in the Company’s consolidated statements of operations.

As of March 31, 2022, the weighted average remaining amortization period for the Company’s intangible assets was approximately 5.6 years.

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

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

During the three months ended September 30, 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 statements of operations relating to operating leases.

During the nine months ended September 30, 2021 and 2020, the Company recognized $ 3.7 million and $ 3.4 million, respectively, in "General and administrative"

During the three months ended March 31, 2022 and 2021, the Company recognized $ 1.2 million and $ 1.2 million, respectively, in "General and administrative"

and $ 0.1 million and $ 0.2 million, respectively, in "Real estate expense"

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(4) 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 $ 2.1 million and $ 2.6 million as of September 30, 2021 and December 31, 2020, respectively.

(5) Accumulated depreciation on corporate furniture, fixtures and equipment was $ 14.7 million and $ 14.3 million as of September 30, 2021 and December 31, 2020, respectively.

(5) Accumulated amortization of leasing costs was $ 0.9 million and $ 1.1 million as of March 31, 2022 and December 31, 2021, respectively.

(6) Accumulated depreciation on corporate furniture, fixtures and equipment was $ 14.9 million and $ 14.8 million as of March 31, 2022 and December 31, 2021, respectively.

Notes to Consolidated Financial Statements (Continued)

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

September 30, 2021

March 31, 2022

December 31, 2021

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Accrued expenses

Intangible liabilities, net (2)

Operating lease liabilities (see table above)

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Accounts payable, accrued expenses and other liabilities

(1) As of September 30, 2021 and December 31, 2020, other liabilities includes $ 20.7 million and $ 36.9 million, respectively, of deferred income.

As of September 30, 2021 and December 31, 2020, other liabilities includes $ 11.7 million and $ 19.0 million, respectively, of derivative liabilities.

As of September 30, 2021 and December 31, 2020, other liabilities includes $ 0.1 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 $ 9.0 million and $ 7.5 million as of September 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 September 30, 2021 and 2020, respectively, and $ 1.9 million and $ 1.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Notes to Consolidated Financial Statements (Continued)

Note 10—Loan Participations Payable, net

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

The loan was repaid in the first quarter 2021.

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

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

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

Notes to Consolidated Financial Statements (Continued)

(1) As of March 31, 2022 and December 31, 2021, other liabilities includes $ 20.8 million and $ 20.1 million, respectively, of deferred income.

As of March 31, 2022 and December 31, 2021, other liabilities includes $ 0.1 million and $ 0.1 million, respectively, of expected credit losses for unfunded loan commitments.

Note 10—Debt Obligations, net

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Carrying Value as of

September 30, 2021

March 31, 2022

December 31, 2021

1 unchanged sentence

Maturity Date

Secured credit facilities and mortgages:

Secured credit facilities:

Revolving Credit Facility

1 unchanged sentence

Senior Term Loan

Mortgages collateralized by net lease assets

1.63 % - 7.19

Total secured credit facilities and mortgages (4)

Total secured credit facilities

Unsecured notes:

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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.

(2) The loan bears interest at the Company’s election of either:

(2) The loan accrued interest at the Company’s election of either:

(i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.50 % or (c) LIBOR plus 1.0 % and subject to a margin of 1.75 % ;

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

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

(4) As of September 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 September 30, 2021 was 71.5797 shares per $1,000 principal amount of 3.125 % Convertible Notes, which equals a conversion price of $ 13.97 per share.

(3) 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 (refer to Note 18) 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, 2022 was 72.3126 shares per $1,000 principal amount of 3.125 % Convertible Notes, which equals a conversion price of $ 13.83 per share.

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

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

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

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

During the nine months ended September 30, 2021 and 2020, the Company recognized $ 6.7 million and $ 6.7 million, respectively, of contractual interest and during the nine months ended September 30, 2020, the Company recognized $ 3.9 million of discount amortization on the 3.125 % Convertible Notes.

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

During both the three months ended March 31, 2022 and 2021, the Company recognized $ 2.2 million of contractual interest on the 3.125 % Convertible Notes.

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

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

(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 $ 0.2 million and $ 0.5 million during the three months ended September 30, 2021 and 2020, respectively, and $ 0.7 million and $ 1.6 million during the nine months ended September 30, 2021 and 2020, respectively.

(7) The Company capitalized interest relating to development activities of $ 0.3 million and $ 0.2 million during the three months ended March 31, 2022 and 2021, respectively.

