What changed in this filing

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Item 1. Business

2024-02-13 compared with 2023-02-22 · 220 added, 167 removed, 21 unchanged (95% of the section changed)

Explanatory Note for Purposes of the "Safe Harbor Provisions"

of Section 21E of the Securities Exchange Act of 1934, as amended

within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Forward-looking statements are included with respect to, among other things, iStar Inc.’s (the “Company’s”) current business plan, including the planned Merger with Safehold Inc.

(“SAFE”) and the Spin-Off and related transactions (refer to “Business – Overview” and Note 1 to the consolidated financial statements), business strategy, portfolio management, prospects and liquidity.

These forward-looking statements generally are identified by the words "believe,"

"project,"

"expect,"

"anticipate,"

"estimate,"

"intend,"

"strategy,"

"plan,"

"may,"

"should,"

"will,"

"would,"

"will be,"

"will continue,"

"will likely result,"

and similar expressions.

Explanatory Note for Purposes of the "Safe Harbor Provisions" of Section 21E of the Securities Exchange Act of 1934, as amended

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Forward-looking statements are included with respect to, among other things, our current business plan, business strategy, portfolio management, prospects and liquidity.

These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions.

Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results or outcomes to differ materially from those contained in the forward-looking statements.

Important factors that iStar Inc.

believes might cause such differences are discussed in the section entitled, "Risk Factors"

in Part I, Item 1A of this Form 10-K or otherwise accompany the forward-looking statements contained in this Form 10-K.

Important factors that we believe might cause such differences are discussed in the section entitled, "Risk Factors" in Part I, Item 1A of this Form 10-K or otherwise accompany the forward-looking statements contained in this Form 10-K.

We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-K.

(references to the "Company,"

"we,"

"us"

or "our"

refer to iStar Inc.) finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform.

The Company also manages entities focused on ground lease ("Ground Lease") investments.

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

The Company’s primary reportable business segments are net lease (refer to note 3 to the consolidated financial statements), real estate finance, operating properties and land and development.

Merger with Safehold Inc.

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

(“SAFE”) pursuant to which SAFE will merge with and into the Company (the "

Merger "), with the Company surviving the Merger and changing its name to Safehold Inc.

(“ New SAFE ”).

New SAFE's shares of common stock will trade on the New York Stock Exchange under the symbol “SAFE.” We currently expect that the Merger will close in the first half of 2023.

In the Merger and related transactions, each outstanding share of common stock of SAFE will be converted into one share of common stock of New Safe.

Each outstanding share of common stock of the Company will undergo a reverse split and will be converted into a fraction of a share of New Safe common stock based on the number of shares of Safe common stock held by the Company at the time of the reverse split, after giving effect to certain adjustments.

Each outstanding share of preferred stock of the Company will be converted into a cash amount equal to the liquidation preference of the share plus accrued and unpaid dividends to and including the closing date of the Merger.

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 (“ Star Holdings ”) by distributing to the Company’s stockholders, on a pro rata basis, the issued and outstanding equity interests of Star Holdings (the “ Spin-Off ”).

If the Merger, Spin-Off and related transactions are completed, the Company's business thereafter will be focused on its Ground Lease and Ground Lease-adjacent businesses.

Completion of the Merger, Spin-Off and related transactions is subject to a number of conditions, some of which are outside of our control, including, without limitation, approval of the stockholders of each of the Company and SAFE, and there can be no assurance that they will close within our currently anticipated time frame or at all.

See note 1 to the consolidated financial statements and "Risk Factors – Risks Related to the Merger and Related Transactions"

for more information.

In addition, the Company has filed a joint proxy

statement/prospectus with the Securities and Exchange Commission with respect to the special meeting of the Company's stockholders to consider and approve the Merger.

The Company’s primary sources of revenues and earnings in 2022 were rent and reimbursements that tenants pay to lease the Company’s properties, interest that borrowers pay on loans, land development revenue from condo, lot and parcel sales, income from our operating properties, proceeds from asset sales and income from management fees and equity investments.

Our Portfolio.

As of December 31, 2022, based on our book value, our total investment portfolio has the following property/collateral type characteristics ($ in thousands):

Property/Collateral

Ground Leases

Land and Development

Entertainment / Leisure

Other Property Types

Percentage of Total

In March 2022, we, through certain subsidiaries of ours and entities managed by us, sold our portfolio of net lease assets for an aggregate gross sales price of $3.07 billion (the “Net Lease Sale”).

Refer also to Note 3 to the consolidated financial statements.

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

It included assets wholly-owned by us and assets owned by two joint ventures managed by us and in which we owned 51.9% interests.

At the time of the sale, the portfolio was encumbered by an aggregate of $702.0 million of mortgage indebtedness, including indebtedness of equity method investments, which was repaid with proceeds from the sale.

After repayment of the mortgage indebtedness and prepayment penalties, repayment of our Senior Term Loan (refer to Note 10 to the consolidated financial statements), payments to terminate derivative contracts, payments to joint venture partners, and payments of promotes, transaction expenses and amounts due under employee incentive plans, we retained net cash proceeds of $1.2 billion from the transaction.

Two net lease properties were not included in the sale but were sold to other third parties in the first quarter 2022.

Our net lease assets associated with our Ground Lease businesses were not included in the sale.

Prior to the Net Lease Sale, our net lease business created stable cash flows through long-term net leases primarily to single tenants on our properties.

