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Item 8. Financial Statements and Supplementary Data

2024-02-13 compared with 2023-02-22 · 986 added, 1524 removed, 278 unchanged (90% of the section changed)

9 unchanged sentences

Notes to Consolidated Financial Statements

Financial Statement Schedules:

Schedule II—Valuation and Qualifying Accounts and Reserves as of December 31, 2022 with reconciliations for the years ended December 31, 2022, 2021 and 2020

Financial Statement Schedule:

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2023 with reconciliations for the years ended December 31, 2023, 2022 and 2021

Schedule IV—Mortgage Loans on Real Estate as of December 31, 2022 with reconciliations for the years ended December 31, 2022, 2021 and 2020

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of iStar Inc.

To the shareholders and the Board of Directors of Safehold Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of iStar Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Safehold Inc.

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Current Expected Credit Loss (“Expected Loss”) – Estimation of Fair Value of Underlying Collateral of Loans Exhibiting Signs of Financial Difficulty - Refer to Note 3 and Note 7 to the financial statements

Merger Transaction — Refer to Note 1 and 3 to the financial statements

Critical Audit Matter Description

The Company estimates its Expected Loss on its collateral-dependent non-performing loans where the borrower is experiencing financial difficulty using the estimated fair value of the collateral.

The estimate of the Company's Expected Loss on such loans required judgment when determining the fair value of the collateral securing the loans.

The Company records a specific allowance using a practical expedient in accordance with the CECL standard if the Company determines that the collateral fair value is less than the carrying value of the loan.

The Company generally uses the income approach through internally developed valuation models to estimate the fair value of the collateral for such loans.

In some cases, the Company obtains external "as is"

appraisals for loan collateral.

Significant judgments are required in determining the specific allowance, including estimates and assumptions regarding the fair value of the

collateral and other estimates.

The determination of the Company’s specific allowance for these loans represents a critical audit matter given the level of subjectivity and judgement involved.

Performing audit procedures to evaluate the specific allowance for non-performing loans required a high degree of auditor judgment, and an increased extent of effort to evaluate whether management reasonably and appropriately quantified the fair value of the collateral.

On March 31, 2023, Safehold Inc.

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

(“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 was accounted for as a business combination using the acquisition method of accounting under Accounting Standards Codification (“ASC”) 805, Business Combinations and treated as a reverse acquisition in which iStar is considered the legal acquirer and Old SAFE is considered the accounting acquirer.

A key accounting judgment in evaluating the Merger transaction is the determination of accounting acquirer.

complexity of evaluating the applicable accounting guidance, this aspect of the accounting for the Merger required especially subjective auditor judgment and an increased extent of effort.

The Company recognized and measured identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the Company’s consolidated balance sheets, and the difference between the purchase consideration and the fair value of identifiable net assets acquired is either recorded as goodwill or bargain purchase.

The determination of fair value of each asset acquired and liability assumed by management requires judgment and is based on estimated cash flow projections that utilize available market information, including discount rates and capitalization rates.

Performing audit procedures to evaluate the reasonableness of such assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve internal fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the determination of the fair value for those assets in which the borrower exhibits signs of financial difficulty as part of estimation of the Expected Loss included the following, among others:

– We tested the design and effectiveness of controls implemented by the Company in relation to the calculation of the specific allowance, including management’s review of the fair value analysis performed in relation to collateral including related assumptions and inputs used within the fair value analysis.

– We evaluated the Company’s determination of fair value of the collateral with the assistance of fair value specialists, by evaluating the reasonableness of the (1) valuation methodology;

(2) significant assumptions made, including whether the significant inputs used in the model were appropriate and consistent with what market participants would use to value the collateral;

and (3) mathematical accuracy of the overall valuation model.

– We tested the underlying data used to develop the fair value to determine that the information used in the analysis was accurate and complete.

– We considered whether events or transactions that occurred after the balance sheet date but before the completion of the audit affect the conclusions reached on the fair value measures and disclosures.

We tested the accuracy and completeness of quantitative data used by management to estimate the current and future economic conditions.

Our audit procedures related to our evaluation of the Company’s determination of the accounting acquirer and the fair value of the assets acquired and liabilities assumed in the Merger included the following, among others:

● We tested the effectiveness of the Company’s controls over the accounting for the Merger which included testing of management’s controls related to the conclusion on the accounting acquirer and related to the management’s engagement and review of the fair values of the assets acquired and liabilities assumed.

● With the assistance of professionals in our firm having expertise in the accounting for business combinations, we evaluated management’s conclusion on the determination of accounting acquirer.

● With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) significant inputs such and discount rate and capitalization rate.

● With the assistance of our fair value specialists, we also tested the mathematical accuracy of the Company’s valuation models.

/s/ DELOITTE & TOUCHE LLP

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of iStar, Inc.

To the shareholders and the Board of Directors of Safehold Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of iStar Inc.

We have audited the internal control over financial reporting of Safehold Inc.

and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) .

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February 13, 2024

Safehold Inc.

Consolidated Balance Sheets (1)

(In thousands, except per share data)

As of December 31,

Net investment in sales-type leases ($ 465 and $ 0 of allowances as of December 31, 2023 and 2022, respectively)

Ground Lease receivables, net ($ 369 and $ 0 of allowances as of December 31, 2023 and 2022, respectively)

Real estate, at cost

1 unchanged sentence

Real estate, net

Real estate-related intangible assets, net

Real estate available and held for sale

Total real estate

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

Net investment in leases

Land and development, net

Loans receivable and other lending investments, net ( $ 925 and $ 4,769 of allowances as of December 31, 2022 and 2021, respectively)

Loans receivable held for sale

Other investments

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

Loans receivable, net - related party ($ 2,429 of allowances as of December 31, 2023)

Equity investments

Cash and cash equivalents

Accrued interest and operating lease income receivable, net

Deferred operating lease income receivable, net

Restricted cash

Deferred tax asset, net

Deferred operating lease income receivable

Deferred expenses and other assets, net (2)

LIABILITIES AND EQUITY

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

Accounts payable, accrued expenses and other liabilities (3)

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

Liabilities associated with properties held for sale

Real estate-related intangible liabilities, net

Debt obligations, net

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Commitments and contingencies (refer to Note 10)

Redeemable noncontrolling interests (refer to Note 3)

Safehold Inc.

shareholders' equity:

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

Common stock, $ 0.01 par value, 400,000 shares authorized, 71,077 and 62,397 shares issued and outstanding as of December 31, 2023 and 2022, respectively

Additional paid-in capital

Accumulated deficit

( 2,053,270 )

( 2,227,213 )

Retained earnings

Accumulated other comprehensive income (loss)

Total iStar Inc.

