What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-04 · 344 added, 306 removed, 897 unchanged (42% of the section changed)

2 unchanged sentences

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

September 30,

Real estate, at cost

4 unchanged sentences

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

Net investment in leases ($ 380 and $ 0 of allowances as of June 30, 2022 and December 31, 2021, respectively)

Net investment in leases ($ 0 of allowances as of December 31, 2021)

Land and development, net

Loans receivable and other lending investments, net ($ 3,033 and $ 4,769 of allowances as of June 30, 2022 and December 31, 2021, respectively)

Loans receivable and other lending investments, net ($ 2,890 and $ 4,769 of allowances as of September 30, 2022 and December 31, 2021, respectively)

Loans receivable held for sale

13 unchanged sentences

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

Common Stock, $ 0.001 par value, 200,000 shares authorized, 83,303 and 68,870 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Common Stock, $ 0.001 par value, 200,000 shares authorized, 86,695 and 68,870 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

12 unchanged sentences

(In thousands, except per share data)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Operating lease income

10 unchanged sentences

Provision for (recovery of) loan losses

Provision for losses on net investment in leases

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

Impairment of assets

2 unchanged sentences

Income from sales of real estate

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

Income (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 loss from continuing operations before income taxes

Net income (loss) from continuing operations before income taxes

Income tax (expense) benefit

Net loss from continuing operations

Net income (loss) from continuing operations

Net income from discontinued operations (1)

Net income (loss)

Net (income) loss from continuing operations attributable to noncontrolling interests

Net (income) from discontinued operations attributable to noncontrolling interests (1)

Net income (loss) attributable to iStar Inc.

Net income attributable to iStar Inc.

Preferred dividends

Net income (loss) allocable to common shareholders

Net income allocable to common shareholders

Per common share data:

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 (loss) from continuing operations and allocable to common shareholders:

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.

2 unchanged sentences

(In thousands)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Net income (loss)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Other comprehensive income:

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

Reclassification of losses on available-for-sale securities

Unrealized losses on available-for-sale securities

Unrealized gains on cash flow hedges

Other comprehensive income

Comprehensive income (loss)

Comprehensive income

Comprehensive (income) attributable to noncontrolling interests (2)

Comprehensive income (loss) attributable to iStar Inc.

(1) Reclassified to “Net income from discontinued operations” in the Company’s consolidated statements of operations for the three and six months ended June 30, 2021 is $ 2,029 and $ 4,133 , respectively.

Reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the three months ended June 30, 2022 and 2021 are $ 580 and $ 457 respectively.

Reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the six months ended June 30, 2022 and 2021 are $ 1,201 and $ 691 , respectively.

(2) For the three months ended June 30, 2021, $ 2.8 million of comprehensive income attributable to noncontrolling interests was from discontinued operations.

For the six months ended June 30, 2022 and 2021, $ 179.1 million and $ 7.8 million, respectively, of comprehensive income attributable to noncontrolling interests was from discontinued operations .

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 and nine months ended September 30, 2021 is $ 2,050 and $ 6,183 respectively.

Reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the three months ended September 30, 2022 and 2021 are $ 562 and $ 633 respectively.

Reclassified to “Earnings from equity method investments” in the Company’s consolidated statements of operations for the nine months ended September 30, 2022 and 2021 are $ 1,763 and $ 1,324 , respectively.

(2) For the three months ended September 30, 2021, $ 4.2 million of comprehensive income attributable to noncontrolling interests was from discontinued operations.

For the nine months ended September 30, 2022 and 2021, $ 179.1 million and $ 12.0 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 March 31, 2022

Balance as of June 30, 2022

( 1,774,069 )

5 unchanged sentences

Change in accumulated other comprehensive income (loss)

Distributions to noncontrolling interests

Balance as of June 30, 2022

Balance as of September 30, 2022

( 1,772,843 )

Balance as of March 31, 2021

Balance as of June 30, 2021

( 2,338,454 )

7 unchanged sentences

Distributions to noncontrolling interests

Balance as of June 30, 2021

Change to noncontrolling interest

Balance as of September 30, 2021

( 2,225,552 )

12 unchanged sentences

Distributions to noncontrolling interests

Balance as of June 30, 2022

Balance as of September 30, 2022

( 1,772,843 )

10 unchanged sentences

Distributions to noncontrolling interests

Balance as of June 30, 2021

Change to noncontrolling interest

Balance as of September 30, 2021

( 2,225,552 )

1 unchanged sentence

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

(3) Refer to Note 10 for details on the Company’s 3.125 % convertible notes.

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

1 unchanged sentence

(In thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities:

Net income (loss)

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

4 unchanged sentences

Non-cash interest income from sales-type leases

Stock-based compensation (income) expense

Stock-based compensation

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

24 unchanged sentences

Net proceeds from sales of net investment in leases

Net proceeds from sales of other investments

Distributions from other investments

21 unchanged sentences

Cash, cash equivalents and restricted cash at end of period

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

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

Distributions to noncontrolling interests

1 unchanged sentence

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

Settlement of senior unsecured notes (refer to Note 10)

Accrued repurchase of stock

Assumption of mortgage by third party

9 unchanged sentences

Since that time, the Company has grown through the origination of new investments and corporate acquisitions.

Merger with Safehold Inc.

—On August 10, 2022, the Company entered into an Agreement and Plan of Merger (the “ Merger Agreement ”) with Safehold Inc.

The Merger Agreement provides that, subject to the terms and conditions thereof, SAFE will merge with and into the Company (the “Merger”).

The surviving company of the Merger will be named Safehold Inc.

(“ New SAFE ”) and its shares of common stock will trade on the New York Stock Exchange under the symbol “SAFE.” The Company expects that the Merger will close in the first quarter or second quarter of 2023.

As discussed further below, shortly before the closing of the Merger, the Company intends to separate its remaining legacy non-ground lease assets and businesses into a separate public company (“ SpinCo ”) by distributing to the Company’s stockholders, on a pro rata basis, the issued and outstanding equity interests of SpinCo (the “ Spin-Off ”).

Conditions to the Merger

The consummation of the Merger is subject to the satisfaction or waiver of certain closing conditions, including:

(i) the approval of the Company’s stockholders, (ii) the approval of SAFE’s stockholders, (iii) completion of the Spin-Off, (iv) the approval of the shares of STAR Common Stock to be issued in the Merger for listing on the NYSE, (v) the effectiveness of a registration statement on Form S-4 registering the STAR Common Stock to be issued in the Merger, (vi) the absence of any temporary restraining order, injunction or other order of any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the reverse stock split or the Merger, (vii) generation of certain cash proceeds, (viii) the receipt of certain tax opinions by the Company and SAFE that the Merger will qualify as a reorganization under the Internal Revenue Code and that the Company and SAFE each qualifies as a REIT for federal income tax purposes, (ix) the accuracy of certain representations and warranties of the Company and SAFE contained in the Merger Agreement and the compliance by the parties with the covenants contained in the Merger Agreement (subject to customary materiality qualifiers), and (x) other conditions specified in the Merger Agreement.