We targeted mission-critical facilities leased on a long-term basis to tenants, offering structured solutions that combined our capabilities in underwriting, lease structuring, asset management and build-to-suit construction.

Leases typically provide for expenses at the facility to be paid by the tenant on a triple net lease basis.

Under a typical net lease agreement, the tenant agrees to pay a base monthly operating lease payment and most or all of the facility operating expenses (including taxes, utilities, maintenance and insurance).

After the Net Lease Sale, the net lease segment includes our Ground Lease investments made primarily through Safehold Inc.

("SAFE"), a publicly traded REIT focused exclusively on Ground Leases that we launched in 2017 and manage pursuant to a management agreement, and our Ground Lease adjacent businesses.

As of December 31, 2022, we owned approximately 54.3% of SAFE’s outstanding common stock.

Real Estate Finance :

The real estate finance portfolio is comprised of leasehold loans (including leasehold loans to SAFE’s tenants) and senior and subordinated loans to business entities and may be either secured or unsecured.

Company’s loan portfolio includes whole loans and loan participations.

The Company’s real estate loans may be either fixed-rate or variable-rate and are structured to meet the specific financing needs of borrowers.

Operating Properties :

The operating properties portfolio is comprised of commercial and residential properties, which represent a pool of assets across a range of geographies and property types.

The Company generally seeks to reposition or redevelop its transitional properties with the objective of maximizing their value through the infusion of capital and/or concentrated asset management efforts.

The commercial properties within this portfolio include hotel, multifamily, entertainment/leisure, retail and other property types.

The residential properties within this portfolio are comprised of single-family homes that the Company intends to sell through retail channels.

Land & Development :

The land and development portfolio is primarily comprised of land entitled for master planned communities and waterfront and urban infill land parcels located throughout the United States.

Master planned communities represent large-scale residential projects that the Company will entitle, plan and/or develop and may sell through retail channels to homebuilders or in bulk ("MPCs").

The communities also typically have a smaller portion of their land reserved for future commercial development.

Waterfront parcels are generally entitled for residential projects and urban infill parcels are generally entitled for mixed-use projects.

The Company may develop these properties itself, or in partnership with commercial real estate developers, or may sell the properties.

Merger Transaction

On August 10, 2022, Safehold Inc.

(“Old SAFE”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with iStar Inc.

(“iStar”), and on March 31, 2023, in accordance with the terms of the Merger Agreement, Old SAFE merged with and into iStar, at which time Old SAFE ceased to exist, and iStar continued as the surviving corporation and changed its name to “Safehold Inc.” (the “Merger”).

For accounting purposes, the Merger is treated as a “reverse acquisition” in which iStar is considered the legal acquirer and Old SAFE is considered the accounting acquirer.

As a result, the historical financial statements of Old SAFE became the historical financial statements of Safehold Inc.

Unless the context otherwise requires, references to “iStar” refer to iStar prior to the Merger, and references to “we,” “our” and “the Company” refer to the business and operations of Old SAFE and its consolidated subsidiaries prior to the Merger and to Safehold Inc.

(formerly known as iStar Inc.) and its consolidated subsidiaries following the consummation of the Merger.

Periods presented prior to the Merger date of March 31, 2023 reflect the operations of Old SAFE and periods presented as of December 31, 2023 represent the financial statements of the Company.

Additionally, in connection with the Merger, Safehold Operating Partnership LP converted from a Delaware limited partnership into a Delaware limited liability company and changed its name to “Safehold GL Holdings LLC” (“Portfolio Holdings”), with the Company as its managing member.

The Company conducts all of its business and owns all of its properties through Portfolio Holdings.

In addition, holders of Caret units in Old SAFE’s subsidiary, Caret Ventures LLC (“Caret Ventures”), contributed their interests in Caret Ventures to Portfolio Holdings in return for Caret units issued by Portfolio Holdings.

Following the restructuring, 100% of the equity interests in Caret Ventures is held by Portfolio Holdings, and Portfolio Holdings is owned by the Company, management of the Company, employees and former employees of the Company, affiliates of MSD Partners, L.P.

(“MSD Partners”) and other outside investors.

Immediately before the closing of the Merger, iStar separated its remaining legacy non-ground lease assets and businesses, approximately $50.0 million of cash, exclusive of working capital reserves and restricted cash, and approximately 13.5 million shares of Old SAFE common stock into Star Holdings, a Maryland statutory trust (“Star Holdings”), by distributing to iStar’s stockholders, on a pro rata basis, the issued and outstanding equity interests of Star Holdings (the “Spin-Off”).

Following the Merger, the Company serves as external manager to Star Holdings.

Other Merger related transactions

On August 10, 2022, iStar entered into an agreement (the “MSD Stock Purchase Agreement”) with MSD Partners pursuant to which MSD Partners agreed to purchase 5,405,406 shares of Old SAFE’s common stock then owned by iStar (the “MSD Stock Purchase”) for an aggregate purchase price of approximately $200 million, or $37.00 per share, payable in cash.

MSD Partners’ rights and obligations under the MSD Stock Purchase Agreement were subsequently assigned to certain of its affiliates.

The MSD Stock Purchase closed on March 31, 2023, shortly before the closing of the Merger.

MSD Partners has the right to designate an observer to the board of directors of the Company, a top-up right on future equity issuances (subject to certain exceptions) and registration rights.

MSD Partners is subject to a customary standstill and certain restrictions on sales of its shares of the Company’s common stock.