Notes to Consolidated Financial Statements (Continued)

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

Future Scheduled Maturities —As of March 31, 2022, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):

Unsecured Debt

2021 (remaining three months)

2022 (remaining nine months) (1)

Total principal maturities

1 unchanged sentence

Total debt obligations, net

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

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

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

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

As of September 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.

(1) Refer to Note 18.

Senior Term Loan —The Company had a $ 650.0 million senior term loan (the “Senior Term Loan”) that accrued interest at LIBOR plus 2.75 % per annum and matured in June 2023.

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

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

The Company repaid the Senior Term Loan in full in March 2022 using proceeds from the Net Lease Sale (refer to Note 3 - Net Lease Sale and Discontinued Operations).

During the three months ended March 31, 2022, the Company incurred a “Loss on extinguishment of debt” of $ 1.4 million in connection with the repayment of the Senior Term Loan.

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

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

2 unchanged sentences

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

As of September 30, 2021, based on the Company’s borrowing base of assets, the Company had the ability to draw $ 340.2 million without pledging any additional assets to the facility.

Unsecured Notes —As of September 30, 2021, the Company has senior unsecured notes outstanding with varying fixed-rates and maturities ranging from September 2022 to February 2026.

As of March 31, 2022, based on the Company’s borrowing base of assets, the Company had the ability to draw $ 59.9 million without pledging any additional assets to the facility.

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

In connection with the Net Lease Sale, in the fourth quarter 2021, the Company obtained the consents of holders of its outstanding 4.75 % senior notes due 2024, 4.25 % senior notes due 2025 and 5.50 % senior notes due 2026 to certain amendments to the indentures governing the notes intended to align the indentures with the potential sale of the Company's net lease assets.

The Company paid holders consent fees ranging from 0.75 % to 1.00 % of the principal amount of consenting notes, depending on the relevant series.

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

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

Debt Covenants —The Company’s outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness, as such terms are defined in the indentures governing the debt securities, of at least 1.3 x and a covenant restricting certain incurrences of debt based on a fixed charge coverage ratio.

If any of the Company’s covenants are breached and not cured within applicable cure periods, the breach could result in acceleration of its debt securities unless a waiver or modification is agreed upon with the requisite percentage of the bondholders.

The Company’s 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 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

Notes to Consolidated Financial Statements (Continued)

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 Company’s Revolving Credit Facility contains 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.

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

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

To satisfy this covenant, the Company has 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 the Company is 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 the Company remains in compliance with its financial covenants after giving effect to the dividend.

The Company’s Senior Term Loan and the Revolving Credit Facility contain cross default provisions that would allow the lenders to declare an event of default and accelerate the Company’s indebtedness to them if the Company fails to pay amounts due in respect of its other recourse indebtedness in excess of specified thresholds or if the lenders under such other indebtedness are otherwise permitted to accelerate such indebtedness for any reason.

Under the Revolving Credit Facility the Company is 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 the Company remains in compliance with its financial covenants after giving effect to the dividend.

The Company’s Revolving Credit Facility contains cross default provisions that would allow the lenders to declare an event of default and accelerate the Company’s indebtedness to them if the Company fails to pay amounts due in respect of its other recourse indebtedness in excess of specified thresholds or if the lenders under such other indebtedness are otherwise permitted to accelerate such indebtedness for any reason.

The indentures governing the Company’s unsecured public debt securities permit the bondholders to declare an event of default and accelerate the Company’s indebtedness to them if the Company’s other recourse indebtedness in excess of specified thresholds is not paid at final maturity or if such indebtedness is accelerated.

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These arrangements are referred to as Strategic Investments.

As of September 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):

As of March 31, 2022, 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

2 unchanged sentences

Notes to Consolidated Financial Statements (Continued)

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

Other Commitments —Future minimum lease obligations under non-cancelable operating leases as of March 31, 2022 are as follows ($ in thousands):

Operating (1)

2021 (remaining three months)

2022 (remaining nine months)

Total undiscounted cash flows

Present value discount (1)

( 1,439,677 )

Other adjustments (2)

Lease liabilities

1 unchanged sentence

For operating leases, lease liabilities were discounted at the Company’s weighted average incremental secured borrowing rate for similar collateral estimated to be 4.7 % and the weighted average remaining lease term is 4.4 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 4.9 years and the weighted average discount rate was 4.7 % .