Conditions to the Spin-Off

Completion of the Spin-Off is subject to:

(i) completion of the documents for the Spin-Off related financings;

(ii) the satisfaction or waiver of relevant conditions to the consummation of the Merger;

(iii) effectiveness of a registration statement on Securities and Exchange Commission (“SEC”) Form 10;

(iv) the absence of an injunction or law preventing the consummation of the Spin-Off, the distribution and the transactions related thereto;

and (v) other customary closing conditions.

Other Merger related transactions

The Company has entered into an agreement (the “ MSD Stock Purchase Agreement ”) with MSD Partners, L.P.

(“ MSD Partners ”) and SAFE under which the Company has agreed to sell and MSD Partners has agreed to buy 5,405,406 shares of the SAFE’s common stock owned by the Company for $ 200.0 million (the “ MSD Stock Purchase ”) shortly before the closing of the Merger.

If the Merger Agreement is terminated for any reason, the parties’ obligations to

Notes to Consolidated Financial Statements (Continued)

consummate the purchase and sale will also terminate.

In addition to customary closing conditions, MSD Partners’ obligations to purchase SAFE’s common stock owned by the Company are subject to the condition that the closing of the MSD Caret Purchase (as defined below) will take place substantially concurrently with the closing of the MSD Stock Purchase.

Upon closing of the transaction, MSD Partners will have a right to designate an observer to the board of directors of New SAFE, a preemptive right on future equity issuances (subject to certain exceptions) and registration rights.

MSD Partners will be subject to a customary standstill and certain restrictions on sales of its New SAFE Common Stock.

MSD Partners has also subscribed to purchase 100,000 Caret units from SAFE for an aggregate purchase price of $ 20.0 million (the “ MSD Caret Purchase ”), conditioned on the closing of the Spin-Off and the Merger.

MSD Partners’ obligations to purchase the Caret units are also subject to the closing of the MSD Stock Purchase and the implementation by SAFE of certain changes to its Caret program.

SpinCo will be capitalized in part with an 8.0 %, four-year term loan from New SAFE having an initial principal amount of $ 100.0 million or such other amount as the parties may agree prior to the closing of the Merger, as well as up to $ 140.0 million of bank debt from Morgan Stanley Bank, N.A.

which will be secured by $ 400 million in shares of SAFE common stock.

New SAFE will enter into a management agreement with SpinCo, under which it will continue to operate and pursue the orderly monetization of SpinCo’s assets.

SpinCo will pay to New SAFE an annual management fee of $ 25.0 million in year one, $ 15.0 million in year two, $ 10.0 million in year three and $ 5.0 million in year four and 2.0 % of the gross book value of SpinCo's assets, excluding shares of SAFE common stock, for each annual term thereafter.

New SAFE and SpinCo will also enter into a governance agreement that will place certain restrictions on the transfer and voting of the shares of New SAFE owned by SpinCo, and a registration rights agreement under which New SAFE will agree to register such shares for resale in accordance with applicable securities laws.

The Company and SAFE have entered into a voting agreement pursuant to which the Company has agreed vote its shares representing 41.9 % of the outstanding SAFE Common Stock to approve the Merger and take certain other actions, including voting against any alternative acquisition proposal or other proposal which could reasonably be expected to materially delay, postpone or materially adversely affect the consummation of the transactions contemplated by the Merger Agreement.

In accordance with the terms of the existing stockholders’ agreement between SAFE and the Company, the remainder of the SAFE Common Stock owned by the Company will be voted in the same manner and proportion as the votes cast by the remaining shareholders of SAFE.

The voting agreement and the obligations thereunder terminate upon the termination of the Merger Agreement in accordance with its terms.

As noted above, the Merger and related transactions are subject to a number of conditions, several of which are outside the Company's control;

therefore, there can be no assurance that the Merger and related transactions will occur within the time frame currently expected by the parties, or at all.

The foregoing descriptions of the Merger and the Merger Agreement and the related transactions and agreements do not purport to be complete and are subject to, and qualified in their entirety by, the full text of such agreements.

Please see the Company's filings with the Securities and Exchange Commission for additional information, including copies of such agreements.

The Company has covenanted to redeem all of its outstanding preferred stock at the liquidation preference per share plus accrued and unpaid dividends and to retire all of its remaining senior unsecured notes in connection with the Merger.

The Company’s trust preferred securities will remain outstanding at New SAFE.

Notes to Consolidated Financial Statements (Continued)

Note 2—Basis of Presentation and Principles of Consolidation

13 unchanged sentences

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

The Company did not have any unfunded commitments related to consolidated VIEs as of June 30, 2022 and December 31,

The Company did not have any unfunded commitments related to consolidated VIEs as of September 30, 2022 and

Notes to Consolidated Financial Statements (Continued)

The following table presents the assets and liabilities of the Company’s consolidated VIEs as of June 30, 2022 and December 31, 2021 ($ in thousands):

June 30, 2022

December 31, 2021.

The following table presents the assets and liabilities of the Company’s consolidated VIEs as of September 30, 2022 and December 31, 2021 ($ in thousands):

September 30, 2022

December 31, 2021

Real estate, at cost

10 unchanged sentences

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

As of June 30, 2022, the Company’s maximum exposure to loss from these investments does not exceed the sum of the $ 57.5 million carrying value of the investments, which are classified in “Other investments” on the Company’s consolidated balance sheets, and $ 2.2 million of related unfunded commitments.

As of September 30, 2022, the Company’s maximum exposure to loss from these investments does not exceed the sum of the $ 55.3 million carrying value of the investments, which are classified in “Other investments” on the Company’s consolidated balance sheets, and $ 4.9 million of related unfunded commitments.

Note 3—Summary of Significant Accounting Policies

9 unchanged sentences

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 of $ 1.2 billion from the transaction.

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

In addition, as part of the transaction, the buyer sold three of the properties

Notes to Consolidated Financial Statements (Continued)

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

to 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.

5 unchanged sentences

Net Lease Venture was part of the Net Lease Sale.

As of June 30, 2022, $ 3.2 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 June 30, 2022.

As of September 30, 2022, $ 3.1 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 September 30, 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 six months ended June 30, 2022, the Company recorded $ 0.4 million of management fees from Net Lease Venture II in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

During the three and six months ended June 30, 2021, the Company recorded $ 0.4 million and $ 0.8 million, respectively, of management fees from Net Lease Venture II in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

During the nine months ended September 30, 2022, the Company recorded $ 0.4 million of management fees from Net Lease Venture II in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

During the three and nine months ended September 30, 2021, the Company recorded $ 0.4 million and $ 1.2 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 June 30, 2022, $ 2.0 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 June 30, 2022.

Discontinued Operations — The Company’s net lease assets and liabilities associated with 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 June 30, 2022 and December 31, 2021.

For the three months ended June 30, 2021 and the six months ended June 30, 2022 and 2021, the operations of such assets are classified in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

As of September 30, 2022, $ 2.0 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 September 30, 2022.

For the three months ended September 30, 2021 and the nine months ended September 30, 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 June 30, 2022 and December 31, 2021 ($ in thousands).

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 September 30, 2022 and December 31, 2021 ($ in thousands).