On August 10, 2022, MSD Partners also agreed to purchase 100,000 Caret units (refer to Note 12 to the consolidated financial statements) from the Company for an aggregate purchase price of $20.0 million (the “MSD Caret Purchase”).

MSD Partners received a credit against their purchase price for Caret units equal to the amount they would have received had they held Caret units at the time of a December 2022 distribution to other Caret unit holders, which was equal to $0.6 million.

MSD Partners’ rights and obligations under the purchase agreement were subsequently assigned to certain of its affiliates.

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 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.

In connection with the Spin-Off, Safehold Management Services Inc.

(“SpinCo Manager”), a Delaware corporation and a subsidiary of the Company, entered into a management agreement with Star Holdings effective as of March 31, 2023, pursuant to which SpinCo Manager will continue to operate and pursue the orderly monetization of Star Holding’s assets.

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 and $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 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.

We are a publicly-traded company that operates our business through one reportable segment by acquiring, managing and capitalizing ground leases.

We believe that our business has characteristics comparable to a high-grade, fixed income investment business, but with certain unique advantages.

Relative to alternative fixed income investments generally, our ground leases typically benefit from built-in growth derived from contractual base rent increases (either at a specified percentage or consumer price index ("CPI") based, or both), and the opportunity to realize value from residual rights to take ownership of the buildings and other improvements on our land at no additional cost to us.

Our CPI lookbacks are generally capped between 3.0% - 3.5% and generally start between years 11 and 21 of the lease term.

In the event cumulative inflation growth for the lookback period exceeds the cap, these rent adjustments may not keep up fully with changes in inflation.

We believe that these features offer us the opportunity to realize superior risk-adjusted total returns when compared to certain alternative highly-rated investments.

Ground leases generally represent the ownership of land underlying commercial real estate projects that is net leased on a long-term basis (base terms are typically 30 to 99 years, often with tenant renewal options) by the fee owner of the land (landlord) to the owners/operators of the real estate projects built thereon ("Ground Lease"), or what we refer to as a Safehold TM .

The property is generally leased on a triple net basis with the tenant generally responsible for taxes, maintenance and insurance as well as all operating costs and capital expenditures.

Ground Leases typically provide that at the end of the lease term or upon tenant default and the termination of the Ground Lease upon such default, the land, building and all improvements revert to the landlord.

We have become the industry leader in Ground Leases by

demonstrating the value of the product to real estate investors, owners, operators and developers and expanding their use throughout major metropolitan areas.

We have a portfolio of properties diversified by property type and region.

Our portfolio is comprised of Ground Leases and one master lease (relating to five hotel assets that we refer to as our “Park Hotels Portfolio”) that provide for contractual periodic rent escalations and in some cases percentage rent participations in gross revenues generated at the relevant properties.

We have chosen to focus on Ground Leases because we believe they meet an important need in the real estate capital markets for our customers.

We also believe Ground Leases offer a unique combination of safety, income growth and the potential for capital appreciation for investors for the following reasons:

High Quality Long-Term Cash Flow :

We believe that a Ground Lease represents a safe position in a property’s capital structure.

The combined value of the land and buildings and improvements thereon subject to a Ground Lease (the "Combined Property Value") typically significantly exceeds the Ground Lease landlord’s investment in the Ground Lease;

therefore, even if the landlord takes over the property following a tenant default or upon expiration of the Ground Lease, the landlord is reasonably likely to recover substantially all of its Ground Lease investment, and possibly amounts in excess of its investment, depending upon prevailing market conditions.

Additionally, the typical structure of a Ground Lease provides the landlord with a residual right to regain possession of its land and take ownership of the buildings and improvements thereon upon a tenant default.

The landlord’s residual right provides a strong incentive for a Ground Lease tenant or its leasehold lender to make the required Ground Lease rent payments.

Income Growth :

Ground Leases typically provide growing income streams through contractual base rent escalators that may compound over the duration of the lease.

These rent escalators may be based on fixed increases, CPI or a combination thereof, and may also include a participation in the gross revenues of the property.

We believe that this growth in the lease rate over time can mitigate the effects of inflation and capture anticipated increases in land values over time, as well as serving as a basis for growing our dividend.

Opportunity for Capital Appreciation:

The opportunity for capital appreciation comes in two forms.

First, as the ground rent grows over time, the value of the Ground Lease should grow under market conditions in which capitalization rates remain flat.

Second, our residual right to regain possession of the land underlying the Ground Lease and take title to the buildings and other improvements thereon at lease expiration or earlier termination of the lease for no additional consideration creates additional potential value to our shareholders.

We generally target Ground Lease investments in which the initial cost of the Ground Lease represents 30% to 45% of the Combined Property Value as if the Ground Lease did not exist.

If the initial cost of a Ground Lease is equal to 35% of the Combined Property Value, the remaining 65% of the Combined Property Value represents potential excess value over the amount of our investment that would be turned over to us upon the reversion of the property, assuming no intervening change in the Combined Property Value.

In our view, there is a strong correlation between inflation and commercial real estate values over time, which supports our belief that the value of our owned residual portfolio should increase over time as inflation increases, although our ability to recognize value in certain cases may be limited by the rights of our tenants under some of our Ground Leases, including tenant rights to purchase our land in certain circumstances and the right of one tenant to demolish improvements prior to the expiration of the lease.

See "Risk Factors" for a discussion of these tenant rights.