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 96.2 years.

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

During the three months ended September 30, 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 statements of operations relating to finance leases.

During the nine months ended September 30, 2021 and 2020, the Company recognized $ 6.2 million and $ 6.1 million, respectively, in "Interest expense"

and $ 1.1 million and $ 1.1 million, respectively, in "Depreciation and amortization"

in its consolidated statements of operations relating to finance leases.

During the three months ended September 30, 2021 and 2020, the Company made payments of $ 0.8 million and $ 1.0 million, respectively, related to its operating leases and $ 1.3 million and $ 1.4 million, respectively, related to its finance leases with SAFE .

During the nine months ended September 30, 2021 and 2020, the Company made payments of $ 2.1 million and $ 3.2 million, respectively, related to its operating leases and $ 4.1 million and $ 4.0 million, respectively, related to its finance leases with SAFE .

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

however, the Company’s tenants at the properties pay this expense directly under the terms of various subleases and these amounts are excluded from lease obligations.

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

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

Operating (1)(2)

Total undiscounted cash flows

Present value discount (1)

( 1,445,896 )

Other adjustments (2)

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 5.0 % .

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

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

however, the Company’s tenants at the properties pay this expense directly under the terms of various subleases and these amounts are excluded from lease obligations.

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)

During the three months ended March 31, 2022 and 2021, the Company made payments of $ 1.7 million and $ 0.8 million, respectively, related to its operating leases and $ 1.3 million and $ 1.4 million, respectively, related to its finance leases with SAFE .

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.

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

Notes to Consolidated Financial Statements (Continued)

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2022 and December 31, 2021 ($ in thousands):

Derivative Liabilities

Balance Sheet

As of September 30, 2021

As of March 31, 2022

Derivatives Designated in Hedging Relationships

Interest rate swaps

Accounts payable, accrued expenses and other liabilities

Liabilities associated with real estate held for sale and classified as discontinued operations

As of December 31, 2021

1 unchanged sentence

Interest rate swaps

Accounts payable, accrued expenses and other liabilities

(1) Over the next 12 months, the Company expects that $ 9.1 million related to cash flow hedges will be reclassified from “Accumulated other comprehensive income (loss)” as an increase to interest expense.

Notes to Consolidated Financial Statements (Continued)

Liabilities associated with real estate held for sale and classified as discontinued operations

(1) Over the next 12 months, the Company expects that $ 2.6 million related to its proportionate share of cash flow hedges held by SAFE will be reclassified from “Accumulated other comprehensive income (loss)” as a decrease to earnings from equity method investments.

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):

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Income into Earnings

For the Three Months Ended September 30, 2021

Interest rate swaps

Interest expense

Interest rate swaps

Earnings from equity method investments

For the Three Months Ended September 30, 2020

Interest rate swaps

Interest expense

Interest rate swaps

Earnings from equity method investments

For the Nine Months Ended September 30, 2021

Interest rate swaps

Interest expense

For the Three Months Ended March 31, 2022

Interest rate swaps

Earnings from equity method investments

For the Nine Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

Interest rate swaps

Interest Expense

Net income from discontinued operations

Interest rate swaps

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Note 13—Equity

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

Preferred Stock —The Company had the following series of Cumulative Redeemable Preferred Stock outstanding as of March 31, 2022 and December 31, 2021:

Cumulative Preferential Cash

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

(2) The Company declared and paid dividends of $ 6.0 million, $ 4.6 million and $ 7.0 million on its Series D, G and I Cumulative Redeemable Preferred Stock during both the nine months ended September 30, 2021 and 2020.

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

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

(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, 2022 and 2021.

The character of the 2021 dividends was 100 % capital gain distribution, of which 18.31 % represented unrecaptured section 1250 gain.

(3) The Company may, at its option, redeem the Series G and I Preferred Stock, in whole or in part, at any time and from time to time, for cash at a redemption price equal to 100 % of the liquidation preference of $ 25.00 per share, plus accrued and unpaid dividends, if any, to the redemption date.

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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, 2021 will be determined upon finalization of the Company’s 2021 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 $ 26.3 million, or $ 0.36 per share, for the nine months ended September 30, 2021 and $ 24.6 million, or $ 0.32 per share, for the nine months ended September 30, 2020.

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

The Company declared common stock dividends of $ 8.7 million, or $ 0.125 per share, for the three months ended March 31, 2022 and $ 8.2 million, or $ 0.11 per share, for the three months ended March 31, 2021.