September 30,

Real estate, at cost

14 unchanged sentences

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 and six months ended June 30, 2022 and 2021 ($ in thousands):

For the Three Months Ended June 30,

For the Six Months Ended June 30,

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 and nine months ended September 30, 2022 and 2021 ($ in thousands):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Operating lease income

6 unchanged sentences

Depreciation and amortization (1)

Recovery of loan losses

Recovery of losses on net investment in leases

Provision for (recovery of) loan losses

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

Impairment of assets (2)

10 unchanged sentences

Net income from discontinued operations attributable to iStar Inc.

(1) For the six months ended June 30, 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 and six months ended June 30, 2021, the Company recorded $ 2.1 million and $ 4.1 million, respectively, of “Interest expense” and $ 0.4 million and $ 0.7 million, respectively, of “Depreciation and amortization” in its consolidated statements of operations from its Ground Leases with SAFE.

(2) During both the six months ended June 30, 2022 and 2021, the Company sold assets and recognized aggregate impairments of $ 1.5 million in connection with the sales.

(3) Represents the reversal of other expenses recognized in connection with the settlement of interest rate hedges during the six months ended June 30, 2022.

The following table presents cash flows provided by operating activities and cash flows used in investing activities from discontinued operations for the six months ended June 30, 2022 and 2021 ($ in thousands):

For the Six Months Ended June 30,

Cash flows provided by operating activities

Cash flows provided by investing activities

(1) For the nine months ended September 30, 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 and nine months ended September 30, 2021, the Company recorded $ 2.1 million and $ 6.2 million, respectively, of “Interest expense” and $ 0.4 million and $ 1.1 million, respectively, of “Depreciation and amortization” in its consolidated statements of operations from its Ground Leases with SAFE.

(2) During the nine months ended September 30, 2022 and 2021, the Company sold assets and recognized aggregate impairments of $ 1.5 million and $ 2.3 million, respectively.

(3) Represents the reversal of other expenses recognized in connection with the settlement of interest rate hedges during the nine months ended September 30, 2022.

Notes to Consolidated Financial Statements (Continued)

The following table presents cash flows provided by operating activities and cash flows used in investing activities from discontinued operations for the nine months ended September 30, 2022 and 2021 ($ in thousands):

For the Nine Months Ended September 30,

Cash flows provided by operating activities

Cash flows provided by (used in) investing activities

New Accounting Pronouncements — In March 2022, the Financial Accounting Standards Board issued Accounting Standards Update 2022-02, Financial Instruments—Credit Losses:

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”).

ASU 2022-02 was issued to eliminate troubled debt restructuring recognition and measurement guidance and required disclosure of gross write-offs by vintage for public business entities.

ASU 2022-02 is effective for annual reporting periods beginning after December 15, 2022.

Early adoption is permitted.

Management is currently evaluating the impact of ASU 2022-02 and does not expect ASU 2022-02 to have a material impact on the Company’s consolidated financial statements.

Note 4—Real Estate

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

June 30, 2022

September 30, 2022

December 31, 2021

5 unchanged sentences

Total real estate

(1) As of June 30, 2022 and December 31, 2021, the Company had $ 2.0 million and $ 0.3 million, respectively, of residential homes/condominiums available for sale in its operating properties portfolio.

(1) As of September 30, 2022 and December 31, 2021, the Company had $ 1.3 million and $ 0.3 million, respectively, of residential homes/condominiums available for sale in its operating properties portfolio.

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

Impairments— During the three and six months ended June 30, 2022, the Company recognized an impairment of $ 1.8 million on an operating property based on the expected cash flows to be received.

Impairments— During the nine months ended September 30, 2022, the Company recognized an impairment of $ 1.8 million on an operating property based on the expected cash flows to be received.

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 $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2022, respectively, and $ 0.8 million and $ 1.4 million for the three and six months ended June 30, 2021, respectively .

Tenant expense reimbursements were $ 0.9 million and $ 2.4 million for the three and nine months ended September 30, 2022, respectively, and $ 0.6 million and $ 2.0 million for the three and nine months ended September 30, 2021, respectively .

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

Allowance for Doubtful Accounts— As of June 30, 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.

Allowance for Doubtful Accounts— As of December 31, 2021, the allowance for doubtful accounts related to real estate tenant receivables was $ 0.1 million.

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 June 30, 2022, are as follows by year ($ in thousands):

2022 (remaining six months)

Notes to Consolidated Financial Statements (Continued)

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

2022 (remaining three months)

Note 5—Net Investment in Leases

3 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.

The Company classified one of the Ground Leases as a sales-type lease and it was recorded in “Net investment in leases” on the

Notes to Consolidated Financial Statements (Continued)

Company’s consolidated balance sheet at the time of acquisition.

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

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).

3 unchanged sentences

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 June 30, 2022, the Company had funded $ 32.0 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.

SAFE acquired the Ground Lease from the Company in July 2022.

The Company’s net investment in leases were comprised of the following as of June 30, 2022 and December 31, 2021 ($ in thousands):

June 30, 2022

The Company funded $ 34.6 million of its commitment and then, pursuant to an agreement with SAFE (refer to Note 8) and upon certain construction related conditions being met, sold the Ground Lease to SAFE in July 2022 for $ 36.0 million and recognized a gain of $ 1.0 million in “Income from sales of real estate” in its consolidated statements of operations.

The Company’s net investment in leases were comprised of the following as of September 30, 2022 and December 31, 2021 ($ in thousands):

September 30, 2022

December 31, 2021

2 unchanged sentences

Present value discount

Allowance for losses on net investment in leases

Net investment in leases (1)

(1) As of June 30, 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.

Future Minimum Lease Payments under Sales-type Leases —Future minimum lease payments to be collected under sales-type leases, excluding lease payments that are not fixed and determinable, in effect as of June 30, 2022, are as follows by year ($ in thousands):

2022 (remaining six months)

Total undiscounted cash flows

(1) As of 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.

Notes to Consolidated Financial Statements (Continued)

Allowance for Losses on Net Investment in Leases —Changes in the Company’s allowance for losses on net investment in leases for the three and six months ended June 30, 2022 and 2021 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 and nine months ended September 30, 2022 and 2021 were as follows ($ in thousands):

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine Months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

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

2 unchanged sentences

(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 and six months ended June 30, 2022, the Company recorded a provision for losses on net investment in leases of $ 0.1 million and $ 0.4 million, respectively, due primarily to the macroeconomic forecast on commercial real estate markets.

During the three and six months ended June 30, 2021, the Company recorded a recovery of losses on net investment in leases of $ 0.3 million and $ 1.9 million (both of which are included in “Net income from discontinued operations”), respectively, due primarily to an improving macroeconomic forecast on commercial real estate markets since December 31, 2020.

(2) During the three and nine months ended September 30, 2022, the Company recorded a provision for (recovery of) losses on net investment in leases of ($ 0.4 ) million and $ 0.0 million, respectively, due primarily to asset sales .

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 (both of which are included in “Net income from discontinued operations”), 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.

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 six months ended June 30, 2022 and 2021, the Company sold land parcels and residential lots and units and recognized land development revenue of $ 39.3 million and $ 64.6 million, respectively.

