What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-01 compared with 2023-08-01 · 263 added, 202 removed, 913 unchanged (34% of the section changed)

3 unchanged sentences

(In thousands)

Net investment in sales-type leases ($ 336 and $ 0 of allowances as of June 30, 2023 and December 31, 2022, respectively)

Ground Lease receivables, net ($ 221 and $ 0 of allowances as of June 30, 2023 and December 31, 2022, respectively)

September 30,

Net investment in sales-type leases ($ 468 and $ 0 of allowances as of September 30, 2023 and December 31, 2022, respectively)

Ground Lease receivables, net ($ 318 and $ 0 of allowances as of September 30, 2023 and December 31, 2022, respectively)

Real estate, at cost

2 unchanged sentences

Real estate-related intangible assets, net

Total real estate, net and real estate-related intangible assets, net

Loans receivable, net - related party ( $ 2,311 of allowances as of June 30, 2023)

Real estate available and held for sale

Total real estate, net and real estate-related intangible assets, net and real estate available and held for sale

Loans receivable, net - related party ( $ 2,421 of allowances as of September 30, 2023)

Equity investments

13 unchanged sentences

shareholders' equity:

Common stock, $ 0.01 par value, 400,000 shares authorized, 63,966 and 62,397 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Common stock, $ 0.01 par value, 400,000 shares authorized, 71,066 and 62,397 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total Safehold Inc.

3 unchanged sentences

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

(2) As of June 30, 2023, includes $ 8.1 million due from related parties.

(2) As of September 30, 2023, includes $ 7.1 million due from related parties.

(3) As of December 31, 2022, includes $ 8.5 million due to related parties.

4 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Interest income from sales-type leases (1)

8 unchanged sentences

General and administrative (4)

Impairment of goodwill

Provision for credit losses

1 unchanged sentence

Total costs and expenses

Income from operations before other items

Gain on sale of net investment in lease

Income (loss) from operations before other items

Earnings from equity method investments

Net income before income taxes

Net income (loss) before income taxes

Income tax expense

Net (income) loss attributable to noncontrolling interests

Net income attributable to Safehold Inc.

Net income (loss)

Net (income) attributable to noncontrolling interests

Net income (loss) attributable to Safehold Inc.

common shareholders

Per common share data:

Net income (loss)

Weighted average number of common shares:

(1) For the six months ended June 30, 2022, the Company recorded $ 2.1 million of “Interest income from sales-type leases” in its consolidated statements of operations from Ground Leases with iStar Inc.

(1) For the nine months ended September 30, 2022, the Company recorded $ 2.1 million of “Interest income from sales-type leases” in its consolidated statements of operations from Ground Leases with iStar Inc.

(2) Refer to Note 3.

(3) For the three and six months ended June 30, 2023, includes $ 7.2 million of management fees from related parties.

(4) For the three months ended June 30, 2023 and 2022, includes $ 8.0 million and $ 9.5 million, respectively, of general and administrative expenses incurred to related parties that includes management fees, expense reimbursements to the Former Manager (refer to Note 1) and equity-based compensation (including equity-based compensation to employees).

For the six months ended June 30, 2023 and 2022, includes $ 21.0 million and $ 17.4 million, respectively, of general and administrative expenses incurred to related parties that includes management fees, expense reimbursements to the Former Manager (refer to Note 1) and equity-based compensation (including equity-based compensation to employees).

(3) For the three and nine months ended September 30, 2023, includes $ 6.0 million and $ 13.2 million, respectively, of management fees from related parties.

(4) For the three months ended September 30, 2023 and 2022, includes $ 7.5 million and $ 8.5 million, respectively, of general and administrative expenses incurred to related parties that includes management fees and expense reimbursements to the Former Manager (refer to Note 1) and equity-based compensation (including equity-based compensation to employees).

For the nine months ended September 30, 2023 and 2022, includes $ 28.5 million and $ 25.8 million, respectively, of general and administrative expenses incurred to related parties that includes management fees, expense reimbursements to the Former Manager (refer to Note 1) and equity-based compensation (including equity-based compensation to employees).

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

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net income (loss)

Other comprehensive income:

1 unchanged sentence

Unrealized gain on derivatives

Other comprehensive income (loss):

Other comprehensive income:

Comprehensive income (loss)

Comprehensive (income) loss attributable to noncontrolling interests

Comprehensive (income) attributable to noncontrolling interests

Comprehensive income (loss) attributable to Safehold Inc.

8 unchanged sentences

Income (Loss)

Balance at March 31, 2023

Balance at June 30, 2023

Net income (loss)

Issuance of common stock, net / amortization

1 unchanged sentence

Change in accumulated other comprehensive income

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Balance at September 30, 2023

Balance at June 30, 2022

Balance at March 31, 2022

Issuance of common stock, net / amortization

2 unchanged sentences

Distributions to noncontrolling interests

Balance at June 30, 2022

Balance at September 30, 2022

Balance at December 31, 2022

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

Net income (loss)

Issuance of common stock, net / amortization

3 unchanged sentences

Distributions to noncontrolling interests

Merger consideration (refer to Note 1)

Balance at June 30, 2023

Merger consideration (refer to Note 1 and Note 3)

Balance at September 30, 2023

Balance at December 31, 2021

5 unchanged sentences

Additional paid in capital attributable to redeemable noncontrolling interests

Balance at June 30, 2022

Balance at September 30, 2022

(1) Refer to Note 3.

3 unchanged sentences

(In thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income to cash flows from operating activities:

5 unchanged sentences

Amortization of real estate-related intangibles, net

Impairment of goodwill

Provision for credit losses

1 unchanged sentence

Distributions from operations of equity method investments

Gain on sale of net investment in lease

Amortization of premium, discount and deferred financing costs on debt obligations, net

6 unchanged sentences

Cash flows from investing activities:

Acquisitions of real estate

Origination/acquisition of net investment in sales-type leases and Ground Lease receivables

( 1,210,274 )

Origination of loans receivable, net

3 unchanged sentences

Funding reserves received from Ground Lease tenant net of disbursements

Net proceeds from sale of net investment in lease

Net proceeds received from sale of real estate available and held for sale

2 unchanged sentences

Cash flows used in investing activities

( 1,047,610 )

Cash flows from financing activities:

2 unchanged sentences

Repayments of debt obligations

( 1,005,000 )

Payments for deferred financing costs

5 unchanged sentences

Contributions from redeemable noncontrolling interests

Other financing activities

Cash flows provided by financing activities

11 unchanged sentences

Non-cash interest accrued to debt balances

Accrued finance costs

Accrued offering costs

4 unchanged sentences

Business —On March 31, 2023, Safehold Inc.

(“Old SAFE”) merged with and into iStar Inc.

(“iStar”) (see Merger Transaction below), at which time Old SAFE ceased to exist and iStar continued as the surviving corporation and changed its name to “Safehold Inc.” (the “Merger”).

(“Old SAFE”) merged with and into iStar (see Merger Transaction below), at which time Old SAFE ceased to exist and iStar continued as the surviving corporation and changed its name to “Safehold Inc.” (the “Merger”).

References to iStar refer to iStar prior to the Merger.

50 unchanged sentences

The closing of the MSD Caret Purchase took place in conjunction with the closing of the Merger on March 31, 2023.

Star Holdings was capitalized in part with an 8.0 %, four-year term loan from the Company having an initial principal amount of $ 115.0 million, as well as SOFR plus 3.00 % bank debt of $ 140.0 million from Morgan Stanley Bank, N.A.

Star Holdings was capitalized in part with an 8.0 %, four-year term loan from the Company having an initial principal amount of $ 115.0 million, as well as SOFR plus 3.00 % bank debt with an initial principal balance of $ 140.0 million from Morgan Stanley Bank, N.A.

which is secured by approximately 13.5 million shares of the Company (refer to Note 4).

14 unchanged sentences

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

As of June 30, 2023, the total assets of these consolidated VIEs were $ 72.6 million and total liabilities were $ 30.1 million.

As of September 30, 2023, the total assets of these consolidated VIEs were $ 73.2 million and total liabilities were $ 30.0 million.

The classifications of these assets are primarily within “Net investment in sales-type leases,” “Real estate, net,” “Real estate-related intangible assets, net” and “Deferred operating lease income receivable” on the Company’s consolidated balance sheets.

The classifications of liabilities are primarily within “Debt obligations, net” and “Accounts payable, accrued expenses and other liabilities” on the Company’s consolidated balance sheets.

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

The Company has provided no

The liabilities of these VIEs are

Safehold Inc.