Total Safehold Inc.

shareholders' equity

Noncontrolling interests

Total liabilities and equity

Total liabilities, redeemable noncontrolling interests and equity

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

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

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

(2) As of December 31, 2023, includes $ 7.1 million due from related parties.

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

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

Safehold Inc.

Consolidated Statements of Operations

1 unchanged sentence

For the Years Ended December 31,

Operating lease income

Interest income

Interest income from sales-type leases (1)

Operating lease income

Interest income - related party (2)

Other income (3)

Land development revenue

Total revenues

2 unchanged sentences

Real estate expense

Land development cost of sales

Depreciation and amortization

General and administrative (4)

Provision for (recovery of) loan losses

Impairment of assets

Impairment of goodwill

Provision for credit losses

Other expense

Total costs and expenses

Income from sales of real estate

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

Loss on early extinguishment of debt, net

Gain on sale of Ground Leases

Income (loss) from operations before other items

Loss on early extinguishment of debt

Earnings from equity method investments

Net income (loss) from continuing operations before income taxes

Income tax benefit (expense)

Net income (loss) from continuing operations

Net income from discontinued operations (2)

Selling profit from sales-type leases

Net income (loss) before income taxes

Income tax expense

Net income (loss)

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

Net (income) from discontinued operations attributable to noncontrolling interests

Net income (loss) attributable to iStar Inc.

Preferred dividends

Net income (loss) allocable to common shareholders

Net (income) attributable to noncontrolling interests

Net income (loss) attributable to Safehold Inc.

common shareholders

Per common share data:

Net income (loss) allocable to common shareholders

Basic and diluted

Net loss from continuing operations and allocable to common shareholders:

Basic and diluted

Net income from discontinued operations and allocable to common shareholders:

Basic and diluted

Net income (loss)

Weighted average number of common shares:

Basic and diluted

(1) During the years ended December 31, 2022, 2021, and 2020, includes $ 20.7 million, $ 15.1 million and $ 12.9 million, respectively, of management fees from related parties.

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

(1) For the years ended December 31, 2022 and 2021, the Company recorded $ 2.1 million and $ 8.4 million, respectively, 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 year ended December 31, 2023, includes $ 19.4 million of management fees from related parties.

(4) For the years ended December 31, 2023, 2022 and 2021, includes $ 31.6 million, $ 34.3 million and $ 24.1 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 year ended December 31, 2023, general and administrative expenses were partially offset by $ 19.4 million of management fees earned from Star Holdings (refer to Note 1), which are included in “Other income.”

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

Safehold Inc.

Consolidated Statements of Comprehensive Income (Loss)

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Net income (loss)

Other comprehensive income (loss):

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

Reclassification of losses on available-for-sale securities

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

Unrealized gains (losses) on cash flow hedges

Other comprehensive income:

Reclassification of (gains) losses on derivatives into earnings (1)

Unrealized gain on derivatives

Other comprehensive income (loss):

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Comprehensive (income) attributable to noncontrolling interests

Comprehensive income (loss) attributable to iStar Inc.

(1) Reclassified to “Net income from discontinued operations” in the Company’s consolidated statements of operations are $ 22,623 and $ 6,974 for the years ended December 31, 2021 and 2020, respectively.

Reclassified to “Earnings (losses) from equity method investments” in the Company’s consolidated statements of operations are $ 7,737 , $ 1,943 and $ 1,101 , respectively, for the years ended December 31, 2022, 2021 and 2020.

(2) For the years ended December 31, 2022, 2021 and 2020, includes $ 179.1 million, $ 16.3 million and $ 6.8 million, respectively, of comprehensive income attributable to noncontrolling interests was from discontinued operations.

Comprehensive income (loss) attributable to Safehold Inc.

(1) During the year ended December 31, 2023, $ 15.2 million was reclassified to “Other income” in the Company’s consolidated statements of operations due to a hedge forecasted for permanent debt that did not occur (refer to Note 11).

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

Safehold Inc.

Consolidated Statements of Changes in Equity

(In thousands)

Shareholders' Equity

Noncontrolling

Comprehensive

Noncontrolling

Interests (1)

Income (Loss)

Balance as of December 31, 2019

( 2,205,838 )

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

Dividends declared—preferred

Dividends declared—common ($ 0.43 per share)

Issuance of stock/restricted stock unit amortization, net (1)

Net income (loss)

Balance at December 31, 2020

Issuance of common stock, net / amortization

Dividends declared ($ 0.67224 per share)

Change in accumulated other comprehensive income (loss)

Repurchase of stock

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Balance as of December 31, 2020

( 2,316,972 )

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

Dividends declared—preferred

Dividends declared—common ($ 0.485 per share)

Issuance of stock/restricted stock unit amortization, net (1)

Balance at December 31, 2021

Issuance of common stock, net / amortization

Dividends declared ($ 0.701 per share)

Change in accumulated other comprehensive income (loss)

Repurchase of stock

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Change to noncontrolling interest

Balance as of December 31, 2021

( 2,227,213 )

Dividends declared—preferred

Dividends declared—common ($ 0.375 per share)

Issuance of stock/restricted stock unit amortization, net (1)

Additional paid in capital attributable to redeemable noncontrolling interests

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

Dividends declared ($ 0.708 per share)

Change in accumulated other comprehensive income (loss)

Paid-in-kind dividend to common shareholders ($ 2.19 per share)

Issuance of common stock in connection with 3.125 % convertible notes (2)

Contributions from noncontrolling interests

Contributions from noncontrolling interests, net

Distributions to noncontrolling interests

Balance as of December 31, 2022

( 2,053,270 )

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

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

Merger consideration (refer to Note 1 and Note 3)

Balance at December 31, 2023

(1) Refer to Note 3.

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

Safehold Inc.