During the six months ended June 30, 2022 and 2021, the Company recognized land development cost of sales of $ 38.6 million and $ 60.1 million, respectively, from its land and development portfolio.

Dispositions— During the nine months ended September 30, 2022 and 2021, the Company sold land parcels and residential lots and units and recognized land development revenue of $ 54.4 million and $ 157.9 million, respectively.

During the nine months ended September 30, 2022 and 2021, the Company recognized land development cost of sales of $ 55.4 million and $ 147.5 million, respectively, from its land and development portfolio.

Notes to Consolidated Financial Statements (Continued)

1 unchanged sentence

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

June 30, 2022

September 30, 2022

December 31, 2021

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Total loans receivable and other lending investments, net

(1) As of June 30, 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 June 30, 2022 and 2021 ($ in thousands):

(1) As of September 30, 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 September 30, 2022 and 2021 ($ in thousands):

General Allowance

Maturity Debt

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Allowance for loan losses at beginning of period

Provision for (recovery of) loan losses (1)

Charge-offs (1)

Allowance for loan losses at end of period

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

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

(1) During the three months ended June 30, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of $ 22.6 million and ( $ 2.2 ) million, respectively, in its consolidated statements of operations.

The provision in 2022 was due primarily to a $ 25.0 million charge-off on the Company’s held-to-maturity debt security, which is now recorded at its expected repayment proceeds.

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

(1) During the three months ended September 30, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of ($ 0.2 ) million and ( $ 1.6 ) million, respectively, in its consolidated statements of operations.

The recovery in 2022 was due primarily to the repayment of loans during the three months ended September 30, 2022.

The recovery in 2021 was d ue 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 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)

Changes in the Company’s allowance for loan losses were as follows for the six months ended June 30, 2022 and 2021 ($ in thousands):

Changes in the Company’s allowance for loan losses were as follows for the nine months ended September 30, 2022 and 2021 ($ in thousands):

General Allowance

Maturity Debt

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Allowance for loan losses at beginning of period

Provision for (recovery of) loan losses (1)

Charge-offs (1)

Allowance for loan losses at end of period

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Allowance for loan losses at beginning of period

1 unchanged sentence

Allowance for loan losses at end of period

(1) During the six months ended June 30, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of $ 22.7 million and ($ 5.8 ) million, respectively, in its consolidated statements of operations.

(1) During the nine months ended September 30, 2022 and 2021, the Company recorded a provision for (recovery of) loan losses of $ 22.6 million and ($ 7.4 ) million, respectively, in its consolidated statements of operations.

The provision in 2022 was due primarily to a $ 25.0 million charge-off on the Company’s held-to-maturity debt security, which is now recorded at its expected repayment proceeds.

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

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

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

Evaluated for

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Impairment (1)

As of June 30, 2022

As of September 30, 2022

Construction loans (2)

Held-to-maturity debt securities

Available-for-sale debt securities (3)

Allowance for loan losses

4 unchanged sentences

Allowance for loan losses

(1) The carrying value of this loan includes an amortized exit fee of $ 0.8 million and $ 0.8 million as of June 30, 2022 and December 31, 2021, respectively.

(1) The carrying value of this loan includes an amortized exit fee of $ 0.8 million and $ 0.8 million as of September 30, 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 includes unamortized discounts, premiums, deferred fees and costs totaling net premiums (discounts) of $ 0.3 million and ($ 0.2 ) million as of June 30, 2022 and December 31, 2021, respectively.

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

(3) During the three and nine months ended September 30, 2022, the Company sold its available-for-sale securities and recognized a gain of $ 2.9 million, which is recorded in “Other income” in the Company’s consolidated statements of operations.

Available-for-sale debt securities were 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.

Risk ratings, which range from 1 (lower risk) to 5 (higher risk), are based on judgments which are inherently uncertain, and there can be no assurance that actual performance will be similar to current expectation.

The Company designates loans as non-performing at such

Risk ratings, which range

Notes to Consolidated Financial Statements (Continued)

from 1 (lower risk) to 5 (higher risk), are based on judgments which are inherently uncertain, and there can be no assurance that actual performance will be similar to current expectation.

The Company designates loans as non-performing at such time as:

(1) interest payments become 90 days delinquent;

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

The Company’s amortized cost basis in performing senior mortgages, corporate/partnership loans and subordinate mortgages, presented by year of origination and by credit quality, as indicated by risk rating, as of June 30, 2022 were as follows ($ in thousands):

Year of Origination

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Subordinate mortgages

(1) As of June 30, 2022, excludes $ 60.3 million for one loan on non-accrual status.

(1) As of September 30, 2022, excludes $ 61.2 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 June 30, 2022

As of September 30, 2022

Senior mortgages

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

As of June 30, 2022

As of September 30, 2022

As of December 31, 2021

1 unchanged sentence

Senior mortgages (1)

(1) The Company has one non-accrual loan as of June 30, 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 and six months ended June 30, 2022 and 2021.

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

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

As of June 30, 2022

Available-for-Sale Securities

Municipal debt securities

As of September 30, 2022

Held-to-Maturity Securities

5 unchanged sentences

Debt securities

(1) During the three months ended June 30, 2022, the Company received a $ 40.0 million repayment, reduced the maturity date by six months to December 30, 2022 and recorded a $ 25.0 million provision in ‘Provision for (recovery of) loan losses” in its consolidated statements of operations on its debt security.

(1) During the nine months ended September 30, 2022, the Company received a $ 40.0 million repayment, reduced the maturity date by nine months to December 30, 2022 and recorded a $ 25.0 million provision in ‘Provision for (recovery of) loan losses” in its consolidated statements of operations on its debt security.

Notes to Consolidated Financial Statements (Continued)

As of June 30, 2022, the contractual maturities of the Company’s securities were as follows ($ in thousands):

As of September 30, 2022, the contractual maturities of the Company’s securities were as follows ($ in thousands):

Held-to-Maturity Debt Securities

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For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Real estate equity investments

Safehold Inc.

("SAFE") (1)

Ground Lease Plus Fund

1 unchanged sentence

Other strategic investments (3)

(1) As of June 30, 2022, the Company owned 40.1 million shares of SAFE common stock which, based on the closing price of $ 35.37 on June 30, 2022, had a market value of $ 1.4 billion.

(1) As of September 30, 2022, the Company owned 40.3 million shares of SAFE common stock which, based on the closing price of $ 26.46 on September 30, 2022, had a market value of $ 1.1 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 six months ended June 30, 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 six months ended June 30, 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.

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, 2022 and 2021, equity in earnings includes dilution gains of $ 0.9 million and $ 60.7 million, respectively, resulting from SAFE equity offerings.

(2) During the three and nine months ended September 30, 2022, one of the Company’s real estate equity investments closed on the sale of a multifamily property.

The Company received a distribution of $ 15.9 million from the sale and recognized a gain of $ 11.5 million in “Earnings from equity method investments” in the Company’s consolidated statements of operations.

(3) During the three and nine months ended September 30, 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 mark-to-market gains of $ 14.0 million and $ 19.1 million, respectively, 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.

—Refer to Note 1 – Merger with Safehold Inc.

SAFE is a publicly-traded company formed by the Company primarily to acquire, own, manage, finance and capitalize ground leases.