Notes to Consolidated Financial Statements

financial support to VIEs that it was not previously contractually required to provide and did not have any unfunded commitments related to consolidated VIEs as of June 30, 2023.

non-recourse to the Company and can only be satisfied from each VIE’s respective assets.

The Company has provided no financial support to VIEs that it was not previously contractually required to provide and did not have any unfunded commitments related to consolidated VIEs as of September 30, 2023.

Note 3—Summary of Significant Accounting Policies

2 unchanged sentences

ASU 2016-13 replaced the incurred loss impairment methodology in prior GAAP with a methodology that reflects expected credit losses over the life of the investment and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The Company analyzes historical unemployment rates and historical data provided by Trepp (“Trepp”) for single asset borrower loans including loan to value ratios, loss rates, timing of losses, vintage, property type and other statistics.

The Company utilizes historical loss rates, timing of losses and unemployment rates and updates its analysis for c urrent market conditions and reasonable and supportable forecasts of unemployment rates to develop an estimate of credit losses.

The Company analyzes its portfolio of Ground Leases based on whether the property is a stabilized property or a development project (projects with unfunded commitments that are under development or in transition).

The Company’s development properties are assigned a higher loss rate due to the more inherent risk of deals under construction.

The Company analyzes historical data provided by Trepp (“Trepp”) for single asset borrower loans and considers comparable loan to value ratios, loss rates, timing of losses, vintage, property type and other statistics.

The Company updates its analysis for c urrent market conditions and reasonable and supportable forecasts of unemployment rates to develop an estimate of credit losses.

The Company analyzes its portfolio of Ground Leases in two categories, based on whether the underlying property is a stabilized property or a development project (projects with unfunded commitments that are under development or in transition).

The Company’s development properties are assigned a higher loss rate due to the higher inherent risk of deals under construction.

Interest receivable is not included in the Company’s allowance for credit losses on net investment in sales-type leases and Ground Lease receivables as the Company performs timely write-offs, if any, of aged interest receivables.

29 unchanged sentences

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

As of June 30, 2023

As of September 30, 2023

As of December 31, 2022

18 unchanged sentences

or (ii) the redemption value.

In the case of the Company’s redeemable Caret units, the carrying amount equals both the initial carrying amount and the redemption value.

Safehold Inc.

21 unchanged sentences

The second TRS was acquired in the Company’s acquisition of iStar and first had activity during the three months ended June 30, 2023.

For the three months ended June 30, 2023, the Company recorded current and deferred income tax expense in the amounts of $ 0.4 million and $ 0.1 million, respectively, with respect to the TRS.

In addition, the Company paid franchise and other state and local income taxes in the amount of $ 50 thousand during the three months ended June 30, 2023.

For the nine months ended September 30, 2023, the Company recorded current income tax expense in the amount of $ 1.4 million, which was partially offset by a deferred tax benefit of $ 0.9 million with respect to the TRS.

In addition, the Company paid other state and local income taxes in the amount of $ 0.1 million during the nine months ended September 30, 2023.

Safehold Inc.

14 unchanged sentences

Any accrued interest receivable is recorded in “Deferred expenses and other assets, net” on the Company’s consolidated balance sheets.

As of June 30, 2023, the Company had $ 26 thousand of accrued interest on its consolidated balance sheets.

As of September 30, 2023, the Company had $ 26 thousand of accrued interest on its consolidated balance sheets.

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

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

During the three and six months ended June 30, 2023, the Company did not reverse any accrued interest on its loan asset.

During the three and nine months ended September 30, 2023, the Company did not reverse any accrued interest on its loan asset.

Interest Income – related party —Interest income - related party (refer to Note 4) is recognized on an accrual basis using the effective interest method and is recorded in “Interest income – related party” in the Company’s consolidated statements of operations.

Equity Investments —Equity investments are accounted for pursuant to the equity method of accounting if the Company can significantly influence the operating and financial policies of the investee.

The Company has noncontrolling equity interests in ventures (refer to Note 6) and determined the entities to be voting interest entities.

The Company has noncontrolling equity interests in multiple ventures (refer to Note 6) and determined the entities to be voting interest entities.

As such, its equity interests in these ventures are accounted for pursuant to the equity method of accounting.

5 unchanged sentences

In connection with the acquisition, the Company has basis differences in these equity interests that are amortized to income over the life of the underlying assets (refer to Note 6).

Management fees —The Company earns management fees through SpinCo Manager’s management agreement with Star Holdings pursuant to which SpinCo Manager operates and pursues the orderly monetization of Star Holding’s assets (refer to Note 1).

Effective March 31, 2023, Star Holdings will pay SpinCo Manager an annual management fee of $ 25.0 million in year one, $ 15.0 million in year two, $ 10.0 million in year three, $ 5.0 million in year four and 2.0 % of the gross book value of Star Holdings’ assets, excluding shares of the Company’s common stock, for each annual term thereafter.

The Company recognizes management fee income in accordance with ASC 606:

Revenue from Contracts with

Management fees are paid quarterly in arrears.

The Company recognizes management fee income in accordance

Safehold Inc.

Notes to Consolidated Financial Statements

Customers (“ASC 606”).

Pursuant to ASC 606, the Company estimated the total transaction price of the management agreement and allocated the transaction price to its performance obligations under the management agreement.

The Company determined that the management contract represents a single continuing performance obligation and will measure its progress toward satisfying its performance obligation using an input method to evaluate the level of effort expended to complete its obligations.

with ASC 606:

Revenue from Contracts with Customers (“ASC 606”).

Upon the Company’s initial evaluation of the management contract, the Company evaluated the payment terms and termination clauses and it determined the estimated term of the contract to be three years and the total transaction price to be $ 50.0 million.

The Company determined that the termination fees payable by Star Holdings in year one through year three upon termination of the management agreement would be substantive and therefore termination of the management agreement would be unlikely before year four.

The Company will continue to evaluate the anticipated term and total transaction price of the management agreement as it executes its performance obligations under the management agreement.

Pursuant to ASC 606, the Company allocated the transaction price to its performance obligations under the management agreement.

The Company determined that the management contract represents a single continuing performance obligation and tracks its progress toward satisfying its performance obligation using an input method to measure the level of effort expended during the period and time budgeted to complete its obligations, which is subject to variability based on market conditions .

The Company recognizes management fee income as it satisfies the performance obligations of the contract and records management fees in “Other income” in the Company’s consolidated statements of operations.

2 unchanged sentences

(ii) the acquisition does not include a substantive process in the form of an acquired workforce;

or (iii) an acquired contract that cannot be replaced without significant cost, effort or delay.

or (iii) there is an acquired contract that cannot be replaced without significant cost, effort or delay.

Acquisitions of a business are accounted for as business combinations and other acquisition transactions are accounted for as asset acquisitions.

24 unchanged sentences

The Merger was accounted for as a business combination pursuant to ASC 805 and all Merger related costs were expensed as incurred.

The Company recorded $ 0.1 million of Merger expenses and $ 0.3 million of related non-recurring charges during the three months ended June 30, 2023 in “Other expense” in the Company’s consolidated statements of operations.

The Company recorded $ 18.9 million of Merger expenses during the six months ended June 30, 2023, of which $ 14.1 million was recorded in “Other expense” and $ 4.8 million was recorded in “General and administrative” in the Company’s consolidated statements of operations.

During the six months ended June 30, 2023, the Company also recorded $ 0.9 million of related non-recurring charges in “Other expense” and a provision for credit losses of $ 2.3 million on the Secured Term Loan Facility (refer to Note 4) which was originated at the time of the Merger in conjunction with the Spin-Off.

Excluding $ 3.0 million of related non-recurring charges and the $ 2.3 million provision for credit losses on the Secured Term Loan Facility, through June 30, 2023, the Company has incurred $ 26.5 million of Merger expenses.

The Company recorded $ 0.1 million of Merger expenses during the three months ended September 30, 2023 in “Other expense” in the Company’s consolidated statements of operations.

The Company recorded $ 18.9 million of Merger expenses during the nine months ended September 30, 2023, of which $ 14.1 million was recorded in “Other expense” and $ 4.8 million was recorded in “General and administrative” in the Company’s consolidated statements of operations.

During the nine months ended September 30, 2023, the Company also recorded $ 0.9 million of related non-recurring charges in “Other expense” and a provision for credit losses of $ 2.3 million on the Secured Term Loan Facility (refer to Note 4) which was originated at the time of the Merger in conjunction with the Spin-Off.

Excluding $ 3.0 million of related non-recurring charges and the $ 2.3 million provision for credit losses on the Secured Term Loan Facility, through September 30, 2023, the Company has incurred $ 26.6 million of Merger expenses.