Consolidated Statements of Cash Flows

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Net income (loss)

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

(Recovery of) provision for loan losses

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

Impairment of assets

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

Depreciation and amortization

Non-cash interest income from sales-type leases

Stock-based compensation expense

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

Amortization of discounts/premiums and deferred interest on loans, net

Deferred interest on loans received

Selling profit from sales-type leases

Earnings from equity method investments

Distributions from operations of other investments

Deferred operating lease income

Income from sales of real estate

Land development revenue in excess of cost of sales

Loss on early extinguishment of debt, net

Other operating activities, net

Non-cash interest income from sales-type leases

Non-cash interest expense

Amortization of real estate-related intangibles, net

Impairment of goodwill

Provision for credit losses

Loss on early extinguishment of debt

Earnings from equity method investments

Distributions from operations of equity method investments

Selling profit from sales-type leases

Gain on sale of Ground Leases

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

Non-cash management fees

Other income recognized from derivative transaction (refer to Note 11)

Other operating activities

Changes in assets and liabilities:

Origination and fundings of loans receivable held for sale, net

Proceeds from sale of loans receivable held for sale

Changes in accrued interest and operating lease income receivable

Changes in deferred expenses and other assets, net

Changes in accounts payable, accrued expenses and other liabilities

Cash flows provided by (used in) operating activities

Cash flows provided by operating activities

Cash flows from investing activities:

Originations and fundings of loans receivable, net

Capital expenditures on real estate assets

Capital expenditures on land and development assets

Acquisitions of real estate, net investments in leases and land assets

Repayments of and principal collections on loans receivable and other lending investments, net

Net proceeds from sales of loans receivable

Net proceeds from sales of real estate

Net proceeds from sales of land and development assets

Net proceeds from sales of other investments

Distributions from other investments

Contributions to and acquisition of interest in other investments

Other investing activities, net

Cash flows provided by investing activities

Acquisitions of real estate

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

( 1,278,406 )

( 1,247,980 )

Origination of loans receivable, net

Payment for merger consideration

Cash and cash equivalents acquired upon merger

Contributions to equity method investments

Funding reserves received from Ground Lease tenant net of disbursements

Net proceeds from sale of Ground Leases

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

Deposits on Ground Lease investments

Other investing activities

Cash flows used in investing activities

( 1,145,953 )

( 1,287,991 )

Cash flows from financing activities:

Borrowings from debt obligations

Repayments and repurchases of debt obligations

Proceeds from issuance of common stock

Proceeds from debt obligations

Repayments of debt obligations

( 1,005,000 )

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

Preferred dividends paid

Common dividends paid

Repurchase of stock

Payments for deferred financing costs

Payments for withholding taxes upon vesting of stock-based compensation

Contributions from noncontrolling interests

Dividends paid to common shareholders

Payment of offering costs

Payments for withholding taxes upon vesting for stock-based compensation

Distributions to noncontrolling interests

Payments for debt prepayment or extinguishment costs

Cash flows used in financing activities

( 1,780,704 )

Effect of exchange rate changes on cash

Contributions from noncontrolling interests

Other financing activities

Cash flows provided by financing activities

Changes in cash, cash equivalents and restricted cash

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Cash, cash equivalents and restricted cash at end of period

Supplemental disclosure of cash flow information:

Cash paid during the period for interest, net of amount capitalized

Consolidated Statements of Cash Flows

(In thousands)

For the Years Ended December 31,

1 unchanged sentence

Cash and cash equivalents

Restricted cash included in deferred expenses and other assets, net

Restricted cash

Total cash and cash equivalents and restricted cash

Supplemental disclosure of cash flow information:

Cash paid for interest

Supplemental disclosure of non-cash investing and financing activity:

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

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

Contributions to other investments

Sales-type lease origination

Distributions to noncontrolling interests

Defeasance of mortgage notes payable

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

Settlement of senior unsecured notes (refer to Note 10)

Increase in net lease assets upon consolidation of equity method investment

Increase in debt obligations upon consolidation of equity method investment

Non-cash proceeds from sale of land and development asset

Financing provided on sales of real estate

Debt obligations assumed (refer to Note 3)

Issuance of common stock for acquisition of assets (refer to Note 3)

Dividends declared to common shareholders

Non-cash interest accrued to debt balances

Accrued finance costs

Accrued repurchase of stock

Transfer of loan receivable to loans receivable held for sale (refer to Note 7)

Payment of non-cash dividend (refer to Note 13)

Assumption of mortgage by third party

Accrued offering costs

Caret unit conversion (refer to Note 12)

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

Safehold Inc.

Notes to Consolidated Financial Statements

Note 1—Business and Organization

Business —iStar Inc.

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

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

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

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

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

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

Merger with Safehold Inc.

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

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

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

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

As discussed further below, shortly before the closing of the Merger, the Company intends to separate its remaining legacy non-ground lease assets and businesses into a separate public company (“ 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 ”).

Conditions to the Merger

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

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

Conditions to the Spin-Off

Completion of the Spin-Off is subject to:

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

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

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

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

and (v) other customary closing conditions.

Business — On March 31, 2023, Safehold Inc.

(“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.

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.

Unless context otherwise requires, references to 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) and its consolidated subsidiaries following the consummation of the Merger.

The Company operates its business through one reportable segment by acquiring, managing and capitalizing ground leases.

The Company also manages entities focused on ground leases (refer to Note 7) and a wholly-owned subsidiary of the Company serves as external manager to Star Holdings (“Star Holdings”), a Maryland statutory trust that holds the legacy non-ground lease assets previously held by iStar.

Ground leases are long-term contracts between the landlord (the Company) and a tenant or leaseholder.

Ground leases generally represent ownership of the land underlying commercial real estate projects that is net leased by the fee owner of the land to the owners/operators of the real estate projects built thereon (“Ground Leases”).

Under a Ground Lease, the tenant is generally responsible for all property operating expenses, such as maintenance, real estate taxes and insurance and is also responsible for development costs and capital expenditures.

Ground Leases are typically long-term (base terms ranging from 30 to 99 years , often with tenant renewal options) and have contractual base rent increases (either at a specified percentage or consumer price index (“CPI”) based, or both) and sometimes include percentage rent participations.

The Company’s 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.

The Company intends to target investments in long-term Ground Leases in which:

(i) the initial cost of its Ground Lease represents 30 % to 45 % of the combined value of the land and buildings and improvements thereon as if there was no Ground Lease on the land ("Combined Property Value");

(ii) the ratio of property net operating income to the Ground Lease payment due the Company ("Ground Rent Coverage") is between 2.0 x to 4.5 x , and for this purpose the Company uses estimates of the stabilized property net operating income if it does not 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;

and (iii) the Ground Lease contains contractual rent escalation clauses or percentage rent that participates in gross revenues generated by the commercial real estate on the land.

A Ground Lease lessor (the Company) typically has the right to regain possession of its land and take ownership of the buildings and improvements thereon upon tenant default and the termination of the Ground Lease on account of such default.

The Company believes that the Ground Lease structure provides an opportunity for potential value accretion through the reversion to the Company, as the Ground Lease owner, of the buildings and improvements on the land at the expiration or earlier termination of the lease, for no additional consideration from the Company.