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 six months ended June 30, 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 June 30, 2022, the Company owned approximately 64.7 % of SAFE’s common stock outstanding.

During the nine months ended September 30, 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

Notes to Consolidated Financial Statements (Continued)

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

As of September 30, 2022, the Company owned approximately 64.8 % 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.

1 unchanged sentence

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.

14 unchanged sentences

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

During the three months ended June 30, 2022 and 2021, the Company recorded $ 5.2 million and $ 3.5 million, respectively, of management fees pursuant to its management agreement with SAFE.

During the six months ended June 30, 2022 and 2021, the Company recorded $ 9.7 million and $ 7.0 million, respectively, of management fees pursuant to its management agreement with SAFE.

During the three months ended September 30, 2022 and 2021, the Company recorded $ 5.3 million and $ 3.6 million, respectively, of management fees pursuant to its management agreement with SAFE.

During the nine months ended September 30, 2022 and 2021, the Company recorded $ 15.0 million and $ 10.6 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.

1 unchanged sentence

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 June 30, 2022 and 2021, the Company recognized $ 3.1 million and $ 1.9 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

During the six months ended June 30, 2022 and 2021, the Company recognized $ 6.3 million and $ 3.8 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.

During the three months ended September 30, 2022 and 2021, the Company recognized $ 3.1 million and $ 1.9 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

During the nine months ended

Notes to Consolidated Financial Statements (Continued)

September 30, 2022 and 2021, the Company recognized $ 9.4 million and $ 5.6 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

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

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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.

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

In January 2022, the Company

Notes to Consolidated Financial Statements (Continued)

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.

1 unchanged sentence

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

Notes to Consolidated Financial Statements (Continued)

improvement allowance up to a maximum of $ 51.8 million, which obligation would be assumed by SAFE upon acquisition.

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.

2 unchanged sentences

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 and six months ended June 30, 2021, the Company recorded $ 0.6 million and $ 1.1 million, respectively, of interest income on the mezzanine loan.

During the three and nine months ended September 30, 2021, the Company recorded $ 0.6 million and $ 1.7 million, respectively, 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.

The Company sold the Ground Lease to SAFE in July 2022 for $ 36.0 million when the construction related conditions were met and recognized a gain of $ 1.0 million in “Income from sales of real estate” in its consolidated statements of operations.

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.

1 unchanged sentence

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

In April 2022, the Company sold a Ground Lease on a hotel property to SAFE for $ 9.0 million.

The Company previously owned a 50 % equity interest in a venture that owned the hotel property.

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

In April 2022, the Company exchanged its 50 % equity interest with a carrying value of $ 4.4 million in a venture that owned a hotel property for land underlying the property with an in-place Ground Lease valued at $ 9.0 million and recorded a gain of $ 4.6 million in “Earnings from equity method investments” in the consolidated statements of operations.

Subsequently, the Company sold the Ground Lease on the land to SAFE for $ 9.0 million and did no t recognize any gain or loss on the sale.

In June 2022, the Loan Fund (refer to Other Strategic Investments below) committed to provide a $ 105.0 million loan to the ground lessee of a Ground Lease originated at SAFE.

11 unchanged sentences

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).

Other real estate equity investments —As of June 30, 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 $ 38.2 million in operating properties and $ 0.3 million in land assets.

Other real estate equity investments —As of September 30, 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 $ 33.8 million in operating properties.

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.

Other strategic investments —As of June 30, 2022 and December 31, 2021, the Company also had investments in real estate related funds and other strategic investments in real estate entities.

Other strategic investments —As of September 30, 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”).

7 unchanged sentences

The loan was for the Ground Lease tenant’s recapitalization of a mixed-use property.

Summarized investee financial information — The following table presents the investee level summarized financial information for the Company’s equity method investment that was significant as of June 30, 2022 ($ in thousands):

Net Income Attributable to Parent

For the Six Months Ended June 30, 2022

For the Six Months Ended June 30, 2021

Notes to Consolidated Financial Statements (Continued)

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, 2022 ($ in thousands):

Net Income Attributable to SAFE (1)

For the Nine Months Ended September 30, 2022

For the Nine Months Ended September 30, 2021

(1) Net Income Attributable to SAFE also includes gain on sale of net investment in leases, earnings from equity method investments, loss on early extinguishment of debt and selling profit from sales-type leases.

Notes to Consolidated Financial Statements (Continued)

Note 9—Other Assets and Other Liabilities

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

June 30, 2022

September 30, 2022

December 31, 2021

13 unchanged sentences

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 June 30, 2022 and 2021, the Company recognized $ 1.2 million and $ 1.2 million, respectively, in "General and administrative"

During the three months ended September 30, 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"

in its consolidated statements of operations relating to operating leases.

During the six months ended June 30, 2022 and 2021, the Company recognized $ 2.4 million and $ 2.5 million, respectively, in "General and administrative"

During the nine months ended September 30, 2022 and 2021, the Company recognized $ 3.6 million and $ 3.7 million, respectively, in "General and administrative"

and $ 0.5 million and $ 0.5 million, respectively, in "Real estate expense"

in its consolidated statements of operations relating to operating leases.

(4) Accumulated depreciation on corporate furniture, fixtures and equipment was $ 12.0 million and $ 14.8 million as of June 30, 2022 and December 31, 2021, respectively.

(5) Accumulated amortization of leasing costs was $ 0.4 million and $ 1.1 million as of June 30, 2022 and December 31, 2021, respectively.

(4) Accumulated depreciation on corporate furniture, fixtures and equipment was $ 12.2 million and $ 14.8 million as of September 30, 2022 and December 31, 2021, respectively.

(5) Accumulated amortization of leasing costs was $ 0.5 million and $ 1.1 million as of September 30, 2022 and December 31, 2021, respectively.

(6) 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 $ 0.1 million and $ 10.2 million as of June 30, 2022 and December 31, 2021, respectively.

Accumulated amortization on intangible assets, net was $ 0.1 million and $ 10.2 million as of September 30, 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 for the three and six months ended June 30, 2021 was $ 0.1 million and $ 0.7 million, respectively.

The amortization expense for in-place leases for the three and nine months ended September 30, 2021 was $ 0.3 million and $ 0.9 million, respectively.

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

As of June 30, 2022, the weighted average remaining amortization period for the Company’s intangible assets was approximately 5.4 years.

As of September 30, 2022, the weighted average remaining amortization period for the Company’s intangible assets was approximately 5.2 years.

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

June 30, 2022

September 30, 2022

December 31, 2021

4 unchanged sentences

Accounts payable, accrued expenses and other liabilities

(1) As of June 30, 2022 and December 31, 2021, other liabilities includes $ 20.2 million and $ 20.1 million, respectively, of deferred income.

(1) As of September 30, 2022 and December 31, 2021, other liabilities includes $ 21.0 million and $ 20.1 million, respectively, of deferred income.

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

3 unchanged sentences

Carrying Value as of

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

Revolving Credit Facility

September 2022

Senior Term Loan

2 unchanged sentences

3.125 % senior convertible notes (3)

September 2022

4.75 % senior notes (4)

8 unchanged sentences

Total debt obligations, net (7)

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

(1) The Revolving Credit Facility 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 ranging from 1.00 % to 1.50 % ;

or (ii) LIBOR subject to a margin ranging from 2.00 % to 2.50 % .