Safehold Inc.

Notes to Consolidated Financial Statements

The following table sets forth the preliminary allocation of the purchase consideration to the fair values of identifiable tangible and intangible assets acquired and liabilities assumed, recognized as a result of the acquisition described in Note 1 above, measurement period adjustments and a revised allocation of the purchase consideration ($ in thousands):

The following table sets forth the preliminary allocation as of March 31, 2023 of the purchase consideration to the fair values of identifiable tangible and intangible assets acquired and liabilities assumed, recognized as a result of the acquisition described in Note 1 above, measurement period adjustments and a revised allocation of the purchase consideration ($ in thousands):

Purchase Price

13 unchanged sentences

(2) During the three months ended June 30, 2023, the Company recorded a deferred tax asset in the amount of $ 6.3 million, net of a valuation allowance in the amount of $ 2.8 million, and reduced goodwill by $ 6.3 million.

The net deferred tax asset relates to net operating loss carryovers to which the Company’s taxable REIT subsidiary is a successor and were finalized upon filing tax returns for periods prior to the Merger.

The net deferred tax asset relates to net operating loss carryovers to which the Company’s taxable REIT subsidiary is a successor and were finalized upon filing tax returns subsequent to the Merger for periods prior to the Merger.

During the three months ended September 30, 2023, the Company recognized $ 6.5 million of deferred expenses and other assets related to final state tax receivables and $ 2.3 million in accounts payable, accrued expenses and other liabilities as a result of finalizing its tax returns which produced additional information not available at the time of the Merger.

The following table presents a rollforward of the Company’s goodwill:

Balance at December 31, 2022

Goodwill recognized at Merger

Reduction to goodwill resulting from measurement period adjustments

Balance at September 30, 2023

(3) Deferred expenses and other assets includes $ 11.0 million attributable to operating lease right of use assets , $ 4.7 million attributable to prepaid expenses resulting from the settlement of iStar’s compensation plans, $ 2.1 million attributable to in-place prepaid contracts, $ 1.3 million attributable to office furniture and equipment and $ 6.3 million attributable to other receivables.

6 unchanged sentences

Notes to Consolidated Financial Statements

The following table summarizes the Company's pro forma revenues and net income (loss) for the three and six months ended June 30, 2023 and 2022 as if the Merger described in Note 1 was completed on January 1, 2022 ($ in thousands):

For the Three Months Ended June 30,

For the Six Months Ended June 30,

The following table summarizes the Company's pro forma revenues and net income (loss) for the three and nine months ended September 30, 2023 and 2022 as if the Merger described in Note 1 was completed on January 1, 2022 ($ in thousands):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Pro forma revenues

1 unchanged sentence

The pro forma revenues and net income (loss) are presented for informational purposes only and may not be indicative of what the actual results of operations of the Company would have been assuming the transaction occurred on January 1, 2022, nor do they purport to represent the Company’s results of operations for future periods.

For the six months ended June 30, 2022, pro forma net loss includes $ 47.7 million of merger expenses (including $ 20.3 million of merger expenses borne by iStar), which are non-recurring in nature.

For the three and six months ended June 30, 2022, pro forma net loss includes $ 116.6 million and $ 158.7 million, respectively, of losses on extinguishment of debt, which are non-recurring in nature.

From the date of the Merger closing through June 30, 2023, $ 0.1 million of total revenues and $ 4.6 million of net income of the acquiree are included in the Company’s consolidated statements of operations.

For the nine months ended September 30, 2022, pro forma net loss includes $ 47.7 million of merger expenses (including $ 20.3 million of merger expenses borne by iStar), which are non-recurring in nature.

For the three and nine months ended September 30, 2022, pro forma net loss includes $ 13.2 million and $ 171.9 million, respectively, of losses on extinguishment of debt, which are non-recurring in nature.

From the date of the Merger closing through September 30, 2023, $ 0.1 million of total revenues and $ 6.0 million of net income of the acquiree are included in the Company’s consolidated statements of operations.

Goodwill — Goodwill is calculated as the excess of purchase consideration over the fair value of the net identifiable assets acquired (or liabilities assumed) and primarily relates to the acquisition of iStar’s workforce and future synergies expected to be realized from the Merger.

Goodwill is not subject to amortization but is tested annually for impairment or more frequently should potential triggering events be identified that may indicate potential impairment, such as when a company’s market capitalization is below its book value.

Any full or partial impairment of goodwill would flow through the Company’s income statement as a non-cash charge and would adversely affect the Company’s net income for the period in which the impairment is recognized.

During the three months ended September 30, 2023, the Company experienced a precipitous and sustained decline in the price per share of its common stock, which it identified as an indicator of goodwill impairment.

As a result, the Company performed an interim goodwill evaluation.

The Company determined that its current operations are carried out through a single reporting unit with a carrying value of approximately $ 2.4 billion.

The estimated fair value of the Company was determined to be the Company’s market capitalization adjusted for a control premium estimated by the Company representing an amount a market participant would pay to obtain a controlling interest in the Company.

The Company determined that its carrying value exceeded its estimated fair value and therefore recorded an impairment of goodwill.

The Company recorded a $ 145.4 million full impairment of the goodwill recognized as a result of the Merger, which is recorded as a non-cash charge in “Impairment of goodwill” in the Company’s consolidated statements of operations.

The Company does not expect goodwill to have any tax impact on its financial statements.

Safehold Inc.

Notes to Consolidated Financial Statements

New accounting pronouncements —The following paragraph describes the impact on the Company's consolidated financial statements from the adoption of Accounting Standards Updates ("ASUs") on January 1, 2023.

10 unchanged sentences

above for more information on how the Company determines its allowance for credit losses on net investment in sales-type leases, Ground Lease receivables and loans receivable, net – related party.

Safehold Inc.

Notes to Consolidated Financial Statements

The Company also adopted ASU 2022-02, Financial Instruments—Credit Losses:

11 unchanged sentences

In May 2023, the Company entered into a joint venture with a sovereign wealth fund, which is also an existing shareholder, focused on new acquisitions for certain Ground Lease investments.

The Company committed approximately $ 275 million for a 55 % controlling interest in the joint venture and the sovereign wealth fund committed approximately $ 225 million for a 45 % noncontrolling interest in the joint venture.

The Company committed approximately $ 275 million for a 55 % controlling interest in the joint venture and the sovereign wealth fund committed

Safehold Inc.

Notes to Consolidated Financial Statements

approximately $ 225 million for a 45 % noncontrolling interest in the joint venture.

Each party’s commitment is discretionary.

3 unchanged sentences

The Company will also receive a promote of 15 % over a 9 % internal rate of return, subject to a 1.275 x multiple on invested capital.

The investment period will be the earlier of 18 months and the full deployment of commitments.

During the six months ended June 30, 2023, the joint venture acquired two Ground Leases for an aggregate purchase price of $ 38.5 million, of which $ 14.5 million has been funded as of June 30, 2023.

The venture has first look rights on qualifying investments for 18 months .

During the nine months ended September 30, 2023, the joint venture acquired two Ground Leases for an aggregate purchase price of $ 38.5 million, of which $ 14.5 million has been funded as of September 30, 2023.

The Company’s net investment in sales-type leases were comprised of the following ($ in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

6 unchanged sentences

Net investment in sales-type leases (2)

(1) As of June 30, 2023, $ 6.5 million was attributable to noncontrolling interests.

(1) As of September 30, 2023, total discounted cash flows were approximately $ 3,153 million and the discounted unguaranteed estimated residual value was $ 30.1 million.

As of December 31, 2022, total discounted cash flows were approximately $ 3,077 million and the discounted unguaranteed estimated residual value was $ 29.1 million.

(2) As of September 30, 2023, $ 6.5 million was attributable to noncontrolling interests.

Safehold Inc.

Notes to Consolidated Financial Statements

The following table presents a rollforward of the Company’s net investment in sales-type leases and Ground Lease receivables for the six months ended June 30, 2023 and 2022 ($ in thousands):

The following table presents a rollforward of the Company’s net investment in sales-type leases and Ground Lease receivables for the nine months ended September 30, 2023 and 2022 ($ in thousands):

Net Investment in

Sales-type Leases

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Beginning balance

1 unchanged sentence

Origination/acquisition/fundings (1)

(Provision for) recovery of credit losses

Provision for credit losses

Ending balance (2)

1 unchanged sentence

Sales-type Leases

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Beginning balance

3 unchanged sentences

For newly originated or acquired Ground Leases, the Company’s estimate of residual value equals the fair value of the land at lease commencement.