Owned Residual Portfolio :

We believe that the residual right is a unique feature distinguishing Ground Leases from other fixed income investments and property types.

We refer to the value of the land and improvements subject to a Ground Lease in excess of our investment basis as unrealized capital appreciation (“UCA”).

We track the UCA in our owned residual portfolio over our basis because we believe it provides relevant information with regard to the three key investment characteristics of our Ground Leases:

(1) the safety of our position in a tenant’s capital structure;

(2) the quality of the long-term cash flows generated by our portfolio rent that increases over time;

and (3) increases and decreases in the Combined Property Value of the portfolio that reverts to us pursuant to such residual rights.

We believe that, similar to a loan to value metric, tracking changes in the value of our owned residual portfolio is useful as an indicator of the quality of our cash flows and the safety of our position in a tenant’s capital structure, which, in turn, supports our objective to pay and grow dividends over time.

Observing changes in our owned residual portfolio value also helps us monitor changes in the value of the real estate portfolio that reverts to us under the terms of the leases, either at the expiration or earlier termination of the lease.

The value may be realized by us at the relevant time by entering into a new lease reflecting then current market terms and values, selling the building, selling the building with the land, or operating the building directly and leasing the spaces to tenants at prevailing market rates.

We have engaged an independent valuation firm to prepare:

(a) initial reports of the Combined Property Value associated with our Ground Lease portfolio;

and (b) periodic updates of such reports, which we use, in part, to determine the current estimated value of our owned residual portfolio.

We calculate this estimated value by subtracting our original aggregate cost basis in the Ground Leases from our estimated aggregate Combined Property Value based on estimates by the valuation firm and by management.

The table below shows the current estimated UCA as of December 31, 2023 and 2022 ($ in millions):

December 31, 2023

December 31, 2022

Combined Property Value (2)

Ground Lease Cost (2)

Unrealized Capital Appreciation in Our Owned Residual Portfolio

(1) Please review our Current Report on Form 8-K filed on February 12, 2024 for a discussion of the valuation methodology used and important limitations and qualifications of the calculation of UCA.

See "Risk Factors- Certain tenant rights under our Ground Leases may limit the value and the UCA we are able to realize upon lease expiration, sale of our land and Ground Leases or other events " for a discussion of certain tenant rights and other terms of the leases that may limit our ability to realize value from the UCA.

(2) Combined Property Value as of December 31, 2023 includes one investment in our Ground Lease Plus Fund (which we acquired from the Ground Lease Plus Fund in January 2024 - refer to Note 7 to the consolidated financial statements), and for both periods includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $1,357.4 million and $1,653.2 million related to transactions with remaining unfunded commitments as of December 31, 2023 and 2022, respectively.

Combined Property Value excludes the term loan to Star Holdings, the assets in the Leasehold Loan Fund (refer to Note 7 to the consolidated financial statements), the remainder of the Ground Lease Plus Fund assets and amounts attributable to noncontrolling interests.

Ground Lease Cost as of December 31, 2023 includes one investment in our Ground Lease Plus Fund (which we acquired from the Ground Lease Plus Fund in January 2024), and for both periods includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $135.6 million (including amounts paid to the Ground Lease Plus Fund in January 2024 to acquire the investment) and $308.2 million of unfunded commitments as of December 31, 2023 and 2022, respectively.

Ground Lease Cost excludes the term loan to Star Holdings, the assets in the Leasehold Loan Fund, the remainder of the Ground Lease Plus Fund assets and amounts attributable to noncontrolling interests.

As of December 31, 2023, our gross book value as a percentage of combined property value was 44%.

In 2018, Old SAFE established the Caret program (as defined below).

The Caret program is designed to recognize the two distinct components of value in our Ground Lease portfolio by separating them into:

● the “bond component,” which consists of the bond-like income stream we receive from contractual rent payments under our Ground Leases, plus the return of our investment basis in each asset;

● the “Caret component,” which consists of the UCA above our investment basis in our Ground Leases due to our ownership of the land and improvements at the end of the term of the applicable Ground Lease.

Portfolio Holdings’ two classes of limited liability company interests are designed to track these two components:

“GL units” are intended to track the bond component and “Caret units” are designed to track the Caret component (the “Caret program”).

We currently hold all of the issued and outstanding GL units of Portfolio Holdings.

In general, all of our Ground Leases are subject to the Caret program, except for non-commercial Ground Leases and pre-development Ground Leases.

Holders of Caret units are generally entitled to amounts equal to the net proceeds from the disposition of a Ground Lease asset in excess of the cost borne by us to acquire such asset (including amounts paid to the tenant in connection with the initial development of improvements at the properties).

However, we are entitled to deduct (i) unrecovered acquisition costs borne by Portfolio Holdings following the termination of an applicable Ground Lease by reason of defaults of tenants;

(ii) accrued unpaid rent under the applicable Ground Lease;

and (iii) unrecovered costs relating to the issuance, maintenance and management of Caret units as a separate security, among other costs, from the amount payable to the holders of Caret units on account of such net proceeds.

See “SAFE Proposal 2:

The SAFE Caret

Amendment Proposal” in our Registration Statement on Form S-4, filed with the SEC on December 16, 2022, for more information on the Caret program.

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”).

Under the Original Caret Performance Incentive Plan, 1,500,000 Caret units were reserved for grants of performance-based awards to Original Caret Performance Incentive Plan participants, including certain executives of the Company, or its affiliates, directors of Old SAFE and service providers of Old SAFE.