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

The Company terminated the Revolving Credit Facility in August 2022.

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

1 unchanged sentence

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

(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 at any time prior to the close of business on the business day immediately preceding September 15, 2022.

The conversion rate as of June 30, 2022 was 72.8554 shares per $1,000 principal amount of 3.125 % Convertible Notes, which equals a conversion price of $ 13.73 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.

During the three months ended June 30, 2022 and 2021, the Company recognized $ 0.9 million and $ 2.2 million, respectively, of contractual interest on the 3.125 % Convertible Notes.

During the six months ended June 30, 2022 and 2021, the Company recognized $ 3.2 million and $ 4.5 million, respectively, of contractual interest on the 3.125 % Convertible Notes.

(3) During the three months ended September 30, 2022 and 2021, the Company recognized $ 0.3 million and $ 2.2 million, respectively, of contractual interest on the 3.125 % Convertible Notes.

During the nine months ended September 30, 2022 and 2021, the Company recognized $ 3.5 million and $ 6.7 million, respectively, 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.

(7) The Company capitalized interest relating to development activities of $ 0.4 million and $ 0.2 million during the three months ended June 30, 2022 and 2021, respectively, and $ 0.7 million and $ 0.4 million during the six months ended June 30, 2022 and 2021, respectively.

Future Scheduled Maturities —As of June 30, 2022, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):

(7) The Company capitalized interest relating to development activities of $ 0.4 million and $ 0.2 million during the three months ended September 30, 2022 and 2021, respectively, and $ 1.1 million and $ 0.6 million during the nine months ended September 30, 2022 and 2021, respectively.

Future Scheduled Maturities —As of September 30, 2022, future scheduled maturities of outstanding debt obligations are as follows ($ in thousands):

Unsecured Debt

2022 (remaining six months)

2022 (remaining three months)

Total principal maturities

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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 six months ended June 30, 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.

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

In addition, there is an undrawn credit facility commitment fee that ranges from 0.25 % to 0.45 %, based on corporate credit ratings.

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

As of June 30, 2022, based on the Company’s borrowing base of assets, the Company had the ability to draw $ 35.2 million without pledging any additional assets to the facility.

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

During the nine months ended September 30, 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 had a secured revolving credit facility with a maximum capacity of $ 350.0 million and a maturity of September 2022 (the “Revolving Credit Facility”).

The Company terminated the Revolving Credit Facility in August 2022.

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

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

In addition, there was an undrawn credit facility commitment fee that ranges from 0.25 % to 0.45 %, based on corporate credit ratings.

Unsecured Notes —As of September 30, 2022, the Company has senior unsecured notes outstanding with varying fixed-rates and maturities ranging from October 2024 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 sale of the Company's net lease assets.

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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).

In April 2022, the Company completed separate, privately-negotiated transactions with holders of $ 194 million aggregate principal amount of the Company's 3.125 % Convertible Notes 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.

3.125% Senior Convertible Notes —In April 2022, the Company completed separate, privately-negotiated transactions with holders of $ 194 million aggregate principal amount of the Company's 3.125 % Convertible Notes 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.

The Company recognized a net increase in shareholders’ equity of $ 180.6 million inclusive of a $ 118.1 million loss on extinguishment of debt in connection with these transactions.

In April 2022, the Company redeemed $ 7.1 million principal amount of its 4.75 % senior notes due October 2024 for $ 7.2 million.

In July and August 2022, the Company completed a series of privately-negotiated exchange transactions with holders of approximately $ 80.9 million aggregate principal amount of the Company's 3.125 % Convertible Notes in which the noteholders exchanged their convertible notes with the Company for an aggregate of approximately 3.3 million newly issued shares of the Company's common stock and aggregate cash payments of approximately $ 43.6 million inclusive of accrued interest.

The convertible notes received by the Company were retired.

The Company recognized a net increase in shareholders’ equity of $ 38.2 million inclusive of a $ 12.1 million loss on extinguishment of debt in connection with these transactions.

In September 2022, the holders of approximately $ 11.7 million aggregate principal amount of the Company's 3.125 % Convertible Notes executed their conversion rights under the notes and exchanged their convertible notes with the Company for an aggregate of approximately 92,011 newly issued shares of the Company's common stock and aggregate cash payments of approximately $ 11.7 million.

The convertible notes received by the Company were retired.

The Company also repaid $ 0.5 million principal amount of its 3.125 % Convertible Notes for cash at maturity.

4.75% Senior Notes —In April 2022, the Company redeemed $ 7.1 million principal amount of its 4.75 % senior notes due October 2024 for $ 7.2 million.

The Company recognized a $ 0.2 million loss on extinguishment of debt in connection with these transactions.

In June 2022, the Company redeemed $ 53.1 million principal amount of its 5.50 % senior notes due February 2026 for $ 50.6 million.

In July and August 2022, the Company redeemed an aggregate $ 14.4 million principal amount of its senior notes due October 2024 for $ 14.5 million.

The Company recognized a $ 0.3 million net loss on extinguishment of debt in connection with these transactions.

Notes to Consolidated Financial Statements (Continued)

5.50% Senior Notes —In June 2022, the Company redeemed $ 53.1 million principal amount of its 5.50 % senior notes due February 2026 for $ 50.6 million.

The Company recognized a $ 1.7 million net gain on extinguishment of debt in connection with these transactions.

4.25% Senior Notes — In August and September 2022, the Company redeemed an aggregate $ 48.0 million principal amount of its senior notes due August 2025 for $ 48.1 million.

The Company recognized a $ 0.7 million loss on extinguishment of debt in connection with these transactions.

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.

Notes to Consolidated Financial Statements (Continued)

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 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.

Note 11—Commitments and Contingencies

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These arrangements are referred to as Strategic Investments.

As of June 30, 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):

As of September 30, 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

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Notes to Consolidated Financial Statements (Continued)

Other Commitments —Future minimum lease obligations under non-cancelable operating leases as of June 30, 2022 are as follows ($ in thousands):

2022 (remaining six months)

Other Commitments —Future minimum lease obligations under non-cancelable operating leases as of September 30, 2022 are as follows ($ in thousands):

2022 (remaining three months)

Total undiscounted cash flows

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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 3.9 years.

During the three months ended June 30, 2022 and 2021, the Company made payments of $ 1.7 million and $ 0.4 million, respectively, related to its operating leases and during the three months ended June 30, 2021 made payments of $ 1.4 million related to finance leases with SAFE .

During the six months ended June 30, 2022 and 2021, the Company made payments of $ 3.4 million and $ 1.2 million, respectively, related to its operating leases and $ 1.3 million and $ 2.7 million, respectively, related to finance leases with SAFE .

During the three months ended September 30, 2022 and 2021, the Company made payments of $ 1.6 million and $ 0.8 million, respectively, related to its operating leases and during the three months ended September 30, 2021 made payments of $ 1.3 million related to finance leases with SAFE.