(2) As of June 30, 2023 and December 31, 2022, all of the Company’s net investment in sales-type leases and Ground Lease receivables were current in their payment status.

As of June 30, 2023, the Company’s weighted average accrual rate for its net investment in sales-type leases and Ground Lease receivables was 5.1 % and 5.4 % , respectively.

As of June 30, 2023, the weighted average remaining life of the Company’s 34 Ground Lease receivables was 98.5 years.

(2) As of September 30, 2023 and December 31, 2022, all of the Company’s net investment in sales-type leases and Ground Lease receivables were current in their payment status.

As of September 30, 2023, the Company’s weighted average accrual rate for its net investment in sales-type leases and Ground Lease receivables was 5.1 % and 5.4 % , respectively.

As of September 30, 2023, the weighted average remaining life of the Company’s 35 Ground Lease receivables was 98.3 years.

Safehold Inc.

Notes to Consolidated Financial Statements

Allowance for Credit Losses —Changes in the Company’s allowance for credit losses on net investment in sales-type leases and Ground Lease receivables for the three and six months ended June 30, 2023 were as follows ($ in thousands):

Allowance for Credit Losses —Changes in the Company’s allowance for credit losses on net investment in sales-type leases and Ground Lease receivables for the three and nine months ended September 30, 2023 were as follows ($ in thousands):

Net investment in sales-type leases

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Allowance for credit losses at beginning of period

2 unchanged sentences

Ground Lease receivables

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Allowance for credit losses at beginning of period

2 unchanged sentences

Net investment in sales-type leases

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Allowance for credit losses at beginning of period

3 unchanged sentences

Ground Lease receivables

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Allowance for credit losses at beginning of period

2 unchanged sentences

Allowance for credit losses at end of period (2)

(1) During the three months ended June 30, 2023, the Company recorded a provision for credit losses on net investment in sales-type leases and Ground Lease receivables of $ 11 thousand and $ 23 thousand, respectively.

The provision for credit losses was due primarily to a declining macroeconomic forecast since March 31, 2023.

During the six months ended June 30, 2023, the Company recorded a recovery of credit losses on net investment in sales-type leases and Ground Lease receivables of $ 20 thousand and $ 2 thousand, respectively.

The recovery of credit losses on net investment in leases and Ground Lease receivables was due primarily to an improving macroeconomic forecast since December 31, 2022.

(1) During the three months ended September 30, 2023, the Company recorded a provision for credit losses on net investment in sales-type leases and Ground Lease receivables of $ 0.1 million and $ 0.1 million, respectively.

The provision for credit losses was due primarily to a declining macroeconomic forecast since June 30, 2023.

During the nine months ended September 30, 2023, the Company recorded a provision for credit losses on net investment in sales-type leases and Ground Lease receivables of $ 0.1 million and $ 0.1 million, respectively.

The provision for credit losses on net investment in leases and Ground Lease receivables was due primarily to a declining macroeconomic forecast since December 31, 2022.

(2) Allowance for credit losses on unfunded commitments is recorded in “Accounts payable and accrued expenses” on the Company’s consolidated balance sheets.

2 unchanged sentences

Notes to Consolidated Financial Statements

The Company’s amortized cost basis in Ground Lease receivables, presented by year of origination and by stabilized or development status, was as follows as of June 30, 2023 ($ in thousands):

The Company’s amortized cost basis in Ground Lease receivables, presented by year of origination and by stabilized or development status, was as follows as of September 30, 2023 ($ in thousands):

Year of Origination

3 unchanged sentences

Development properties

Future Minimum Lease Payments under Sales-type Leases —Future minimum lease payments to be collected under sales-type leases accounted for under ASC 842 - Leases, excluding lease payments that are not fixed and determinable, in effect as of June 30, 2023, are as follows by year ($ in thousands):

Future Minimum Lease Payments under Sales-type Leases —Future minimum lease payments to be collected under sales-type leases accounted for under ASC 842 - Leases, excluding lease payments that are not fixed and determinable, in effect as of September 30, 2023, are as follows by year ($ in thousands):

with Inflation

2023 (remaining six months)

2023 (remaining three months)

Total undiscounted cash flows

During the three and six months ended June 30, 2023 and 2022, the Company recognized interest income from sales-type leases in its consolidated statements of operations as follows ($ in thousands):

During the three and nine months ended September 30, 2023 and 2022, the Company recognized interest income from sales-type leases in its consolidated statements of operations as follows ($ in thousands):

Net Investment

in Sales-type

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Total interest income from sales-type leases

1 unchanged sentence

in Sales-type

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Total interest income from sales-type leases

1 unchanged sentence

in Sales-type

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Total interest income from sales-type leases

3 unchanged sentences

in Sales-type

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Total interest income from sales-type leases

Loans receivable, net – related party —On March 31, 2023, the Company, as lender and as administrative agent, and Star Holdings, as borrower, entered into a senior secured term loan facility in an aggregate principal amount of $ 115.0 million (the “Secured Term Loan Facility”) and an additional commitment amount of up to $ 25.0 million at Star Holding’s election (the “Incremental Term Loan Facility”, together with the Secured Term Loan Facility, the “Star Holdings Term Loan Facility”).

During the three and six months ended June 30, 2023, the Company recorded $ 2.4 million of interest income on the Star Holdings Term Loan Facility, which is recorded in “Interest income – related party” in the Company’s consolidated statements of operations.

As of June 30, 2023, the Star Holdings Term Loan Facility had a principal balance of $ 115.0 million and a carrying value of $ 112.2 million.

During the three and nine months ended September 30, 2023, the Company recorded $ 2.4 million and $ 4.8 million, respectively, of interest income on the Star Holdings Term Loan Facility, which is recorded in “Interest income – related party” in the Company’s consolidated statements of operations.

As of September 30, 2023, the Star Holdings Term Loan Facility had a principal balance of $ 115.0 million and a carrying value of $ 112.1 million.

The Star Holdings Term Loan Facility is a secured credit facility.

Borrowings under the Star Holdings Term Loan Facility bear interest at a fixed rate of 8.00 % per annum, which may increase to 10.00 % per annum if either (i) any loans remain outstanding under the Incremental Term Loan Facility or (ii) Star Holdings elects for interest due for any two fiscal quarters to be paid in kind.

The interest rate will increase to 12.00 % per annum if both (i) and (ii) in the previous sentence occur.

Borrowings under the Star Holdings Term Loan Facility bear interest at a fixed rate of 8.00 % per annum, which may increase to 10.00 % per annum if any loans remain outstanding under the Incremental Term Loan Facility (refer to Note 14).

The Star Holdings Term Loan Facility has a maturity date of March 31, 2027.

The Star Holdings Term Loan Facility is secured by a first-priority perfected security pledge of all the equity interests in Star Holding’s primary real estate subsidiary.

Starting the quarter that is six months after closing, within five business days after Star Holdings has delivered its unaudited quarterly financial statements, Star Holdings will apply any unrestricted cash on its balance sheet in excess of the aggregate of (i) an operating reserve; and (ii) $ 50 million, to prepay its Star Holdings Term Loan Facility or alternatively, with the consent of Company, Star Holdings may apply such cash to prepay its margin loan facility in lieu of any prepayment of the Star Holdings Term Loan Facility.

Starting the quarter that is nine months after closing, within five business days after Star Holdings has delivered its unaudited quarterly financial statements, Star Holdings will apply any unrestricted cash on its balance sheet in excess of the aggregate of (i) an operating reserve; and (ii) $ 50 million, to prepay its Star Holdings Term Loan Facility or alternatively, with the consent of the Company, Star Holdings may apply such cash to prepay its margin loan facility in lieu of any prepayment of the Star Holdings Term Loan Facility.

The operating reserve will be calculated quarterly and is equal to the aggregate of projected operating expenses (including payments to the Star Holdings local property consultants but excluding management fees and public company costs), projected land carry costs, projected capital expenditure and projected interest expense on the margin loan facility and Star Holdings Term Loan Facility for the next twelve months; less the projected operating revenues for the next twelve months consistent with the operating budget approved by the Company.

1 unchanged sentence

Furthermore, the Star Holdings Term Loan Facility contains customary events of default, including payment defaults, failure to perform covenants, cross-default and cross acceleration to other indebtedness, including the margin loan facility, impairment of security interests and change of control.

During the three and six months ended June 30, 2023, the Company recorded a provision for credit losses of $ 11 thousand and $ 2.3 million, respectively, on the Secured Term Loan Facility which was originated at the time of the Merger in conjunction with the Spin-Off.