Initial grants under the Original Caret Performance Incentive Plan were subject to graduated vesting based on time-based service conditions and hurdles of our common stock price, all of which were satisfied as of December 31, 2023.

In connection with the Merger, certain of Old SAFE’s 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 connection with the Merger, each Award Agreement (as defined in the Original Caret Performance Incentive Plan) related to outstanding Caret unit awards was assigned to Portfolio Holdings, and Old SAFE amended and restated the Original Caret Performance Incentive Plan (the “Caret Performance Incentive Plan”).

Following the merger, 76,801 Caret units were awarded to executive officers and other employees under such plan that are subject to cliff vesting on the fourth anniversary of their grant date if our common stock has traded at an average price of $60.00 or more for at least 30 consecutive trading days during that four-year period.

As a result, as of December 31, 2023, vested and unvested Caret units beneficially owned by our officers and other employees represent approximately 15.4% of the outstanding Caret units and 12.5% of the authorized Caret units, including 6.1% held directly and indirectly by Jay Sugarman, our Chairman and Chief Executive Officer.

In addition to the Caret units awarded or reserved for issuance under our Caret Performance Incentive Plan, as of December 31, 2023, Old SAFE sold or contracted to sell an aggregate of 259,642 Caret units to third-party investors, including affiliates of MSD Partners and an entity affiliated with one of our independent directors.

As of December 31, 2023, the Company owned 82.2% of the outstanding Caret units.

In connection with the sale of 137,142 Caret units in February 2022 (28,571 of which were committed to be purchased at the time, but have not yet closed), Old SAFE agreed to use commercially reasonable efforts to provide public market liquidity for such Caret units by seeking to provide a listing of the Caret units (or securities into which they may be exchanged) on a public exchange within two years of the sale.

In the event market liquidity of the Caret units is not achieved within such two year period at a valuation not less than the purchase price for the Caret units purchased in February 2022, reduced by an amount equal to the amount of subsequent cash distributions made to investors on account of such Caret units, then the investors in the February 2022 transaction have the right to cause their Caret units purchased in February 2022 to be redeemed by Portfolio Holdings at such purchase price as so reduced.

On March 31, 2023, Old SAFE sold 100,000 Caret units to affiliates of MSD Partners for an aggregate purchase price of $20.0 million (refer to Note 1 to the consolidated financial statements) pursuant to a subscription agreement entered into on August 10, 2022 and sold an aggregate of 22,500 Caret units to third-party investors for an aggregate $4.5 million pursuant to a subscription agreement entered into in November 2022.

In September 2022, Old SAFE sold a Ground Lease in the Washington, D.C.

market for $136.0 million to a third-party purchaser.

The transaction generated a net book gain for us of approximately $46.4 million.

After paying closing costs, establishing reserves for Caret-related expenses and deducting the original $76.7 million cost basis to us, the remaining proceeds have been distributed approximately 84% to Old SAFE and approximately 16% to the minority holders of Caret units.

In addition, the affiliates of MSD Partners received a credit against their purchase price for Caret units equal to the amount they would have received had they held Caret units at the time of the distribution.

Market Opportunity :

We believe that there is a significant market opportunity for a dedicated provider of Ground Lease capital like us.

We believe that the market for existing Ground Leases is fragmented with ownership comprised primarily of high net worth individuals, pension funds, life insurance companies, estates and endowments.

However, while we intend to pursue acquisitions of existing Ground Leases, our investment thesis is predicated, in part, on what we believe is an untapped market opportunity to expand the use of Ground Leases to a broader component of the approximately $7.0 trillion institutional commercial property market in the U.S.

We intend to capture this market opportunity by utilizing multiple sourcing and origination channels, including manufacturing new Ground Leases with third-party owners and

developers of commercial real estate and originating Ground Leases to provide capital for development and redevelopment.

We further believe that Ground Leases generally represent an attractive source of capital for our tenants and may allow them to generate superior returns on their invested equity as compared to utilizing alternative sources of capital.

Prior to the Merger, we relied on the extensive investment origination and sourcing platform of iStar, the parent company of our Former Manager, to actively promote the benefits of the Ground Lease structure to prospective Ground Lease tenants.

Subsequent to the Merger and the acquisition of iStar and its employees, we are internally managed.

Additionally, we have created additional channels and products that allows us to build a larger, captive pipeline.

In connection with the Merger, Old SAFE acquired iStar’s 53% interest in iStar’s two Ground Lease ecosystem funds, Ground Lease Plus Fund and Leasehold Loan Fund (refer to Note 7 to the consolidated financial statements).

The Ground Lease Plus Fund includes three assets and targets high quality projects in pre-construction development phase with institutional developers.

The Leasehold Loan Fund currently includes four assets and allows for customers to receive their full capital structure needs in one place.

Customers are able to receive a mortgage leasehold loan as well as a Ground Lease through us.

We also created “SAFExSWAP,” which is a program that allows real estate investors with existing ground leases to swap into one of our Ground Leases.

Additionally, our product “SAFExSELL” provides clients with an opportunity to enter into a Ground Lease at the time of the sale of a real estate asset, generating greater proceeds than would normally be expected in connection with a fee simple sale.

We are a Maryland corporation and our common stock is listed on the New York Stock Exchange under the symbol "SAFE." The Company, then known as iStar, elected to be taxed as a real estate investment trust ("REIT") for U.S.

federal income tax purposes, commencing with the tax year ended December 31, 1998.