Prior to the Merger, Old SAFE was managed by SFTY Manager, LLC (the “Former Manager”), a wholly-owned subsidiary of iStar, pursuant to a management agreement.

Old SAFE had no employees, as the Former Manager provided all services to it.

Old SAFE relied on the extensive investment origination and sourcing platform of its Former Manager to actively promote the benefits of the Ground Lease structure to prospective Ground Lease tenants.

Subsequent to the Merger, the Company is internally managed.

Organization — The Company is a Maryland corporation and its common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “SAFE.” The Company (then known as iStar) elected to be treated as a real estate investment trust (“REIT”) for U.S.

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

As part of a restructuring in connection with the Merger (the “Caret Restructuring”), Safehold Operating Partnership LP converted into a Delaware limited liability company and renamed itself “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.

The Company, management of the Company, employees and former employees of the Company, affiliates of MSD Partners (as defined below) and other outside investors own the issued and outstanding equity of Portfolio Holdings.

Merger Transaction —On August 10, 2022, Old SAFE entered into an Agreement and Plan of Merger (the “Merger Agreement”) with iStar, and on March 31, 2023, the Merger was completed in accordance with the terms of the Merger Agreement.

For accounting purposes, the Merger was accounted for as a business combination using the acquisition method of accounting under Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) and treated as a “reverse acquisition” in which iStar is considered the legal acquirer and Old SAFE is considered the accounting acquirer.

The Company considered the following relevant facts for this determination:

● At the time of the Merger closing, Old SAFE shareholders, excluding the Old SAFE shares held directly by iStar, members of iStar management and Star Holdings, control a majority of the voting interests in the Company and the combined company operates under the name “Safehold Inc.;”

● The composition of the combined company’s board of directors, which includes three directors from Old SAFE, two directors from iStar, and two management members of both Old SAFE and iStar;

● Old SAFE was the larger entity by size when comparing the key metrics of total assets, total revenue and net income (loss) from continuing operations and allocable to common shareholders;

● Substantially all of the assets and liabilities of the Company consist of the historical assets and liabilities of Old SAFE, and the go-forward business plan of the Company is to conduct the Ground Lease business conducted by Old SAFE prior to the Merger.

As a result, the historical financial statements of Old SAFE become the historical financial statements of the Company.

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

Other Merger related transactions

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

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

If the Merger Agreement is terminated for any reason, the parties’ obligations to consummate the purchase and sale will also terminate.

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

Notes to Consolidated Financial Statements

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

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

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

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

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

which will be secured by $ 400.0 million in shares of SAFE common stock.

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

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

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

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

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

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

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

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

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

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

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

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

On August 10, 2022, iStar entered into an agreement (the “MSD Stock Purchase Agreement”) with MSD Partners, L.P.

(“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) 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.

Note 2—Basis of Presentation and Principles of Consolidation

Basis of Presentation —The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP").

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

The preparation of these consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from those estimates.

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

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

All intercompany balances and transactions have been eliminated in consolidation.

The Company’s

Notes to Consolidated Financial Statements

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

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

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

As of December 31, 2023, the total assets of these consolidated VIEs were $ 73.9 million and total liabilities were $ 30.1 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 did not have any unfunded commitments related to consolidated VIEs as of December 31, 2022.

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

December 31, 2022

December 31, 2021

Real estate, at cost

accumulated depreciation

Real estate, net

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

Land and development, net

Cash and cash equivalents

Deferred operating lease income receivable, net

Deferred expenses and other assets, net

Accounts payable, accrued expenses and other liabilities

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

Total liabilities

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

As of December 31, 2022, the Company’s maximum exposure to loss from these investments does not exceed the sum of the $ 32.1 million carrying value of the investments, which are classified in "Other investments"

on the Company’s consolidated balance sheets.

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 December 31, 2023.

Note 3—Summary of Significant Accounting Policies

Significant Accounting Policies

Real estate and land and development— Real estate and land and development assets are recorded at cost less accumulated depreciation and amortization, as follows:

Net Investment in Sales-type Leases and Ground Lease Receivables —Net investment in sales-type leases and Ground Lease receivables are recognized when the Company’s Ground Leases qualify as sales-type leases.

The net investment in sales-type leases is initially measured at the present value of the fixed and determinable lease payments, including any guaranteed or unguaranteed residual value of the asset at the end of the lease, discounted at the rate implicit in the lease.

Acquisition-related costs are capitalized and recorded in "Net investment in sales-type leases" and "Ground lease receivables" on the Company’s consolidated balance sheets.

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

If a lease qualifies as a sales-type lease, it is further evaluated to determine whether the transaction is considered a sale leaseback transaction.

When the Company acquires land and enters into a Ground Lease directly with the seller that qualifies as a sales-type lease, the lease does not qualify as a sale leaseback transaction and the lease is considered a financing receivable and is recognized in accordance with ASC 310 - Receivables and included in "Ground Lease receivables" on the Company’s consolidated balance sheets (refer to Note 4).

Allowance for credit losses on net investment in sales-type leases and Ground Lease receivables —Effective January 1, 2023, upon the adoption of ASU 2016-13, the Company implemented procedures to estimate its allowance for credit losses on net investment in sales-type leases and Ground Lease receivables, including unfunded commitments, using a quantitative analysis to estimate expected loss rates for its portfolio of net investment in sales-type leases and Ground Lease receivables.

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 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.

The Company did not have any charge-offs of its net investment in sales-type leases or Ground Lease receivables for any of the periods presented.

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.

The Company has also made a policy election to write off aged interest receivables through interest income from sales-type leases as opposed to through the provision for credit losses.

Real estate —Real estate assets are recorded at cost less accumulated depreciation and amortization, as follows:

Capitalization and depreciation—Certain improvements and replacements are capitalized when they extend the useful life of the asset.

For real estate projects, the Company begins to capitalize qualifying development and construction costs, including interest, real estate taxes, compensation and certain other carrying costs incurred which are specifically identifiable to a development project once activities necessary to get the asset ready for its intended use have commenced.

If specific allocation of costs is not practicable, the Company will allocate costs based on relative fair value prior to construction or relative sales value, relative size or other methods as appropriate during construction.

The Company’s policy for interest capitalization on qualifying real estate assets is to use the average amount of accumulated expenditures during the period the asset is being prepared for its intended use, which is typically when physical construction commences, and a capitalization rate which is derived from specific borrowings on the qualifying asset or the Company’s corporate borrowing rate in the absence of specific borrowings.

The Company ceases capitalization on the portions substantially completed and ready for their intended use.

Repairs and maintenance costs are expensed as incurred.