During the three and nine months ended September 30, 2023, the Company recorded a provision for credit losses of $ 0.1 million and $ 2.4 million, respectively, on the Secured Term Loan Facility which was originated at the time of the Merger in conjunction with the Spin-Off.

Safehold Inc.

2 unchanged sentences

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

June 30, 2023

September 30, 2023

December 31, 2022

4 unchanged sentences

Real estate-related intangible assets, net

Total real estate, net and real estate-related intangible assets, net (1)

(1) During the three and six months ended June 30, 2023, the Company sold $ 1.5 million of residential homes that were acquired from iStar that were classified as available for sale.

Real estate available and held for sale (1)

Total real estate, net and real estate-related intangible assets, net and real estate available and held for sale

(1) During the three months ended September 30, 2023, the Company acquired $ 7.2 million of real property that is being marketed for sale and is recorded in real estate available and held for sale.

During the nine months ended September 30, 2023, the Company sold $ 1.5 million of real property that was acquired from iStar that was classified as available for sale upon acquisition.

The Company recognized $ 0.1 million of gains on the sales, which is recorded in “Other income” in the Company’s consolidated statements of operations.

Real estate-related intangible assets, net consist of the following items ($ in thousands):

As of June 30, 2023

As of September 30, 2023

Above-market lease assets, net (1)

11 unchanged sentences

Notes to Consolidated Financial Statements

The amortization of real estate-related intangible assets had the following impact on the Company’s consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 ($ in thousands):

The amortization of real estate-related intangible assets had the following impact on the Company’s consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 ($ in thousands):

Income Statement

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Intangible asset

6 unchanged sentences

Income Statement

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Intangible asset

6 unchanged sentences

The estimated amortization of real estate-related intangible assets for each of the five succeeding fiscal years is as follows ($ in thousands):

2023 (remaining six months)

(1) As of June 30, 2023, the weighted average amortization period for the Company’s real estate-related intangible assets was approximately 80.2 years.

2023 (remaining three months)

(1) As of September 30, 2023, the weighted average amortization period for the Company’s real estate-related intangible assets was approximately 80.3 years.

Real estate-related intangible liabilities, net consist of the following items ($ in thousands):

As of June 30, 2023

As of September 30, 2023

Below-market lease liabilities (1)

5 unchanged sentences

Notes to Consolidated Financial Statements

The amortization of real estate-related intangible liabilities had the following impact on the Company’s consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 ($ in thousands):

The amortization of real estate-related intangible liabilities had the following impact on the Company’s consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 ($ in thousands):

Income Statement

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Intangible liability

2 unchanged sentences

Income Statement

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Intangible liability

1 unchanged sentence

Operating lease income

Future Minimum Operating Lease Payments —Future minimum lease payments to be collected under non-cancelable operating leases, excluding lease payments that are not fixed and determinable, in effect as of June 30, 2023, are as follows by year ($ in thousands):

2023 (remaining six months)

(1) During the three months ended June 30, 2023 and 2022, the Company recognized $ 0.3 million and $ 0.2 million, respectively, of percentage rent in “Operating lease income” in the Company’s consolidated statements of operations.

During the six months ended June 30, 2023 and 2022, the Company recognized $ 4.0 million and $ 0.9 million, respectively, of percentage rent in “Operating lease income” in the Company’s consolidated statements of operations.

Future Minimum Operating Lease Payments —Future minimum lease payments to be collected under non-cancelable operating leases, excluding lease payments that are not fixed and determinable, in effect as of September 30, 2023, are as follows by year ($ in thousands):

2023 (remaining three months)

(1) During the three months ended September 30, 2023 and 2022, the Company recognized $ 0.2 million and $ 0.2 million, respectively, of percentage rent in “Operating lease income” in the Company’s consolidated statements of operations.

During the nine months ended September 30, 2023 and 2022, the Company recognized $ 4.2 million and $ 1.1 million, respectively, of percentage rent in “Operating lease income” in the Company’s consolidated statements of operations.

Safehold Inc.

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Equity investment

1 unchanged sentence

Ground Lease Plus Fund (1)

Loan Plus Fund (2)

(1) As of June 30, 2023, the Company has a basis difference of $ 21.0 million in the Ground Lease Plus Fund that will be amortized over a weighted average remaining term of 96.7 years using the effective interest method.

During the three and six months ended June 30, 2023, $ 0.8 million of the basis difference was amortized as an increase to earnings from equity method investments.

(2) As of June 30, 2023, the Company has a basis difference of $ 13.8 million in the Leasehold Loan Fund that will be amortized over a weighted average remaining term of 3.5 years using the effective interest method.

During the three and six months ended June 30, 2023, $ 1.0 million of the basis difference was amortized as an increase to earnings from equity method investments.

Leasehold Loan Fund (2)

(1) As of September 30, 2023, the Company has a basis difference of $ 20.2 million in the Ground Lease Plus Fund that will be amortized over a weighted average remaining term of 100.6 years using the effective interest method.

During the three and nine months ended September 30, 2023, $ 0.8 million and $ 1.6 million, respectively, of the basis difference was amortized as an increase to earnings from equity method investments.

(2) As of September 30, 2023, the Company has a basis difference of $ 12.3 million in the Leasehold Loan Fund that will be amortized over a weighted average remaining term of 3.3 years using the effective interest method.

During the three and nine months ended September 30, 2023, $ 1.0 million and $ 2.0 million, respectively, of the basis difference was amortized as an increase to earnings from equity method investments.

425 Park Avenue —In August 2019, the Company formed a venture with a sovereign wealth fund that is an existing shareholder of the Company to acquire the existing Ground Lease at 425 Park Avenue in New York City.

22 unchanged sentences

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

As of June 30, 2023, the Company has not funded any of the commitment.

As of September 30, 2023, the Company has not funded any of the commitment.

In June 2022, the Leasehold Loan Fund committed to provide a $ 105.0 million loan to the ground lessee of a Ground Lease originated by the Company.

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

As of June 30, 2023, $ 37.5 million of the commitment has been funded.

As of September 30, 2023, $ 39.5 million of the commitment has been funded.

Note 7—Deferred Expenses and Other Assets, Net and Accounts Payable, Accrued Expenses and Other Liabilities

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

June 30, 2023

September 30, 2023

December 31, 2022

11 unchanged sentences

Operating lease right-of-use asset is amortized on a straight-line basis over the term of the lease and is recorded in “Real estate expense” in the Company’s consolidated statements of operations.

During both the three months ended June 30, 2023 and 2022, the Company recognized $ 0.1 million in “Real estate expense” and $ 0.1 million in “Other income” from its operating lease right-of-use asset.

During the six months ended June 30, 2023 and 2022, the Company recognized $ 0.3 million and $ 0.2 million, respectively, in “Real estate expense” and $ 0.3 million and $ 0.2 million, respectively, in “Other income” from its operating lease right-of-use asset.

During both the three months ended September 30, 2023 and 2022, the Company recognized $ 0.1 million in “Real estate expense” and $ 0.1 million in “Other income” from its operating lease right-of-use asset.

During the nine months ended September 30, 2023 and 2022, the Company recognized $ 0.4 million and $ 0.3 million, respectively, in “Real estate expense” and $ 0.4 million and $ 0.3 million, respectively, in “Other income” from its operating lease right-of-use asset.

The related operating lease liability (see table below) equals the present value of the minimum rental payments due under the lease discounted at the Company’s incremental secured borrowing rate for a similar asset estimated to be 5.5 % .

The Company also has operating leases for office space that it assumed from iStar in connection with the Merger (refer to Note 9).

(2) Accumulated amortization of deferred finance costs was $ 8.3 million and $ 5.7 million as of June 30, 2023 and December 31, 2022, respectively.

(3) As of June 30, 2023, includes $ 7.2 million of management fees due from Star Holdings.

(2) Accumulated amortization of deferred finance costs was $ 9.7 million and $ 5.7 million as of September 30, 2023 and December 31, 2022, respectively.

(3) As of September 30, 2023, includes $ 6.9 million of management fees due from Star Holdings.

Through September 30, 2023, the Company has earned $ 13.2 million of management fees from Star Holdings and as of September 30, 2023, $ 36.8 million of the transaction price is attributable to performance obligations that remain unsatisfied.

Safehold Inc.

1 unchanged sentence

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

June 30, 2023

September 30, 2023

December 31, 2022

8 unchanged sentences

(2) Refer to Note 9.

(3) As of June 30, 2023, accrued expenses includes accrued compensation, legal, audit and property expenses.

(3) As of September 30, 2023, accrued expenses includes accrued compensation, legal, audit and property expenses.