Investment Strategy

Throughout our history, we have focused on providing capital to the commercial real estate sector in a differentiated way that emphasizes custom-tailored solutions over commoditized products.

We have adjusted the allocation of our capital and resources from time to time based on market conditions.

Our Ground Lease strategy is the most recent example of our approach.

We believe that investment and financing opportunities in the Ground Lease sector currently offer more attractive risk adjusted returns than other investment opportunities, and should enable us to benefit from the unique insights and competitive advantages we have gained through SAFE.

We have been actively transitioning our portfolio to be primarily focused on Ground Lease and Ground Lease adjacent investments, held directly and through our investment in SAFE.

In furtherance of this objective, we completed the Net Lease Sale in March 2022 and have significantly reduced the level of our "legacy assets,"

which refer primarily to properties that we took back from defaulting borrowers in the financial crisis.

As we sell these assets, we expect to use the net proceeds primarily to make additional investments in our Ground Lease business, to repay indebtedness and for general corporate purposes.

Our primary investment objective is to construct a diversified portfolio of Ground Leases that will generate attractive high-quality risk-adjusted returns and support stable and growing distributions to our shareholders.

We have identified several channels for pursuing Ground Lease investment opportunities which include:

● Create a Ground Lease with a Third Party at Acquisition or Recapitalization.

We seek to pursue opportunities where a third party acquiror or existing owner of a commercial property may be interested in utilizing a Ground Lease structure to facilitate its options with respect to its interests in the property.

We will create the Ground Lease by splitting ownership of the property into an ownership interest and Ground Lease on the land, and a separate leasehold interest of the building and improvements thereon.

We will acquire the ownership interest and Ground Lease on the land from the third party.

● Originate Ground Leases to Provide Capital For Development or Value-Add Redevelopment or Repositioning.

We seek opportunities where we can purchase land and simultaneously lease it pursuant to a new Ground Lease to a tenant who plans to develop a new, or significantly improve an existing, commercial property on the land.

● Acquire Existing Ground Leases.

We seek to acquire existing Ground Leases or options to acquire existing Ground Leases that are marketed for sale and actively solicit potential sellers and related property brokers of existing Ground Leases to engage in off-market transactions.

Our structure as a holding company gives us the ability to acquire Ground Leases from owners, particularly estates and high net worth individuals, using GL units or Caret units that may provide the seller with tax advantages, as well as liquidity, portfolio diversification and professional management.

We generally intend to target Ground Leases that meet some or all of the following investment criteria:

● Properties of any type that are located in the top 30 metropolitan areas;

● Properties that we believe are well located in markets with high barriers to entry and that have durable cash flow;

● Transaction sizes between $10 million and $500 million or more;

● Average remaining initial lease terms that are typically 30 to 99 years;

● Periodic contractual rent escalators or percentage rent participations;

● Ground Rent Coverage, defined as the ratio of the Property’s NOI to the annualized rental payment due us, of approximately 2.0x to 4.5x.

Property NOI is defined as the trailing twelve month net operating income of the building and improvements being operated at the property without giving effect to any rent paid or payable under our Ground Lease, and for this purpose we use estimates of the stabilized Property NOI if we don’t receive current tenant information and for properties under construction or in transition, in each case based on leasing activity at the property and available market information, including leasing activity at comparable properties in the relevant market;

● Value of approximately 30% to 45% of the Combined Property Value at the commencement of the lease or the acquisition date;

● First year cash return on asset of between 2.5% and 5.0% and effective yields between 4.5% and 7.0%.

Financing Strategy

We use leverage to enhance our return on assets.

As of December 31, 2022 our principal financing sources are unsecured bonds issued in capital markets transactions and trust preferred securities.

Beginning in April 2022 and continuing through September 2022, we completed separate, privately-negotiated transactions with holders of our 3.125% convertible notes in which the noteholders exchanged their convertible notes with us for newly issued shares of our common stock and cash (refer to Note 10 to the consolidated financial statements).

We also repaid $0.5 million principal amount of our 3.125% convertible notes for cash at maturity.

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

A more detailed discussion of the Company’s current liquidity and capital resources is provided in Item 7—"Management’s Discussion and Analysis of Financial Condition and Results of Operations."

Underwriting Process

The Company reviews investment opportunities with its investment professionals, as well as representatives from its legal, credit, risk management and capital markets departments.

The Company has developed a process for screening potential investments called the Six Point Methodology sm .

Through this proprietary process, the Company internally evaluates an investment opportunity by:

(1) evaluating the source of the opportunity;

(2) evaluating the quality of the collateral, corporate credit or lessee, as well as the market and industry dynamics;

(3) evaluating the borrower equity,

corporate sponsorship and/or guarantors;

(4) determining the optimal legal and financial structure for the transaction given its risk profile;

(5) performing an alternative investment test;

and (6) evaluating the liquidity of the investment.

The Company uses a similar screening methodology for leasehold loans to tenants of SAFE and related party transactions with SAFE.

The Company maintains an internal investment committee, and certain investments, including related party transactions and leasehold loans to tenants of SAFE, are subject to the approval of the Board of Directors or a committee thereof.

We utilize and expect to continue to utilize leverage.

Our current strategy is to generally target overall leverage at an amount that is approximately 25% of the aggregate Combined Property Value of our portfolio, but not to exceed an overall ratio of 2:1 relative to our total equity.

However, our organizational documents do not limit the amount of indebtedness that we may incur.