Depreciation is computed using the straight-line method of cost recovery over the estimated useful life, which is generally 40 years for

Notes to Consolidated Financial Statements

facilities, five years for furniture and equipment, the shorter of the remaining lease term or expected life for tenant improvements and the remaining useful life of the facility for facility improvements.

Purchase price allocation— The Company’s acquisition of properties is generally accounted for as an acquisition of assets.

on the Company’s consolidated balance sheets.

Repair and maintenance costs are expensed as incurred.

Depreciation is computed using the straight-line method over the estimated useful life, which is generally 40 years for facilities, the shorter of the remaining lease term or expected life for tenant improvements and the remaining useful life of the facility for facility improvements.

Purchase price allocation—The Company’s acquisitions of properties are generally accounted for as an acquisition of assets.

For asset acquisitions, the Company recognizes and measures identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree based on their relative fair values and acquisition-related costs are capitalized and recorded in "Real estate, net," "Real estate-related intangible assets, net" and "Real estate-related intangible liabilities, net" on the Company’s consolidated balance sheets.

The Company accounts for its acquisition of properties by recording the purchase price of tangible and intangible assets and liabilities acquired based on their relative fair values.

The value of the tangible assets, consisting of land, buildings, building improvements and tenant improvements is determined as if these assets are vacant.

Intangible assets may include the value of lease incentive assets, above-market leases and in-place leases which are each recorded at their relative fair values and included in “Deferred expenses and other assets, net” on the Company’s consolidated balance sheets.

Intangible liabilities may include the value of below-market leases, which are recorded at their relative fair values and included in “Accounts payable, accrued expenses and other liabilities” on the Company’s consolidated balance sheets.

In-place leases are amortized over the remaining non-cancelable term and the amortization expense is included in "Depreciation and amortization"

in the Company’s consolidated statements of operations.

Lease incentive assets and above-market (or below-market) lease value is amortized as a reduction of (or, increase to) operating lease income over the remaining non-cancelable term of each lease plus any renewal periods with fixed rental terms that are considered to be below-market.

The Company may also engage in sale/leaseback transactions and execute leases with the occupant simultaneously with the purchase of the asset.

Intangible assets may include the value of lease incentive assets, above-market leases, below-market Ground Lease assets and in-place leases, which are each recorded at their relative fair values and included in "Real estate-related intangible assets, net" on the Company’s consolidated balance sheets.

Intangible liabilities may include the value of below-market leases, which are recorded at their relative fair values and included in "Real estate-related intangible liabilities, net" on the Company’s consolidated balance sheets.

In-place leases are amortized over the remaining non-cancelable term of the lease and the amortization expense is included in "Depreciation and amortization" in the Company’s consolidated statements of operations.

Lease incentive assets and above-market (or below-market) lease value are amortized as a reduction of (or increase to) operating lease income over the remaining non-cancelable term of each lease.

Below-market Ground Lease assets are amortized to real estate expense over the remaining non-cancelable term of the lease.

The Company may also engage in sale/leaseback transactions whereby the Company executes a net lease with the occupant simultaneously with the purchase of the asset.

These transactions are accounted for as asset acquisitions.

Impairments— The Company reviews real estate assets to be held for use and land and development assets for impairment in value whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

The value of a long-lived asset held for use and land and development assets are impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the asset (taking into account the anticipated holding period of the asset) is less than the carrying value.

Such estimate of cash flows considers factors such as expected future operating income trends, as well as the effects of demand, competition and other economic factors.

To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the estimated fair value of the asset and reflected as an adjustment to the basis of the asset.

Impairments of real estate assets and land and development assets are recorded in "Impairment of assets"

in the Company’s consolidated statements of operations.

Impairments—The Company reviews real estate assets for impairment in value whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

The value of a long-lived asset held for use is impaired if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the asset (taking into account the anticipated holding period of the asset) are less than its carrying value.

Such estimate of cash flows considers factors such as expected future operating income trends, as well as

the effects of demand, competition and other economic factors.

To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the asset over the estimated fair value of the asset and reflected as an adjustment to the basis of the asset.

Impairments of real estate assets, if any, are recorded in the Company’s consolidated statements of operations.

The Company did not record any impairments for the periods presented.

Real estate available and held for sale— The Company reports real estate assets to be sold at the lower of their carrying amount or estimated fair value less costs to sell and classifies them as “Real estate available and held for sale” on the Company’s consolidated balance sheets.

If the estimated fair value less costs to sell is less than the carrying value, the difference will be recorded as an impairment charge.

Impairment for real estate assets disposed of or classified as held for sale are included in "Impairment of assets"

in the Company’s consolidated statements of operations.

Impairment for real estate assets disposed of or classified as held for sale are included in "Impairment of assets" in the Company’s consolidated statements of operations.

Once a real estate asset is classified as held for sale, depreciation expense is no longer recorded.

6 unchanged sentences

and (vi) the Company does not anticipate changes to its plan to sell the asset.

Assets held for sale may qualify as a discontinued operation if certain conditions exist (refer to Net Lease Sale and Discontinued Operations).

If circumstances arise that were previously considered unlikely and, as a result the Company decides not to sell a property previously classified as held for sale, the property is reclassified as held and used and included in "Real estate, net"

on the Company’s consolidated balance sheets.

The Company measures and records a property that is reclassified as held and used at the lower of:

1 unchanged sentence

or (ii) the estimated fair value at the date of the subsequent decision not to sell.

Notes to Consolidated Financial Statements

Dispositions— Gains or losses on the sale of real estate assets, including residential property, are recognized in accordance with Accounting Standards Codification ("ASC") 610-20 , Gains and Losses from the Derecognition of Nonfinancial Assets.

The Company primarily uses specific identification and the relative sales value method to allocate costs.

Gains on sales of real estate are included in "Income from sales of real estate"

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

Net Investment in Leases —Net investment in leases are recognized when the Company’s leases qualify as sales-type leases.

The net investment in leases is initially measured at the present value of the fixed and determinable lease payments, including any guaranteed or unguaranteed estimated residual value of the asset at the end of the lease, discounted at the rate implicit in the lease.

Acquisition-related costs are capitalized and recorded in "Net Investment in Leases"

on the Company’s consolidated balance sheets.

If a lease qualifies as a sales-type lease, it is further evaluated to determine whether the transaction is considered a sale leaseback transaction.

If the sales-type lease does not qualify as a sale leaseback transaction, the lease is considered a financing receivable and is recognized in accordance with ASC 310 - Receivables (refer to Note 5) and recorded in "Loans receivable and other lending investments, net"

on the Company’s consolidated balance sheets.