As of December 31, 2022, accrued expenses includes accrued legal, audit and property expenses.

3 unchanged sentences

The Company’s outstanding debt obligations consist of the following ($ in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

14 unchanged sentences

Trust preferred securities

LIBOR plus 1.50

Adjusted SOFR

Total unsecured financing

3 unchanged sentences

(1) For mortgages, represents the weighted average stated interest rate over the term of the debt from funding through maturity based on the contractual payments owed excluding the effect of debt premium, discount and deferred financing costs.

As of June 30, 2023, the weighted average cash interest rate for the Company’s consolidated mortgage debt, based on interest rates in effect at that date, was 3.29 % .

As of September 30, 2023, the weighted average cash interest rate for the Company’s consolidated mortgage debt, based on interest rates in effect at that date, was 3.30 % .

The difference between the weighted average interest rate and the weighted average cash interest rate is recorded to interest payable within “Accounts payable, accrued expenses, and other liabilities” on the Company’s consolidated balance sheets.

As of June 30, 2023, the Company’s combined weighted average stated interest rate and combined weighted average cash interest rate of the Company’s consolidated mortgage debt, the mortgage debt of the Company’s unconsolidated ventures (applying the Company’s percentage interest in the ventures - refer to Note 6), unsecured senior notes and trust preferred securities were 3.84 % and 3.31 % , respectively.

As of September 30, 2023, the Company’s combined weighted average stated interest rate and combined weighted average cash interest rate of the Company’s consolidated mortgage debt, the mortgage debt of the Company’s unconsolidated ventures (applying the Company’s percentage interest in the ventures - refer to Note 6), unsecured senior notes and trust preferred securities were 3.85 % and 3.32 % , respectively.

In October 2023, the Company’s interest rates on the 2021 Unsecured Revolver and the 2023 Unsecured Revolver decreased to Adjusted SOFR plus 0.90 % as a result of a credit ratings upgrade.

(2) Represents the extended maturity date for all debt obligations.

(3) As of June 30, 2023, $ 2.0 billion of real estate, at cost, net investment in sales-type leases and Ground Lease receivables served as collateral for the Company’s debt obligations.

(4) Effective July 1, 2023, LIBOR was replaced with a rate equal to three-month Term SOFR plus 0.26161 % .

(3) As of September 30, 2023, $ 2.0 billion of real estate, at cost, net investment in sales-type leases and Ground Lease receivables served as collateral for the Company’s debt obligations.

Mortgages —Mortgages consist of asset specific non-recourse borrowings that are secured by the Company’s real estate and Ground Leases.

As of June 30, 2023, the Company’s mortgages are full term interest only, bear interest at a weighted average interest rate of 3.99 % and have maturities between April 2027 and November 2069.

As of September 30, 2023, the Company’s mortgages are full term interest only, bear interest at a weighted average interest rate of 3.99 % and have maturities between April 2027 and November 2069.

Unsecured Notes —In May 2021, Portfolio Holdings, then known as Safehold Operating Partnership LP, (as issuer) and the Company (as guarantor), issued $ 400.0 million aggregate principal amount of 2.80 % senior notes due June 2031 (the “ 2.80 % Notes”).

27 unchanged sentences

In January 2023, t he Company amended the 2021 Unsecured Revolver primarily to transition from LIBOR to Adjusted SOFR, as defined in the applicable agreement.

As of June 30, 2023, there was $ 302.0 million of undrawn capacity on the 2021 Unsecured Revolver.

As of September 30, 2023, there was $ 347.0 million of undrawn capacity on the 2021 Unsecured Revolver.

Safehold Inc.

1 unchanged sentence

2023 Unsecured Revolver — In January 2023, Portfolio Holdings, then known as Safehold Operating Partnership LP (as borrower) and the Company (as guarantor) closed on a new $ 500 million unsecured revolving credit facility (the “2023 Unsecured Revolver”).

The 2023 Unsecured Revolver has a current borrowing rate of Adjusted SOFR, as defined in the applicable agreement, plus 100 basis points, with a maturity of July 31, 2025.

As of June 30, 2023, there was $ 500.0 million of undrawn capacity on the 2023 Unsecured Revolver.

The 2023 Unsecured Revolver has a current borrowing rate of Adjusted SOFR, as defined in the applicable agreement, plus 90 basis points, subject to the Company’s credit ratings, with a maturity of July 31, 2025.

As of September 30, 2023, there was $ 500.0 million of undrawn capacity on the 2023 Unsecured Revolver.

Trust Preferred Securities —The Company assumed trust preferred securities from iStar in connection with Merger.

The trust preferred securities bear interest at LIBOR plus 1.50 % and mature in October 2035.

Effective July 1, 2023, LIBOR was replaced with a rate equal to three-month Term SOFR plus 0.26161 % .

The trust preferred securities bear interest at three-month Adjusted Term SOFR plus 1.50 % .

Debt Covenants —The Company is subject to financial covenants under the 2021 Unsecured Revolver and the 2023 Unsecured Revolver, including maintaining:

6 unchanged sentences

The Company’s mortgages contain no significant maintenance or ongoing financial covenants.

As of June 30, 2023, the Company was in compliance with all of its financial covenants.

Future Scheduled Maturities —As of June 30, 2023, future scheduled maturities of outstanding debt obligations, assuming all extensions that can be exercised at the Company’s option, are as follows ($ in thousands):

2023 (remaining six months)

As of September 30, 2023, the Company was in compliance with all of its financial covenants.

Future Scheduled Maturities —As of September 30, 2023, future scheduled maturities of outstanding debt obligations, assuming all extensions that can be exercised at the Company’s option, are as follows ($ in thousands):

2023 (remaining three months)

Total principal maturities

1 unchanged sentence

Total debt obligations, net

(1) As of June 30, 2023, the Company’s weighted average maturity for its secured mortgages was 28.0 years.

(1) As of September 30, 2023, the Company’s weighted average maturity for its secured mortgages was 27.8 years.

Safehold Inc.

1 unchanged sentence

Note 9—Commitments and Contingencies

Lease Commitments —Future minimum lease obligations under non-cancelable operating leases as of June 30, 2023 are as follows ($ in thousands):

2023 (remaining six months)

Lease Commitments —Future minimum lease obligations under non-cancelable operating leases as of September 30, 2023 are as follows ($ in thousands):

2023 (remaining three months)

Total undiscounted cash flows

4 unchanged sentences

For operating leases, lease liabilities were discounted at the Company’s weighted average incremental secured borrowing rate for similar collateral estimated to be 5.8 % and the weighted average remaining lease term is 2.9 years.

The Company assumed its operating leases from iStar in connection with the Merger and therefore did not directly make any payments under its operating leases for the three months ended March 31, 2023 or the three and six months ended June 30, 2022.

During the three months ended June 30, 2023, the Company made payments of $ 1.5 million related to its operating leases.

During the three and nine months ended September 30, 2023, the Company made payments of $ 1.4 million and $ 2.9 million, respectively, related to its operating leases.

(2) Other adjustments relates to a property that is majority-owned by a third party and is ground leased to the Company.

2 unchanged sentences

Unfunded Commitments —The Company has unfunded commitments to certain of its Ground Lease tenants related to leasehold improvement allowances that it expects to fund upon the completion of certain conditions.

As of June 30, 2023, the Company had $ 250.6 million of such commitments, excluding commitments to be funded by noncontrolling interests.

As of September 30, 2023, the Company had $ 190.6 million of such commitments, excluding commitments to be funded by noncontrolling interests.

The Company also has unfunded forward commitments related to agreements that it entered into for the acquisition of new Ground Leases or additions to existing Ground Leases if certain conditions are met (refer to Note 13).

These commitments may also include leasehold improvement allowances that will be funded to the Ground Lease tenants when certain conditions are met.

As of June 30, 2023, the Company had an aggregate $ 271.2 million of such commitments.

As of September 30, 2023, the Company had an aggregate $ 283.6 million of such commitments.

There can be no assurance that the conditions to closing for these transactions will be satisfied and that the Company will acquire the Ground Leases or fund the leasehold improvement allowances .

1 unchanged sentence

We refer to these arrangements as performance-based commitments.

As of June 30, 2023, the Company had $ 127.7 million of such commitments.

As of September 30, 2023, the Company had $ 118.9 million of such commitments.

Legal Proceedings —The Company evaluates developments in legal proceedings that could require a liability to be accrued and/or disclosed.

7 unchanged sentences

Although the Company’s Ground Leases are geographically diverse and the tenants operate in a variety of industries and property types, to the extent the Company has a significant concentration of interest income from sales-type leases or operating lease income from any tenant, the inability of that tenant to make its payment could have a material adverse effect on the Company.