We will consider a number of factors in evaluating our level of indebtedness from time to time, as well as the amount of such indebtedness that will be either fixed or floating rate.

Our board of directors may from time to time modify our leverage policies in light of the then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general market conditions for debt and equity issuances, fluctuations in the market price of our common stock, growth and acquisition opportunities and other factors, including the restrictive covenants under our debt obligations.

Subject to our qualification as a REIT, we seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements.

To the extent our board of directors determines to obtain additional capital, we may, without stockholder approval, borrow funds or issue debt or equity securities, including additional GL units or Caret units, retain earnings (subject to the distribution requirements applicable to REITs under the Code) or pursue a combination of these methods.

Hedging Strategy

The Company finances its business with a combination of fixed-rate and variable-rate debt and its asset base consists of fixed-rate and variable-rate investments.

Its variable-rate assets and liabilities are intended to be matched against changes in variable interest rates.

This means that as interest rates increase, the Company earns more on its variable-rate lending assets and pays more on its variable-rate debt obligations and, conversely, as interest rates decrease, the Company earns less on its variable-rate lending assets and pays less on its variable-rate debt obligations.

When the Company’s variable-rate debt obligations differ from its variable-rate lending assets, the Company may utilize derivative instruments to limit the impact of changing interest rates on its net income.

The Company may also use derivative instruments to limit its exposure to changes in currency rates in respect of certain investments denominated in foreign currencies.

The derivative instruments the Company uses are typically in the form of interest rate swaps, interest rate caps and foreign exchange contracts.

Investment Restrictions or Limitations

The Company does not have any prescribed allocation among investments or product lines.

Instead, the Company focuses on corporate and real estate credit underwriting to develop an analysis of the risk/reward trade-offs in determining the pricing and advisability of each particular transaction.

The Company believes that it is not, and intends to conduct its operations so as not to become, regulated as an investment company under the Investment Company Act.

The Company engages primarily in the non-investment company businesses of investing in, financing and developing real estate and real estate-related projects, generally through subsidiaries and affiliated companies, including SAFE.

Subject to applicable limitations resulting from the Company’s intentions to continue to qualify as a REIT and remain exempt from registration as an investment company, the Company may make additional investments in the securities of other REITs, other entities engaged in real estate activities or other issuers, including for the purpose of exercising control over such entities.

The Company operates in a competitive market.

See Item 1A—Risk factors—"We compete with a variety of financing and leasing sources for our customers,"

for a discussion of how we may be affected by competition.

The operations of the Company are subject, in certain instances, to supervision and regulation by state and federal governmental authorities and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, which, among other things:

(1) regulate credit granting activities;

(2) establish maximum interest rates, finance charges and other charges;

(3) require disclosures to customers;

(4) govern secured transactions;

(5) set collection, foreclosure, repossession and claims-handling procedures and other trade practices;

(6) govern privacy of customer information;

and (7) regulate anti-terror and anti-money laundering activities.

Although most states do not regulate commercial finance, certain states impose limitations on interest rates and other charges and on certain collection practices and creditor remedies, and require licensing of lenders and financiers and adequate disclosure of certain contract terms.

The Company is also required to comply with certain provisions of the Equal Credit Opportunity Act that are applicable to commercial loans.

In the judgment of management, the Company’s compliance with existing statutes and regulations, including environmental regulations, is not currently expected to have a material effect on the Company’s capital expenditures, earnings and competitive position.

It is not possible at this time to forecast the exact nature of any future legislation,

regulations, judicial decisions, orders or interpretations, nor their impact upon the future capital expenditures, earnings or competitive position of the Company.

The Company has elected and expects to continue to qualify to be taxed as a REIT under Section 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code").

As a REIT, the Company must generally distribute at least 90% of its net taxable income, excluding capital gains, to its shareholders each year.

In addition, the Company must distribute 100% of its net taxable income (including net capital gains) each year to eliminate U.S.

corporate federal income taxes payable by it.

REITs are also subject to a number of organizational and operational requirements in order to elect and maintain REIT qualification.

These requirements include specific share ownership tests and asset and gross income tests.

If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S.

federal income tax on its net taxable income at regular corporate tax rates.

Even if the Company qualifies for taxation as a REIT, the Company may be subject to state and local taxes and to U.S.

federal income tax and excise tax on its undistributed income.

Code of Conduct

The Company has adopted a code of conduct that sets forth the principles of conduct and ethics to be followed by our directors, officers and employees (the "Code of Conduct").

The purpose of the Code of Conduct is to promote honest and ethical conduct, compliance with applicable governmental rules and regulations, full, fair, accurate, timely and understandable disclosure in periodic reports, prompt internal reporting of violations of the Code of Conduct and a culture of honesty and accountability.

We may enter into hedging transactions to manage interest rate risk.

Hedging transactions could take a variety of forms, including interest rate swap agreements, interest rate cap agreements, treasury locks, options, futures contracts, forward rate agreements or similar financial instruments.

We intend to structure hedging transactions in a manner that does not jeopardize our qualification as a REIT.

Conflict of Interest Policies

Conflicts of interest may exist or could arise in the future with any member of Portfolio Holdings or in our relationship with Star Holdings.

Conflicts may include, without limitation:

conflicts between the interests of our stockholders and the management holders of Caret units;

conflicts arising from the enforcement of agreements between us and Star Holdings;

conflicts in the amount of time that our officers and employees will spend on the affairs of Star Holdings versus our affairs;

conflicts in determining whether to seek reimbursement from Star Holdings of certain expenses we incur on its behalf;

and conflicts between the interests of our stockholders and members of our management who hold Star Holdings common stock.