During the nine months ended September 30, 2022 and 2021, the Company made payments of $ 5.0 million and $ 2.1 million, respectively, related to its operating leases and $ 1.3 million and $ 4.1 million, respectively, related to 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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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 June 30, 2022 and December 31, 2021 ($ in thousands):

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2022 and December 31, 2021 ($ in thousands):

Derivative Liabilities

Balance Sheet

As of June 30, 2022

As of September 30, 2022

Derivatives Designated in Hedging Relationships

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Income into Earnings

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Interest rate swaps

Earnings from equity method investments

For the Three Months Ended June 30, 2021

For the Three Months Ended September 30, 2021

Interest rate swaps

2 unchanged sentences

Earnings from equity method investments

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Interest rate swaps

Earnings from equity method investments

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

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 June 30, 2022 and December 31, 2021:

Preferred Stock —The Company had the following series of Cumulative Redeemable Preferred Stock outstanding as of September 30, 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 $ 4.0 million, $ 3.1 million and $ 4.7 million on its Series D, G and I Cumulative Redeemable Preferred Stock during both the six months ended June 30, 2022 and 2021.

(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, 2022 and 2021.

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

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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 $ 19.2 million, or $ 0.25 per share, for the six months ended June 30, 2022 and $ 17.4 million, or $ 0.235 per share, for the six months ended June 30, 2021.

The Senior Term Loan permits 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 $ 30.1 million, or $ 0.375 per share, for the nine months ended September 30, 2022 and $ 26.3 million, or $ 0.36 per share, for the nine months ended September 30, 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.

The Company did not repurchase any shares of its common stock during the six months ended June 30, 2022.

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

The Company did not repurchase any shares of its common stock during the nine months ended September 30, 2022.

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.

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 June 30, 2022, the Company had remaining authorization to repurchase up to $ 50.0 million of common stock under its stock repurchase program.

As of September 30, 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):

June 30, 2022

September 30, 2022

December 31, 2021

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

Unrealized gains on available-for-sale securities

Unrealized losses on cash flow hedges

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Note 14—Stock-Based Compensation Plans and Employee Benefits

Stock-Based Compensation —The Company recorded stock-based compensation, including the expense related to performance incentive plans (see below), of ($ 17.9 ) million and $ 14.8 million for the three months ended June 30, 2022 and 2021, respectively, and ($ 30.4 ) million and $ 20.3 million for the six months ended June 30, 2022 and 2021, respectively, in “General and administrative” in the Company’s consolidated statements of operations.

Stock-Based Compensation —The Company recorded stock-based compensation, including the expense related to performance incentive plans (see below), of ($ 0.4 ) million and $ 3.0 million for the three months ended September 30, 2022 and 2021, respectively, and ($ 30.7 ) million and $ 23.3 million for the nine months ended September 30, 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 June 30, 2022, 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 September 30, 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 six months ended June 30, 2022 and 2021, the Company recorded $ 2.4 million and $ 1.5 million, respectively, of expense related to the 2019-2022 iPIP plans.

During the nine months ended September 30, 2022 and 2021, the Company recorded $ 3.5 million and $ 2.6 million, respectively, of expense related to the 2019-2022 iPIP plans.

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

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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 six months ended June 30, 2022.

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, 2022.

iPIP Investment Pool

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Points at end of period

As of June 30, 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

As of September 30, 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

Notes to Consolidated Financial Statements (Continued)

aggregate gross book value of $ 435 million, including 5.0 million shares of SAFE common stock acquired by the Company, were attributable to the 2021-2022 Plan.

an aggregate gross book value of $ 406 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 six months ended June 30, 2022.

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, 2022.

iPIP Investment Pool

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Points at end of period

(1) As of June 30, 2022, all awards under the 2015-2016 Plan had been paid.

During the six months ended June 30, 2022, the Company recorded a $ 37.1 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 six months ended June 30, 2021, the Company recorded $ 15.1 million of expense related to the 2013-2018 iPIP plans.

As of June 30, 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 $ 238 million, including 7.6 million shares of SAFE common stock acquired by the Company, were attributable to the 2017-2018 Plan.

As of June 30, 2022 there were no investments attributable to the 2015-2016 Plan.

During the six months ended June 30, 2022, the Company made distributions to participants in the 2013-2014 investment pool.

(1) As of September 30, 2022, all awards under the 2015-2016 Plan had been paid.

During the nine months ended September 30, 2022, the Company recorded a $ 39.0 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 nine months ended September 30, 2021, the Company recorded $ 15.0 million of expense related to the 2013-2018 iPIP plans.

As of September 30, 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 $ 236 million, including 7.6 million shares of SAFE common stock acquired by the Company, were attributable to the 2017-2018 Plan.

As of September 30, 2022 there were no investments attributable to the 2015-2016 Plan.

During the nine months ended September 30, 2022, the Company made distributions to participants in the 2013-2014 investment pool.

The iPIP participants received total distributions in the amount of $ 19.6 million as compensation, comprised of cash and 412,041 shares of the Company’s common stock with a fair value of $ 16.06 per share, which are fully-vested and issued under the 2009 LTIP.

After deducting statutory minimum tax withholdings, a total of 215,657 shares of the Company’s common stock were issued.

During the six months ended June 30, 2022, the Company made distributions to participants in the 2015-2016 investment pool.

During the nine months ended September 30, 2022, the Company made distributions to participants in the 2015-2016 investment pool.

The iPIP participants received total distributions in the amount of $ 19.2 million as compensation, comprised of cash and 402,731 shares of the Company’s common stock with a fair value of $ 16.06 per share, which are fully-vested and issued under the 2009 LTIP.

After deducting statutory minimum tax withholdings, a total of 193,416 shares of the Company’s common stock were issued.

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

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.

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

As of June 30, 2022 and December 31, 2021, the Company had accrued compensation costs relating to iPIP of $ 47.0 million and $ 116.6 million, respectively, which are included in “Accounts payable, accrued expenses and other liabilities” on the Company’s consolidated balance sheets.

Notes to Consolidated Financial Statements (Continued)

As of September 30, 2022 and December 31, 2021, the Company had accrued compensation costs relating to iPIP of $ 45.1 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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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 June 30, 2022, an aggregate of 2.3 million shares remain available for issuance pursuant to future awards under the Company’s 2009 LTIP.

Restricted Stock Unit Activity —A summary of the Company’s stock-based compensation awards to certain employees in the form of long-term incentive awards for the six months ended June 30, 2022, is as follows (in thousands):

As of September 30, 2022, an aggregate of 2.3 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, 2022, is as follows (in thousands):

Nonvested at beginning of period

Nonvested at end of period

As of June 30, 2022, there was $ 7.7 million of total unrecognized compensation cost related to all unvested restricted stock units that are expected to be recognized over a weighted average remaining vesting/service period of 1.54 years.

Directors’ Awards — During the six months ended June 30, 2022, the Company granted 38,953 restricted shares of common stock to non-employee Directors at a fair value of $ 16.33 at the time of grant for their annual equity awards and also issued 1,280 common stock equivalents (“CSEs”) at a fair value of $ 17.97 per CSE in respect of dividend equivalents on outstanding CSEs.

As of June 30, 2022, a combined total of 131,983 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 $ 1.8 million.