The Company did not have a significant concentration of operating lease income from any tenant for the periods presented.

The Company did not have a significant concentration of interest income from sales-type leases or operating lease income from any tenant for the periods presented.

Derivative instruments and hedging activity —The Company’s use of derivative financial instruments has been associated with debt issuances and primarily limited to the utilization of interest rate swaps and interest rate caps to manage interest rate risk exposure.

10 unchanged sentences

Notes to Consolidated Financial Statements

The table below presents the Company’s derivatives as well as their classification on the consolidated balance sheets as of June 30, 2023 and December 31, 2022 ($ in thousands):

June 30, 2023

The table below presents the Company’s derivatives as well as their classification on the consolidated balance sheets as of September 30, 2023 and December 31, 2022 ($ in thousands):

September 30, 2023

December 31, 2022

7 unchanged sentences

The Company has agreements with each of its derivative counterparties that contain a provision whereby if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

As of June 30, 2023, the Company had one interest rate hedge that was in a liability position for which the Company has not posted any collateral.

The table below presents the effect of the Company’s derivative financial instruments in the consolidated statements of operations and the consolidated statements of comprehensive income (loss) for the three and months ended June 30, 2023 and 2022 ($ in thousands):

Amount of Gain

9 unchanged sentences

Derivatives Designated in Hedging Relationships

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Interest rate swaps

Interest expense

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Interest rate swaps

Interest expense

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Interest rate swaps

Interest expense

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Interest rate swaps

2 unchanged sentences

Common Stock —At the effective time of the Merger on March 31, 2023, each share of Old SAFE common stock issued and outstanding immediately prior to the effective time (other than any shares owned directly by iStar or any of the wholly-owned subsidiaries of iStar and in each case not held on behalf of third parties) was converted into the right to receive one share of newly issued common stock of the Company.

As of June 30, 2023, the Company has one class of common stock outstanding.

As of September 30, 2023, the Company has one class of common stock outstanding.

In April 2023, the Company filed with the U.S.

Securities and Exchange Commission (the “SEC”) an automatic shelf registration statement on Form S-3ASR.

In addition, the Company and Portfolio Holdings entered into an ATM

In addition, the Company and Portfolio Holdings entered into an ATM Equity Offering Sales Agreement (the “Primary Sales Agreement”) with the sales agents named therein pursuant to which

Safehold Inc.

Notes to Consolidated Financial Statements

Equity Offering Sales Agreement (the “Primary Sales Agreement”) with the sales agents named therein pursuant to which the Company may sell, from time to time, shares of its common stock, $ 0.01 par value per share (“Common Stock”), having an aggregate gross sales price of up to $ 300.0 million (the “Primary Shares”) through or to the sales agents.

the Company may sell, from time to time, shares of its common stock, $ 0.01 par value per share (“Common Stock”), having an aggregate gross sales price of up to $ 300.0 million (the “Primary Shares”) through or to the sales agents.

The Company may sell the Primary Shares in amounts and at times to be determined by the Company from time to time but has no obligation to sell any of the Primary Shares.

Actual sales, if any, will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, the trading price of the Common Stock, capital needs and determinations by the Company of the appropriate sources of its funding.

Through June 30, 2023, the Company has no t sold any shares of its common stock through the Primary Sales Agreement.

Through September 30, 2023, the Company has no t sold any shares of its common stock through the Primary Sales Agreement.

In August 2023, the Company sold 6,500,000 shares of its common stock in an underwritten public offering for gross proceeds of $ 139.1 million.

The Company’s Chief Executive Officer purchased $ 1.4 million in shares, or 65,420 shares, from the underwriters in the offering.

The underwriters received the same underwriting discount with respect to these shares as they did from other shares of common stock sold to the public in the underwritten offering.

Concurrently with the public offering, the Company sold $ 12.8 million in shares, or 599,983 shares, of its common stock to affiliates of MSD Partners in a private placement.

The Company incurred a total of approximately $ 6.6 million of offering costs in connection with these transactions which were recorded as a reduction to additional paid-in capital.

Equity Plans —Old SAFE adopted an equity incentive plan to provide equity incentive opportunities to members of the Former Manager’s management team and employees who performed services for Old SAFE, Old SAFE’s non-management directors, advisers, consultants and other personnel (the “2017 Equity Incentive Plan”).

2 unchanged sentences

Prior to the effective time of the Merger, Old SAFE awarded all shares of Old SAFE common stock remaining available for issuance under the 2017 Equity Incentive Plan to members of its Former Manager’s management team and employees who performed services for Old SAFE.

As of June 30, 2023, there were no shares available for issuance for future awards under Old SAFE’s 2017 Equity Incentive Plan.

As of September 30, 2023, there were no shares available for issuance for future awards under Old SAFE’s 2017 Equity Incentive Plan.

iStar’s amended and restated 2009 Long-Term Incentive Program (the “LTIP”) was approved by stockholders in 2021 and remained in effect after the closing of the Merger.

5 unchanged sentences

On June 20, 2023, the LTIP was further amended to, among other things, increase the aggregate number of shares of common stock available for issuance.

As of June 30, 2023, an aggregate of 435,205 shares of the Company’s common stock remain available for awards under the LTIP.

As of September 30, 2023, an aggregate of 435,612 shares of the Company’s common stock remain available for awards under the LTIP.

During the third quarter of 2018, Old SAFE adopted, and in the second quarter of 2019, its stockholders approved, the Caret Performance Incentive Plan (the “Original Caret Performance Incentive Plan”).

1 unchanged sentence

Grants under the Original Caret Performance Incentive Plan were subject to vesting based on time-based service conditions and hurdles relating to Old SAFE’s common stock price, all of which were satisfied as of December 31, 2022, except with respect to approximately 850 Caret units that are scheduled to vest on December 31, 2023.

In connection with the Merger, certain of Old SAFE’s former executive officers, entered into re-vesting agreements pursuant to which the executives agreed to subject 25 % of their previously vested Caret units to additional vesting conditions which will be satisfied on the second anniversary of the Merger, subject to the applicable executive’s continued employment through such date.

In the event of a termination of the executive’s employment by the Company without “cause”, or due to the executive’s death, disability or retirement, the unvested Caret units shall continue to vest as and when the vesting conditions described above are satisfied.

In connection with the Merger, certain of Old SAFE’s former executive officers, entered into re-vesting agreements pursuant to which the

Safehold Inc.

Notes to Consolidated Financial Statements

executives agreed to subject 25 % of their previously vested Caret units to additional vesting conditions which will be satisfied on the second anniversary of the Merger, subject to the applicable executive’s continued employment through such date.

In connection with the consummation of the Merger and the Caret Restructuring, Old SAFE, Caret Ventures and CARET Management Holdings LLC assigned each Award Agreement (as defined in the Original Caret Performance Incentive Plan) relating to outstanding Caret unit awards to Portfolio Holdings pursuant to the Omnibus Assignment, Assumption and Amendment Agreement, dated as of March 31, 2023 (the “Caret Assignment Agreement”).

2 unchanged sentences

The new Caret unit awards were granted immediately following the Merger and the effectiveness of the Amended Caret Performance Incentive Plan, and cliff vest on the fourth anniversary of their grant date if the Company’s common stock has traded at an average per share price of $ 60.00 or more for at least 30 consecutive trading days during that four-year period.

As of June 30, 2023, and after giving effect to the Caret Restructuring and the post-Merger Caret unit awards, Amended Caret Performance Incentive Plan participants held 1,499,432 Caret units, representing 15.41 % of the then-outstanding Caret units and 12.50 % of the then-authorized Caret units.

During the six months ended June 30, 2023 and 2022, the Company recognized $ 0.5 million and $ 0.3 million in expense from Caret units, which is recorded in “General and administrative” in the Company’s consolidated statements of operations and “Noncontrolling interests” on the Company’s consolidated balance sheets.

As of September 30, 2023, and after giving effect to the Caret Restructuring and the post-Merger Caret unit awards, Amended Caret Performance Incentive Plan participants held 1,499,382 Caret units, representing 15.41 % of the then-outstanding Caret units and 12.50 % of the then-authorized Caret units.

During the nine months ended September 30, 2023 and 2022, the Company recognized $ 1.0 million and $ 0.4 million in expense from Caret units, which is recorded in “General and administrative” in the Company’s consolidated statements of operations and “Noncontrolling interests” on the Company’s consolidated balance sheets.