We have adopted a policy that all transactions between Star Holdings and us must be approved by a majority of our independent directors.

However, we cannot assure you this policy or other policies and provisions of law will always succeed in eliminating the influence of such conflicts.

If they are not successful, decisions could be made that might fail to reflect the best interest of all shareholders.

See "Risk Factors – Risks Related to the Spin-Off and Our Relationship with Star Holdings – “There are various potential conflicts of interest in our relationship with Star Holdings, which could result in decisions that are not in the best interest of our shareholders.”

We compete with numerous commercial developers, real estate companies (including other REITs), financial institutions (such as banks and insurance companies) and other investors (such as pension funds, investment funds, private

companies and individuals) for investment opportunities and tenants.

This competition may result in higher costs for properties, lower returns and impact our ability to grow.

Some of these competitors have greater financial and other resources and access to more attractive capital than we do.

However, due to our focus on Ground Leases located throughout the U.S., and because some of our competitors are locally and/or regionally focused, we do not always encounter the same competitors in each market.

We believe that we have been organized and have operated in a manner that has enabled us to maintain our qualification as a REIT and our exemption from regulation as an investment company under the Investment Company Act of 1940, as amended, and we intend to continue to do so.

In addition, our properties are subject to various laws, ordinances and regulations.

Our tenants are generally responsible under our Ground Leases for taxes, maintenance and insurance as well as all operating costs and capital expenditures, including capital expenditures that may result from compliance with environmental and other laws and regulations.

Although our tenants are primarily responsible for any damages and claims arising from the leased properties’ compliance with applicable environmental and other laws and regulations, a tenant’s bankruptcy or inability to satisfy its obligations for these types of damages or claims could require us to satisfy such liabilities.

In addition, we may be held directly liable for any such damages or claims irrespective of the provisions of any lease.

Code of Ethics and Conduct

On March 31, 2023, the Company adopted a new Code of Ethics and Conduct that applies to our directors, officers and employees (the "Code of Conduct").

The Code of Conduct sets forth the principles of conduct and ethics to be followed by our directors, officers and employees.

The purpose of the Code of Conduct is to promote honest and ethical conduct;

full, fair, accurate, timely and understandable disclosure;

compliance with applicable governmental laws, rules and regulations;

prompt internal reporting of violations of law or the Code of Conduct;

accountability for adherence to the Code of Conduct;

consistent enforcement of the Code of Conduct;

protection for persons reporting any questionable behavior;

protection of the Company’s legitimate business interests;

and confidentiality of information entrusted to our directors, officers and employees.

A copy of the Code of Conduct has been provided to each of our directors, officers and employees, who are required to acknowledge that they have received and will comply with the Code of Conduct.

A copy of the Company’s Code of Conduct has been previously filed with the SEC and is incorporated by reference in this Annual Report on Form 10-K as Exhibit 14.0.

The Code of Conduct is also available on the Company’s website at www.istar.com .

The Company will disclose to shareholders material changes to its Code of Conduct, or any waivers for directors or executive officers, if any, within four business days of any such event.

The Code of Conduct is available on the Company’s website at www.safeholdinc.com .

The Company will disclose on its website material changes to its Code of Conduct, or any waivers for directors or executive officers, if any, within four business days of any such event.

As of December 31, 2023, there have been no amendments to the Code of Conduct and the Company has not granted any waivers from any provision of the Code of Conduct to any directors or executive officers.

Employees and Human Capital Resources

Human Capital Resources

Central to our business strategy is attracting, developing and retaining a talented, diverse and engaged workforce to drive our success.

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We also offer our professionals the opportunity to participate in a variety of development programs, including discussions led by outside speakers on topics of interest and a learning management tool that enables employees and their managers to select courses that enhance professional development.

In March 2022, we sold our net lease portfolio and in August 2022, we and SAFE announced the proposed Merger, Spin-Off and related transactions.

In light of these transactions, we have reduced and may continue to reduce the number of our employees.

We maintain a number of health and wellness programs to support the welfare of our people.

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We seek to provide a safe workplace for our employees.

In addition to the safety protocols that we instituted in response to the pandemic, we have established emergency procedures that address emergency health and safety situations.

In addition to the safety protocols that we instituted in response to the COVID pandemic, we have established emergency procedures that address emergency health and safety situations.

Additional Information

We maintain a website at www.istar.com .

The information on our website is not incorporated by reference in this report, and our web address is included only as an inactive textual reference.

In addition to this Annual Report on Form 10-K, the Company files quarterly and special reports, proxy statements and other information with the SEC.

Through the Company’s corporate website, www.istar.com , the Company makes available free of charge its annual proxy statement, annual reports to shareholders, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.

We maintain a website at www.safeholdinc.com .

The information on our website is not incorporated by reference in this Annual Report on Form 10-K, and our web address is included only as an inactive textual reference.

In addition to this Annual Report on Form 10-K, we file quarterly and special reports, proxy statements and other information with the SEC.

Through our website, we make available free of charge our annual proxy statement, annual reports to shareholders, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

These documents also may be accessed through the SEC’s electronic data gathering, analysis and retrieval system via electronic means, including on the SEC’s homepage, which can be found at www.sec.gov .

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-K

Item 1. Business