Loans receivable and other lending investments, net — Loans receivable and other lending investments, net includes the following investments:

senior mortgages, corporate/partnership loans, subordinate mortgages, preferred equity investments and debt securities.

Management considers nearly all of its loans to be held-for-investment, although certain investments may be classified as held-for-sale or available-for-sale.

Loans receivable classified as held-for-investment and debt securities classified as held-to-maturity are reported at their outstanding unpaid principal balance net of any unamortized acquisition premiums or discounts and unamortized deferred loan costs or fees.

These loans and debt securities could also include accrued and paid-in-kind interest and accrued exit fees that the Company determines are probable of being collected.

Debt securities classified as available-for-sale are reported at fair value with unrealized gains and losses recorded in "Accumulated other comprehensive income (loss)"

on the Company’s consolidated balance sheets.

Realized gains on the sale of available-for-sale securities are recorded in “Other income” in the Company’s consolidated statements of operations.

Loans receivable and other lending investments designated for sale are classified as held-for-sale and are carried at lower of amortized cost or estimated fair value.

The amount by which carrying value exceeds fair value is recorded as a valuation allowance.

Subsequent changes in the valuation allowance are included in the determination of net income (loss) in the period in which the change occurs.

The Company may acquire properties through foreclosure or by deed-in-lieu of foreclosure in full or partial satisfaction of non-performing loans.

Based on the Company’s strategic plan to realize the maximum value from the collateral received, property is classified as "Land and development, net,"

"Real estate, net"

or "Real estate available and held for sale"

at its estimated fair value when title to the property is obtained.

Any excess of the carrying value of the loan over the estimated fair value of the property (less costs to sell for assets held for sale) is charged-off against the allowance for loan losses as of the date of foreclosure.

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

The Company’s periodic share of earnings and losses in equity method investees is included in "Earnings from equity method investments"

in the consolidated statements of operations.

Equity method investments are included in "Other investments"

on the Company’s consolidated balance sheets.

The Company also has equity interests that are not accounted for pursuant to the equity method of accounting.

These equity interests are carried at cost, plus or minus any changes in value identified through observable comparable price changes in transactions in identical or similar investments of the same entity.

The changes in fair value for these investments are included in "Other income"

in the consolidated statements of operations.

Interest Income from Sales-type Leases —Interest income from sales-type leases is recognized under the effective interest method.

The effective interest method produces a constant yield on the net investment in the sales-type lease and Ground Lease receivable over the term of the lease.

Rent payments that are not fixed and determinable at lease inception, such as percentage rent and CPI adjustments, are not included in the effective interest method calculation and are recognized in the Company’s consolidated statements of operations in the period earned.

A Ground Lease receivable is placed on non-accrual status if and when it becomes 90-days past due or if the Company considers the Ground Lease receivable impaired.

Loans receivable, net – related party —Loans receivable, net – related party includes the four-year term loan that the Company originated to Star Holdings (refer to Note 6).

Loans receivable classified as held-for-investment are reported at their outstanding unpaid principal balance net of any unamortized acquisition premiums or discounts and unamortized deferred loan costs or fees and credit loss allowances.

The Company performs a quarterly analysis of its loan receivable that incorporates management’s current judgments about credit quality based on all known and relevant internal and external factors that may affect collectability.

The Company considers, among other things, payment status, lien position, borrower financial resources and investment collateral, collateral type, project economics and other economic factors.

The Company estimates its Expected Loss on its loans receivable (including unfunded commitments) based on relevant information including current market conditions and reasonable and supportable forecasts that affect the collectability of its investments.

The estimate of the Company’s Expected Loss requires significant judgment.

The Company calculated its Expected Loss through the use of third-party market data that provided current and future economic conditions that may impact the performance of the commercial real estate assets securing its investments.

The Company will consider a loan to be non-performing and place it on non-accrual status at such time as:

(1) interest payments become 90 days delinquent;

(2) it has a maturity default;

or (3) management determines it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan.

Non-accrual loans will be returned to accrual status when they have become contractually current and management believes all amounts contractually owed will be received.

The Company made the accounting policy election to record accrued interest on its loan asset separate from its loans receivable and to exclude accrued interest from its amortized cost basis disclosures.

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

As of December 31, 2023, the Company had $ 0.1 million 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 year ended December 31, 2023, the Company did not reverse any accrued interest on its loan asset.

Interest Income – related party —Interest income - related party (refer to Note 6) 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 multiple ventures (refer to Note 7) 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.

The Company’s periodic share of earnings and losses in equity method investees are included in "Earnings from equity method investments" in the Company’s consolidated statements of operations.

Equity investments are included in "Equity investments" on the Company’s consolidated balance sheets.

The Company acquired two equity interests from iStar in connection with the Merger.

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 7).

The Company periodically reviews equity method investments for impairment in value whenever events or changes in circumstances indicate that the carrying amount of such investments may not be recoverable.

The Company will record an impairment charge to the extent that the estimated fair value of an investment is less than its carrying value and the Company determines the impairment is other-than-temporary.

Impairment charges are recorded in "Earnings from equity method investments"

in the Company’s consolidated statements of operations.

Notes to Consolidated Financial Statements

Cash and cash equivalents — Cash and cash equivalents include cash held in banks or invested in money market funds with original maturity terms of less than 90 days.

Restricted cash — Restricted cash represents amounts required to be maintained under certain of the Company’s debt obligations, loans, leasing, land development and derivative transactions.

Restricted cash is included in "Deferred expenses and other assets, net"

on the Company’s consolidated balance sheets.

Impairment charges, if applicable, are recorded in "Earnings from equity method investments" in the Company’s consolidated statements of operations.

Cash and cash equivalents —Cash and cash equivalents include cash held in banks or invested in money market funds, if applicable, with original maturity terms of less than 90 days.

Restricted cash— Restricted cash primarily includes property escrow balances, investment deposits and cash balances required to be maintained under certain of the Company’s derivative transactions, if any.

Operating lease income —Operating lease income includes rent earned from leases of land and buildings owned by the Company to its tenants.

Operating lease income is recognized on the straight-line method of accounting, generally from the later of the date the lessee takes possession of the space and it is ready for its intended use or the date of acquisition of the asset subject to existing leases.

Accordingly, increases in contractual lease payments are recognized evenly over the term of the lease.

The periodic difference between operating lease income recognized under this method and contractual lease payment terms is recorded as deferred operating lease income receivable and is included in "Deferred operating lease income receivable" on the Company’s consolidated balance sheets.