401(k) Plan — The Company made contributions of $ 0.1 million and $ 0.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 0.9 million and $ 0.7 million for the six months ended June 30, 2022 and 2021, respectively, to the Company’s 401(k) Plan.

As of September 30, 2022, there was $ 6.5 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 1.33 years.

Directors’ Awards — During the nine months ended September 30, 2022, the Company granted 38,953 restricted shares of common stock to non-employee Directors at a fair value of $ 16.33 at the time of grant for their annual equity awards and also issued 2,193 common stock equivalents (“CSEs”) at a fair value of $ 15.79 per CSE in respect of dividend equivalents on outstanding CSEs.

As of September 30, 2022, a combined total of 132,896 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 $ 1.2 million.

401(k) Plan — The Company made contributions of $ 0.1 million and $ 0.1 million for the three months ended September 30, 2022 and 2021, respectively, and $ 1.0 million and $ 0.8 million for the nine months ended September 30, 2022 and 2021, respectively, to the Company’s 401(k) Plan.

Notes to Consolidated Financial Statements (Continued)

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 June 30,

For the Six Months Ended June 30,

Net loss from continuing operations

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Net income (loss) from continuing operations

Net (income) loss from continuing operations attributable to noncontrolling interests

Preferred dividends

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

Net income (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 June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Earnings allocable to common shares:

Numerator for basic and diluted earnings per share:

Net loss from continuing operations and allocable to common shareholders

Net income (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

Net income 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 loss from continuing operations and allocable to common shareholders

Basic earnings per common share:

Net income (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 six months ended June 30, 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 June 30, 2022 and 2021, 1,787,708 and 4,700,805 shares, respectively, of the 3.125 % Convertible Notes were antidilutive based upon the conversion price for such periods.

For the six months ended June 30, 2022 and 2021, 5,308,491 and 3,797,296 shares, respectively, of the 3.125 % Convertible Notes were antidilutive based upon the conversion price for such periods .

Net income allocable to common shareholders

Diluted earnings per common share:

Net income (loss) from continuing operations and allocable to common shareholders

Net income from discontinued operations and allocable to common shareholders

Net income allocable to common shareholders

(1) For the nine months ended September 30, 2022, 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 nine months ended September 30, 2022, 3,649,934 shares of the 3.125 % Convertible Notes were antidilutive due to the Company having a net loss from continuing operations and allocable to common shareholders for the period.

Notes to Consolidated Financial Statements (Continued)

Note 16—Fair Values

8 unchanged sentences

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):

The Company did not have any assets or liabilities recorded at fair value as of September 30, 2022.

The following fair value hierarchy table summarizes the Company’s assets and liabilities recorded at fair value on a recurring basis by the above categories as of December 31, 2021 ($ in thousands):

Fair Value Using

As of June 30, 2022

Recurring basis:

Available-for-sale securities (1)

Non-recurring basis:

Real estate, net (2)

Held-to-maturity securities (3)

As of December 31, 2021

3 unchanged sentences

(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 $ 1.8 million impairment on an operating property with an estimated fair value of $ 0.8 million.

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

(3) In the second quarter 2022, the Company received a $ 40.0 million repayment on a held-to-maturity security.

The Company then recorded a $ 25.0 million charge-off (refer to Note 7) on the held-to-maturity security to record the security at the expected future cash flows 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 six months ended June 30, 2022 and 2021 ($ in thousands):

The fair value of the Company’s available-for-sale securities (refer to Note 7) are based upon unadjusted third-party broker quotes and are classified as Level 3.

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, 2022 and 2021 ($ in thousands):

Beginning balance

Sales and Repayments

Realized gain recorded in other income

Unrealized losses recorded in other comprehensive income

2 unchanged sentences

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

As of June 30, 2022

As of September 30, 2022

As of December 31, 2021

10 unchanged sentences

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

(3) As of June 30, 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 June 30, 2022 and December 31, 2021, the fair value of the Company’s 3.125 % Senior Convertible Notes was $ 99.6 million and $ 527.5 million, respectively (refer to Note 10).

(3) As of September 30, 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 December 31, 2021, the fair value of the Company’s 3.125 % Senior Convertible Notes was $ 527.5 million (refer to Note 10).

Note 17—Segment Reporting

8 unchanged sentences

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Operating lease income

10 unchanged sentences

Allocated general and administrative (2)

Notes to Consolidated Financial Statements (Continued)

Segment profit (loss) (3)

Notes to Consolidated Financial Statements (Continued)

Other significant items:

Provision for loan losses

Provision for losses on net investment in leases

Impairment of assets

Recovery of loan losses

Recovery of losses on net investment in leases

Depreciation and amortization

Capitalized expenditures

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Operating lease income

12 unchanged sentences

Other significant non-cash items:

Provision for (recovery of) loan losses

Provision for losses on net investment in leases

Recovery of loan losses

Recovery of losses on net investment in leases

Impairment of assets

Depreciation and amortization

Capitalized expenditures

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Operating lease income

13 unchanged sentences

Provision for loan losses

Provision for losses on net investment in leases

Impairment of assets

1 unchanged sentence

Capitalized expenditures

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Operating lease income

9 unchanged sentences

Allocated interest expense

Notes to Consolidated Financial Statements (Continued)

Allocated general and administrative (3)

Segment profit (loss) (4)

Notes to Consolidated Financial Statements (Continued)

Other significant items:

4 unchanged sentences

Capitalized expenditures

As of June 30, 2022

As of September 30, 2022

Real estate, net

2 unchanged sentences

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

Net investment in leases

Land and development, net

Loans receivable and other lending investments, net

Loan receivable held for sale

Other investments

16 unchanged sentences

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

(3) General and administrative excludes stock-based compensation of ($ 17.9 ) million and $ 14.8 million for the three months ended June 30, 2022 and 2021, respectively, and ($ 30.4 ) million and $ 20.3 million for the six months ended June 30, 2022 and 2021, respectively.

(3) General and administrative excludes stock-based compensation of ($ 0.4 ) million and $ 3.0 million for the three months ended September 30, 2022 and 2021, respectively, and ($ 30.7 ) million and $ 23.3 million for the nine months ended September 30, 2022 and 2021, respectively.

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Segment income

(Provision for) recovery of loan losses

Provision for losses on net investment in leases

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

Impairment of assets

4 unchanged sentences

Net income from discontinued operations

Net income (loss)

Notes to Consolidated Financial Statements (Continued)

Note 18 – Subsequent Events

In July and August 2022, the Company completed a series of privately-negotiated exchange transactions with holders of approximately $ 47.9 million aggregate principal amount of the Company's 3.125 % Convertible Notes due 2022 (refer to Note 10) in which the noteholders exchanged their convertible notes with the Company for an aggregate of approximately 2.0 million newly issued shares of the Company's common stock and aggregate cash payments of approximately $ 24.3 million.

The convertible notes received by the Company were retired.

The Company will recognize a net increase in shareholders’ equity of $ 24.2 million inclusive of a $ 6.1 million loss on extinguishment of debt in connection with these transactions.

In July 2022, the Company sold a Ground Lease to SAFE for $ 36.0 million.

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