The character of the 2021 dividends was 100 % capital gain distribution, of which 18.31 % represented unrecaptured section 1250 gain.

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

During the nine months ended September 30, 2021, the Company repurchased 4.2 million shares of its outstanding common stock for $ 91.9 million, for an average cost of $ 21.70 per share.

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

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

As of September 30, 2021, the Company had remaining authorization to repurchase up to $ 30.9 million of common stock under its stock repurchase program.

The Company did not repurchase any shares of its common stock during the three months ended March 31, 2022.

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.

The Company is generally authorized to repurchase up to $ 50.0 million in shares of its common stock and in February 2022, the Company's Board of Directors authorized an increase to the stock repurchase program to $ 50.0 million.

As of March 31, 2022, the Company had remaining authorization to repurchase up to $ 50.0 million of common stock under its stock repurchase program.

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):

September 30, 2021

March 31, 2022

December 31, 2021

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Unrealized losses on cash flow hedges

Unrealized losses on cumulative translation adjustment

Accumulated other comprehensive loss

Note 14—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 $ 3.0 million and $ 23.3 million for the three and nine months ended September 30, 2021, respectively, and $ 5.7 million and $ 26.7 million for the three and nine months ended September 30, 2020, respectively, in “General and administrative” in the Company’s consolidated statements of operations.

Stock-Based Compensation —The Company recorded stock-based compensation (income) expense, including the expense related to performance incentive plans (see below), of ($ 12.4 ) million and $ 5.5 million for the three months ended March 31, 2022 and 2021, 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 September 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.

As of March 31, 2022, 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 nine months ended September 30, 2021 and 2020, the Company recorded $ 2.6 million and $ 2.5 million, respectively, of expense related to the 2019-2022 iPIP plans.

During the three months ended March 31, 2022 and 2021, the Company recorded $ 1.3 million and $ 1.4 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;

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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 nine months ended September 30, 2021.

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, 2022.

iPIP Investment Pool

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Points at end of period

As of March 31, 2022, investments with an aggregate gross book value of $ 764 million, including 26.7 million shares of SAFE common stock acquired by the Company, were attributable to the 2019-2020 Plan and investments with an

Notes to Consolidated Financial Statements (Continued)

As of September 30, 2021, investments with an aggregate gross book value of $ 1.2 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 $ 163 million, including 1.0 million shares of SAFE common stock acquired by the Company, were attributable to the 2021-2022 Plan.

aggregate gross book value of $ 416 million, including 5.0 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.

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

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, 2022.

iPIP Investment Pool

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Points at end of period

During the nine months ended September 30, 2021 and 2020, the Company recorded $ 15.0 million and $ 20.2 million, respectively, of expense related to the 2013-2018 iPIP plans.

As of September 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 $ 396 million were attributable to the 2015-2016 Plan and investments with an aggregate gross book value of $ 480 million, including 7.6 million shares of SAFE common stock acquired by the Company, were attributable to the 2017-2018 Plan.

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

During the three months ended March 31, 2022, the Company recorded a $ 16.0 million reduction of expense related to the 2013-2018 iPIP plans, primarily due to a decrease in the price per share of SAFE common stock.

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

As of March 31, 2022, investments with an aggregate gross book value of $ 13 million were attributable to the 2013-2014 Plan and investments with an aggregate gross book value of $ 277 million, including 7.6 million shares of SAFE common stock acquired by the Company, were attributable to the 2017-2018 Plan.

As of March 31, 2022 there were no investments attributable to the 2015-2016 Plan.

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

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

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

As of September 30, 2021 and December 31, 2020, the Company had accrued compensation costs relating to iPIP of $ 80.9 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 March 31, 2022 and December 31, 2021, the Company had accrued compensation costs relating to iPIP of $ 102.4 million and $ 116.6 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 2021, the

In May 2021, the 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 March 31, 2022, an aggregate of 2.8 million shares remain available for issuance pursuant to future awards under the Company’s 2009 LTIP.

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 September 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 nine months ended September 30, 2021, is as follows (in thousands):

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, 2022, is as follows (in thousands):

Nonvested at beginning of period

Nonvested at end of period

As of September 30, 2021, there was $ 6.8 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 1.35 years.