The Company is also entitled to percentage rent, representing a portion of the lessee’s gross revenues from the properties, pursuant to some of its leases and records percentage rent as operating lease income when earned.

During the years ended December 31, 2023, 2022 and 2021, the Company recorded $ 4.4 million, $ 1.3 million and $ 0.3 million, respectively, of percentage rent from operating leases.

Operating lease income also includes the amortization of finite lived intangible assets and liabilities, which are amortized over the period during which the assets or liabilities are expected to contribute directly or indirectly to the future cash flows of the property acquired.

The Company moves to cash basis operating lease income recognition in the period in which collectability of all lease payments is no longer considered probable.

At such time, any deferred operating lease income receivable balance will be written off.

If and when lease payments that were previously not considered probable of collection become probable, the Company will move back to the straight-line method of income recognition and record an adjustment to operating lease income in that period as if the lease was always on the straight-line method of income recognition.

Other income —Other income primarily includes management fees (see below) from Star Holdings effective with the Merger and also includes interest income earned on the Company’s cash balances and other ancillary income.

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.

Management fees are paid quarterly in arrears.

The Company recognizes management fee income in accordance 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.

Earnings per share —The Company has one class of common stock.

Earnings per share ("EPS") is calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding.

Diluted earnings per share is calculated similarly, however, it reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower earnings per share amount.

Deferred expenses and other assets —Deferred expenses and other assets (refer to Note 8) includes operating lease right-of-use assets, purchase deposits, deferred financing fees associated with the 2021 Unsecured Revolver (refer to Note 9) and the 2023 Unsecured Revolver (refer to Note 9), derivative assets, deferred costs, leasing costs such as brokerage, legal and other costs which are amortized over the life of the respective leases and presented as an operating

activity in the Company’s consolidated statements of cash flows.

Amortization of leasing costs is included in "Depreciation and amortization" in the Company’s consolidated statements of operations.

Deferred financing fees —Deferred financing fees associated with the Company’s mortgages and unsecured notes are recorded in ‘‘Debt obligations, net’’ on the Company’s consolidated balance sheets.

The amortization of deferred financing fees is included in ‘‘Interest expense’’ in the Company’s consolidated statements of operations.

Stock-based compensation —The Company’s equity compensation plans (refer to Note 12) are designed to provide incentive compensation for officers, key employees, directors and advisors of the Company.

Compensation cost for stock-based awards is measured on the grant date and adjusted over the period of the employees’ services to reflect:

(i) estimated or actual forfeitures;

and (ii) the service conditions through the requisite service period.

The awards vest ratably over a four-year service period.

Compensation costs are recognized ratably over the applicable vesting/service period and recorded in "General and administrative" in the Company’s consolidated statements of operations.

Income taxes — The Company (then known as iStar) elected to be taxed as a REIT under sections 856 through 859 of the Internal Revenue Code of 1986, as amended (the "Code") beginning with its taxable year ended December 31, 1998.

The Company operates its business in a manner consistent with its election to be taxed as a REIT.

As such, the consolidated financial statements of the Company have been prepared consistent with the Company’s qualification as a REIT for the periods presented.

The Company will be subject to federal and state income taxation at corporate rates on its net taxable income;

the Company, however, may claim a deduction for the amount of dividends paid to its shareholders.

Amounts distributed as dividends by the Company will be subject to taxation at the stockholder level only.

While the Company must distribute at least 90% of its net taxable income to qualify as a REIT, the Company intends to distribute all of its net taxable income, if any, and eliminate federal and state taxes on undistributed net taxable income.

Certain states may impose minimum franchise taxes.

In addition, the Company is allowed certain other non-cash deductions or adjustments, such as depreciation expense, when computing its net taxable income and distribution requirement.

These deductions permit the Company to reduce its dividend payout requirement under federal tax laws.

The Company’s tax years from 2019 through 2023 remain subject to examination by major tax jurisdictions.

The Company has two taxable REIT subsidiaries (“TRS”), one of which was formed during the year ended December 31, 2018 and until the year ended December 31, 2023 had no material activity.

Accordingly, no provision for income taxes was required.

The second TRS provides management services to Star Holdings and internally to the REIT.

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 year ended December 31, 2023, the Company recorded current income tax expense in the amount of $ 3.1 million, which was partially offset by a deferred tax benefit of $ 1.3 million with respect to the TRS.

In addition, during the years ended December 31, 2023, 2022 and 2021, the Company paid $ 5.4 million, $ 0.5 million and $ 0.1 million, respectively, in taxes.

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

The Company does not enter into derivatives for trading purposes.

Refer to Note 11 for more information on the Company’s derivative activity.

Variable interest entities —The Company evaluates its investments and other contractual arrangements to determine if they constitute variable interests in a VIE.

4 unchanged sentences

The Company reassesses its evaluation of the primary beneficiary of a VIE on an ongoing basis and assesses its evaluation of an entity as a VIE upon certain reconsideration events.

Deferred expenses and other assets / Accounts payable, accrued expenses and other liabilities — Deferred expenses and other assets include right-of-use lease assets, prepaid expenses, certain non-tenant receivables, leasing costs, lease incentives and financing fees associated with revolving-debt arrangements.

Financing fees associated with other debt obligations are recorded as a reduction of the carrying value of "Debt obligations, net"

on the Company’s consolidated balance sheets.

Lease incentives and leasing costs that include brokerage, legal and other costs are amortized over the life of the respective leases and presented as an operating activity in the Company’s consolidated statements of cash flows.

External fees and costs incurred to obtain long-term debt financing have been deferred and are amortized over the term of the respective borrowing using the effective interest method.

Amortization of leasing costs is included in "Depreciation and amortization"

and amortization of deferred financing fees is included in "Interest expense"

in the Company’s consolidated statements of operations.

The Company, as lessee, records right-of-use operating lease assets in "Deferred expenses and other assets,"

operating lease liabilities in "Accounts payable, accrued expenses and other liabilities,"

right-of-use finance lease assets in “Finance lease right of use assets” and finance lease liabilities in “Finance lease liabilities” on its consolidated balance sheets, all measured at the present value of the fixed and determinable lease payments.

Some of the Company’s lease agreements include extension options, which are not included in the lease payments unless the extensions are reasonably certain to be exercised.

For operating leases, the Company recognizes a single lease cost for office leases in "General and administrative"

and a single lease cost for ground leases in "Real estate expense"

in the consolidated statements of operations, calculated so that the cost of the lease is allocated generally on a straight-line basis over the term of the lease, and classifies all cash payments within operating activities in the consolidated statements of cash flows.