Noncontrolling Interests —Noncontrolling interests includes unrelated third-party equity interests in ventures that are consolidated in the Company’s consolidated financial statements and Caret units that have been sold to third-parties (refer to Note 1) or have been granted to employees of the Company’s Former Manager.

4 unchanged sentences

Because taxable income differs from cash flow from operations due to non-cash revenues and expenses (such as depreciation and other items), 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.

During the six months ended June 30, 2023 and 2022, the Company declared cash dividends on its common stock of $ 22.6 million, or $ 0.354 per share, and $ 21.5 million, or $ 0.347 per share, respectively.

During the nine months ended September 30, 2023 and 2022, the Company declared cash dividends on its common stock of $ 35.3 million, or $ 0.531 per share, and $ 32.5 million, or $ 0.524 per share, respectively.

Safehold Inc.

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

Net (income) attributable to noncontrolling interests

Net income attributable to Safehold Inc.

Net income (loss) attributable to Safehold Inc.

common shareholders for basic and diluted earnings per common share

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Earnings attributable to common shares:

Numerator for basic and diluted earnings per share:

Net income attributable to Safehold Inc.

Net income (loss) attributable to Safehold Inc.

common shareholders - basic

Net income attributable to Safehold Inc.

Net income (loss) attributable to Safehold Inc.

common shareholders - diluted

3 unchanged sentences

Basic and diluted earnings per common share:

Net income attributable to Safehold Inc.

Net income (loss) attributable to Safehold Inc.

common shareholders - basic

Net income attributable to Safehold Inc.

Net income (loss) attributable to Safehold Inc.

common shareholders - diluted

(1) For the three and six months ended June 30, 2023, the effect of 452 shares and 456 shares related to restricted stock awards, respectively, were antidilutive.

For the three and six months ended June 30, 2022, weighted average shares outstanding and earnings per share have been recast in accordance with ASC 805 to reflect the exchange ratio used in the reverse acquisition.

(1) For the three and nine months ended September 30, 2023, the effect of certain of the Company’s restricted stock awards were antidilutive due to the Company having a net loss for the period.

For the three and nine months ended September 30, 2022, weighted average shares outstanding and earnings per share have been recast in accordance with ASC 805 to reflect the exchange ratio used in the reverse acquisition.

Note 13—Related Party Transactions

21 unchanged sentences

3 x prior year’s management fee

The Company did no t incur management fees to the Former Manager for the three months ended June 30, 2023.

During the three months ended June 30, 2022, the Company recorded $ 5.2 million in management fees to the Former Manager.

During the six months ended June 30, 2023 and 2022, the Company recorded $ 5.2 million and $ 9.7 million, respectively, in management fees to the Former Manager.

During the three months ended September 30, 2022, the Company recorded $ 5.3 million in management fees to the Former Manager.

During the nine months ended September 30, 2023 and 2022, the Company recorded $ 5.2 million and $ 15.0 million, respectively, in management fees to the Former Manager.

These management fees are recorded in “General and administrative” in the Company’s consolidated statements of operations.

1 unchanged sentence

The Company paid, or reimbursed iStar for, certain of the Company’s operating expenses as well as the costs of personnel performing certain legal, accounting, finance, due diligence tasks and other services, in each case except those specifically required to be borne or elected not to be charged by the iStar under the management agreement.

The Company was no t allocated any expenses from iStar for the three months ended June 30, 2023.

During the three months ended June 30, 2022, the Company was allocated $ 3.1 million in expenses from iStar.

During the six months ended June 30, 2023 and 2022, the Company was allocated $ 3.1 million and $ 6.2 million, respectively, in expenses from iStar.

During the three months ended September 30, 2022, the Company was allocated $ 3.1 million in expenses from iStar.

During the nine months ended September 30, 2023 and 2022, the Company was allocated $ 3.1 million and $ 9.4 million, respectively, in expenses from iStar.

These expenses are recorded in “General and administrative” in the Company’s consolidated statements of operations.

Acquisitions and Commitments

iStar participated in certain of the Company’s investment transactions, as the Company’s tenant or either as a seller of land or by providing financing to the Company’s Ground Lease tenants.

Prior to the Merger, iStar participated in certain of the Company’s investment transactions, as the Company’s tenant or either as a seller of land or by providing financing to the Company’s Ground Lease tenants.

The following is a list of transactions in which the Company and iStar or other persons deemed to be related parties have participated for the periods presented.

These transactions were approved by the Company’s independent directors in accordance with the Company’s policy with respect to related party transactions.

Safehold Inc.

Notes to Consolidated Financial Statements

These transactions were approved by the Company’s independent directors in accordance with the Company’s policy with respect to related party transactions.

In July 2022, the Company, pursuant to an agreement with iStar and upon certain construction related conditions being met, acquired an existing Ground Lease from iStar for $ 36.4 million inclusive of closing costs (refer to Note 4).

20 unchanged sentences

In May 2023, certain milestones were met by the tenant as it exited the pre-development stage and the tenant began accessing the leasehold improvement allowance.

As of June 30, 2023, the Company funded $6.2 million of the leasehold improvement allowance.

As of September 30, 2023, the Company funded $ 12.7 million of the leasehold improvement allowance.

In June 2021, the Company acquired from iStar a purchase option agreement for $ 1.2 million, which amount was equal to the deposit previously made by iStar under such option agreement plus assumption of iStar’s out of pocket costs and expenses in connection with entering into such option agreement.

Under the option agreement, the Company had the

Safehold Inc.

Notes to Consolidated Financial Statements

Under the option agreement, the Company has the right to acquire for $ 215.0 million a property that is under a separate option for the benefit of a third party, whereby such third party has the right to enter into a Ground Lease and develop approximately 1.1 million square feet of office space.

right to acquire for $ 215.0 million a property that is under a separate option for the benefit of a third party, whereby such third party has the right to enter into a Ground Lease and develop approximately 1.1 million square feet of office space.

In September 2023, the Company terminated its acquisition right under the option agreement for $ 0.3 million and recognized a loss of $ 1.9 million, inclusive of the derecognition of previously-capitalized deal structuring costs.

The loss is recorded in “Other expense” in the Company’s consolidated statements of operations.

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

25 unchanged sentences

In the event of a termination by the Company based on a reduction in the amount of Star Holdings’ consolidated assets below designated thresholds, Star Holdings will pay SpinCo Manager a termination fee of $ 30.0 million if the termination occurs in the first year, $ 15.0 million if the termination occurs in the second year and $ 5.0 million if the termination occurs in the third year, in each case, plus the balance of any unpaid portion of the annual management fee for the applicable year.

During the three and six months ended June 30, 2023, the Company recorded $ 7.2 million in management fees from Star Holdings.

During the three and nine months ended September 30, 2023, the Company recorded $ 6.0 million and $ 13.2 million, respectively, in management fees from Star Holdings.

The management fees are included in “Other income” in the Company’s consolidated statements of operations.

The Company and Star Holdings also entered into a governance agreement that places certain restrictions on the transfer and voting of the shares of the Company owned by Star Holdings, and a registration rights agreement under which the Company agreed to register such shares for resale in accordance with applicable securities laws.

As of June 30, 2023, Star Holdings owned approximately 21.1 % of the Company’s common stock outstanding through a wholly-owned subsidiary.

As of September 30, 2023, Star Holdings owned approximately 19.0 % of the Company’s common stock outstanding through a wholly-owned subsidiary.

In April 2023, the Company, Portfolio Holdings and Star Investment Holdings SPV LLC (“Star Investment Holdings”), a subsidiary of Star Holdings, entered into an ATM Equity Offering Sales Agreement (the “Selling Stockholder Sales Agreement”) with the sales agents named therein pursuant to which Star Investment Holdings may sell, from time to time, subject to receiving the Company’s consent, up to 1,000,000 shares of the Company’s common stock (the “Selling Stockholder Shares”) through or to the sales agents.

1 unchanged sentence

Actual sales, if any, will depend on a variety of factors to be determined by Star Investment Holdings from time to time, including, among other things, market conditions, the trading price of the Company’s common stock, capital needs and determinations by Star Investment Holdings of the appropriate sources of its funding.

Safehold Inc.

Notes to Consolidated Financial Statements

Note 14—Subsequent Events

On October 4, 2023, the Company entered into an amendment to the Star Holdings Term Loan Facility (refer to Note 4) with Star Holdings.

The amendment provides that:

(i) Star Holdings may access the existing $ 25.0 million additional commitment provided under the agreement to replenish funds expended by Star Holdings on or after October 4, 2023 to make voluntary prepayments under its margin loan facility;

and (ii) Star Holdings will no longer have the right to pay interest in kind under the Star Holdings Term Loan Facility.

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