Directors’ Awards —During the nine months ended September 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 1,592 common stock equivalents (“CSEs”) at a fair value of $ 20.41 per CSE in respect of dividend equivalents on outstanding CSEs.

As of September 30, 2021, a combined total of 129,452 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.

401(k) Plan — The Company made contributions of $ 0.1 million and $ 0.2 million for the three months ended September 30, 2021 and 2020, respectively, and $ 0.8 million and $ 1.0 million for the nine months ended September 30, 2021 and 2020, respectively, to the Company’s 401(k) Plan.

As of March 31, 2022, there was $ 9.4 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 1.78 years.

Directors’ Awards —During the three months ended March 31, 2022, the Company issued 478 common stock equivalents (“CSEs”) at a fair value of $ 23.99 per CSE in respect of dividend equivalents on outstanding CSEs.

As of March 31, 2022, a combined total of 130,414 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 $ 3.1 million.

401(k) Plan — The Company made contributions of $ 0.8 million and $ 0.5 million for the three months ended March 31, 2022 and 2021, respectively, to the Company’s 401(k) Plan.

Note 15—Earnings Per Share

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Net income (loss)

Net income attributable to noncontrolling interests

For the Three Months Ended March 31,

Net loss from continuing operations

Net loss from continuing operations attributable to noncontrolling interests

Preferred dividends

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

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

Notes to Consolidated Financial Statements (Continued)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Earnings allocable to common shares:

Numerator for basic earnings per share:

Net income (loss) attributable to iStar Inc.

and allocable to common shareholders

Numerator for diluted earnings per share:

Numerator for basic and diluted earnings per share:

Net loss from continuing operations and allocable to common shareholders

Net income from discontinued operations

Net (income) from discontinued operations attributable to noncontrolling interests

Net income (loss) allocable to common shareholders

Denominator for basic and diluted earnings per share:

Weighted average common shares outstanding for basic earnings per common share

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

Effect of convertible debt

Weighted average common shares outstanding for basic and diluted earnings per common share

Basic and diluted earnings per common share:

Net income (loss) allocable to common shareholders

Diluted earnings per common share:

Net loss from continuing operations and allocable to common shareholders

Net income from discontinued operations and allocable to common shareholders

Net income (loss) allocable to common shareholders

(1) For the three and nine months ended September 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.

(1) For the three months ended March 31, 2022 and 2021, the effect of certain of the Company’s restricted stock awards were anti-dilutive due to the Company having a net loss from continuing operations and allocable to common shareholders for the period.

For the three months ended March 31, 2022 and 2021, 8,829,274 and 2,893,787 shares, respectively, of the 3.125 % Convertible Notes were antidilutive based upon the conversion price for such periods.

Note 16—Fair Values

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Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Notes to Consolidated Financial Statements (Continued)

Certain of the Company’s assets and liabilities are recorded at fair value either on a recurring or non-recurring basis.

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Such assets are classified as being valued on a non-recurring basis.

Notes to Consolidated Financial Statements (Continued)

The following fair value hierarchy table summarizes the Company’s assets and liabilities recorded at fair value on a recurring and non-recurring basis by the above categories ($ in thousands):

Fair Value Using

As of September 30, 2021

As of March 31, 2022

Recurring basis:

Derivative liabilities (1)

Available-for-sale securities (1)

Non-recurring basis:

Impaired real estate available and held for sale (2)

Other investments (3)

As of December 31, 2021

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Available-for-sale securities (1)

Non-recurring basis:

Impaired land and development (4)

(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) The Company recorded a $ 0.4 million impairment on an operating property held for sale with an estimated fair value of $ 1.7 million.

The estimated fair value is based on an executed sales contract with a third party.

(3) During the nine months ended September 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.

(4) 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 nine months ended September 30, 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 three months ended March 31, 2022 and 2021 ($ in thousands):

Beginning balance

Unrealized gains (losses) recorded in other comprehensive income

Unrealized losses recorded in other comprehensive income

Ending balance

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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 September 30, 2021

As of March 31, 2022

As of December 31, 2021

Net investment in leases (1)

Net investment in leases (refer to Note 5) (1)

Loans receivable and other lending investments, net (1)

Loans receivable held for sale (1)

Cash and cash equivalents (2)

Restricted cash (2)

Loan participations payable, net (1)

Debt obligations, net (1)(3)

(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.

Total debt obligations, net

(1) The fair value of the Company’s net investment in leases, loans receivable and other lending investments, net, loans receivable held for sale and certain debt obligations are classified as Level 3 within the fair value hierarchy.

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

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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 September 30, 2021 and December 31, 2020, the fair value of the Company’s 3.125 % Senior Convertible Notes was $ 527.2 million and $ 338.8 million, respectively.

(3) As of March 31, 2022 and December 31, 2021, t he fair value of the Company’s unsecured notes is classified as Level 1 in the fair value hierarchy.

As of March 31, 2022 and December 31, 2021, the fair value of the Company’s 3.125 % Senior Convertible Notes was $ 497.5 million and $ 527.5 million, respectively (refer to Note 18).

Note 17—Segment Reporting

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

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

The Net Lease segment (refer to Note 3 - Net Lease Sale and Discontinued Operations) includes the Company’s investments in SAFE and its Ground Lease adjacent businesses (refer to Note 8).

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

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

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

Operating lease income

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Land development revenue

Earnings (losses) from equity method investments

Earnings from equity method investments

Income from sales of real estate

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Allocated interest expense

Allocated general and administrative (2)

Segment profit (loss) (3)

Other significant items:

Provision for (recovery of) loan losses

Provision for losses on net investment in leases

Impairment of assets

Depreciation and amortization

Capitalized expenditures

Notes to Consolidated Financial Statements (Continued)

Three Months Ended September 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 (3)

Segment profit (loss) (4)

Other significant non-cash items:

Provision for (recovery of) loan losses

Other significant items:

Provision for loan losses

Provision for losses on net investment in leases

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Capitalized expenditures

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2021

Operating lease income

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Recovery of loan losses

Recovery of losses on net investment in leases

Impairment of assets

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Capitalized expenditures

Nine Months Ended September 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

Provision for losses on net investment in leases

Notes to Consolidated Financial Statements (Continued)

Impairment of assets

Depreciation and amortization

Capitalized expenditures

As of September 30, 2021

As of March 31, 2022

Real estate, net

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Total real estate

Real estate and other assets available and held for sale and classified as discontinued operations (1)

Net investment in leases

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Total real estate

Real estate and other assets available and held for sale and classified as discontinued operations (1)

Net investment in leases

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Loans receivable and other lending investments, net

Loan receivable held for sale

Other investments

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Cash and other assets

(1) Refer to Note 3 – Net Lease Sale and Discontinued Operations.

(2) 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 $ 3.0 million and $ 23.3 million for the three and nine months ended September 30, 2021, respectively, and $ 5.7 million and $ 26.7 million for the three and nine months ended September 30, 2020, respectively.

Notes to Consolidated Financial Statements (Continued)

(3) General and administrative excludes stock-based compensation (income) expense of ($ 12.4 ) million and $ 5.5 million for the three months ended March 31, 2022 and 2021, respectively.

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Segment profit

Recovery of (provision for) loan losses

(Provision for) recovery of losses on net investment in leases

For the Three Months Ended March 31,

(Provision for) recovery of loan losses

Provision for losses on net investment in leases

Impairment of assets

Stock-based compensation expense

Stock-based compensation income (expense)

Depreciation and amortization

Income tax benefit (expense)

Income tax (expense) benefit

Loss on early extinguishment of debt, net

Net income (loss)

Notes to Consolidated Financial Statements (Continued)

Net income from discontinued operations

Note 18—Subsequent Events

Subsequent to the end of the quarter, the Company obtained the consents of holders of its outstanding 4.75 % senior notes due 2024, 4.25 % senior notes due 2025 and 5.50 % senior notes due 2026 to certain amendments to the indentures governing the notes intended to align the indentures with the potential sale of the Company's net lease assets.

The Company paid holders consent fees ranging from 0.75 % to 1.00 % of the principal amount of consenting notes, depending on the relevant series.

The Company previously announced on July 6, 2021 that it intended to explore market interest for possible sales of its net lease assets.

That process remains ongoing.

There can be no assurance as to whether the Company will sell some, all or none of its net lease assets, or as to the timing and terms of any sales.

On April 8, 2022, the Company completed separate, privately-negotiated transactions with holders of $ 194 million aggregate principal amount of the Company's 3.125 % Convertible Notes (refer to Note 10) in which the noteholders exchanged their convertible notes with the Company for 13.75 million newly issued shares of the Company's common stock and aggregate cash payments of $ 14 million.

The 3.125 % Convertible Senior Notes received by the Company were retired.

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