For finance leases, the Company recognizes amortization of the right-of-use assets on a straight-line basis over the term of the lease in "Depreciation and amortization"

and interest expense on the lease liability using the effective interest method in "Interest expense"

in the consolidated statements of operations.

Repayments of the principal portion of the finance lease liability are classified within financing activities in the consolidated statements of cash flows and payments of interest on a finance lease liability are classified within operating activities in the consolidated statement of cash flows.

Identified intangible assets and liabilities — Upon the acquisition of a business or an asset, the Company records intangible assets or liabilities acquired at their relative fair values and determines whether such intangible assets or liabilities have finite or indefinite lives.

As of December 31, 2022, all such intangible assets and liabilities acquired by the Company have finite lives.

Intangible assets are included in "Deferred expenses and other assets, net"

and intangible liabilities are included in "Accounts payable, accrued expenses and other liabilities"

on the Company’s consolidated balance sheets.

The Company amortizes finite lived intangible assets and liabilities based on the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the business acquired.

The Company reviews finite lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

If the Company determines the carrying value of an intangible asset is not recoverable it will record an impairment charge to the extent its carrying value exceeds its estimated fair value.

Notes to Consolidated Financial Statements

Impairments of intangible assets are recorded in "Impairment of assets"

in the Company’s consolidated statements of operations.

Revenue recognition — The Company’s revenue recognition policies are as follows:

Operating lease income:

For the Company’s leases classified as operating leases, operating lease income is recognized on the straight-line method of accounting generally from the later of the date the lessee takes possession of the space or the space is ready for its intended use.

If the Company acquires a facility subject to an existing operating lease, the Company will recognize operating lease income on the straight-line method beginning on the date of acquisition.

Accordingly, contractual lease payment increases are recognized evenly over the term of the lease.

The periodic difference between lease revenue recognized under this method and contractual lease payment terms is recorded as "Deferred operating lease income receivable, net"

on the Company’s consolidated balance sheets.

The Company also recognizes revenue from certain tenant leases for reimbursements of all or a portion of operating expenses, including common area costs, insurance, utilities and real estate taxes of the respective property.

This revenue is accrued in the same periods as the expense is incurred and is recorded as “Operating lease income” in the Company’s consolidated statements of operations.

Revenue is also recorded from certain tenant leases that is contingent upon tenant sales exceeding defined thresholds.

These rents are recognized only after the defined threshold has been met for the period.

The Company moves to cash basis operating lease income recognition in the period in which collectability of all lease payments is no longer considered probable.

At such time, any operating lease receivable or deferred operating lease income receivable balance will be written off.

Interest Income:

Interest income on loans receivable and financing receivables is recognized on an accrual basis using the interest method.

On occasion, the Company may acquire loans at premiums or discounts.

These discounts and premiums in addition to any deferred costs or fees, are typically amortized over the contractual term of the loan using the interest method.

Exit fees are also recognized over the lives of the related loans as a yield adjustment, if management believes it is probable that such amounts will be received.

If loans with premiums, discounts, loan origination or exit fees are prepaid, the Company immediately recognizes the unamortized portion, which is included in "Other income"

or "Other expense"

in the Company’s consolidated statements of operations.

The Company considers a loan to be non-performing and places it on non-accrual status at such time as:

(1) interest payments become 90 days delinquent;

(2) it has a maturity default;

or (3) management determines it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan.

While on non-accrual status, based on the Company’s judgment as to collectability of principal, loans are either accounted for on a cash basis, where interest income is recognized only upon actual receipt of cash, or on a cost-recovery basis, where all cash receipts reduce a loan’s carrying value.

Non-accrual loans are returned to accrual status when a loan has become contractually current and management believes all amounts contractually owed will be received.

Certain of the Company’s loans contractually provide for accrual of interest at specified rates that differ from current payment terms.

Interest is recognized on such loans at the accrual rate subject to management’s determination that accrued interest and outstanding principal are ultimately collectible, based on the underlying collateral and operations of the borrower.

Certain of the Company’s loan investments provide for additional interest based on the borrower’s operating cash flow or appreciation of the underlying collateral.

Such amounts are considered contingent interest and are reflected as interest income only upon receipt of cash.

Notes to Consolidated Financial Statements

Interest Income from Sales-Type Leases:

Interest income from sales-type leases is recognized in "Interest income from sales-type leases"

in the Company’s consolidated statements of operations under the effective interest method.

The effective interest method produces a constant yield on the net investment in the lease over the term of the lease.

Other income:

Other income includes mark-to-market gains on equity investments, management fees, other ancillary income from our operating properties, land and development projects and loan portfolio and revenues from hotel operations, which are recognized when rooms are occupied and the related services are provided.

Hotel revenues include room sales, food and beverage sales, parking, telephone, spa services and gift shop sales.

Other ancillary income could include gains from sales of loans, loan prepayment fees, yield maintenance payments, lease termination fees and other ancillary income.

Land development revenue and cost of sales:

Land development revenue includes lot and parcel sales from wholly-owned properties and is recognized for full profit recognition upon closing of the sale transactions, when the profit is determinable, the earnings process is virtually complete, the parties are bound by the terms of the contract, all consideration has been exchanged, any permanent financing for which the seller is responsible has been arranged and all conditions for closing have been performed.

The Company primarily uses specific identification and the relative sales value method to allocate costs.

Allowance for loan losses and net investment in leases — The Company performs quarterly a comprehensive analysis of its loan and sales-type lease portfolios and assigns risk ratings that incorporate management’s current judgments about credit quality based on all known and relevant internal and external factors that may affect collectability.

The Company considers, among other things, payment status, lien position, borrower or tenant financial resources and investment collateral, collateral type, project economics and geographical location as well as national and regional economic factors.

This methodology results in loans and sales-type leases being risk rated, with ratings ranging from "1"

to "5"

with "1"

representing the lowest risk of loss and "5"

representing the highest risk of loss.

The Company estimates its expected loss (“Expected Loss”) on its loans (including unfunded loan commitments), held-to-maturity debt securities and net investment in leases based on relevant information including historical realized loss rates, current market conditions and reasonable and supportable forecasts that affect the collectability of its investments.

The estimate of the Company’s Expected Loss requires significant judgment and the Company analyzes its loan portfolio based upon its different categories of financial assets, which includes:

(i) loans and held-to-maturity debt securities;

(ii) construction loans;

and (iii) net investment in leases and financings that resulted from the acquisition of properties that did not qualify as a sale leaseback transaction and, as such, are accounted for as financing receivables (refer to Note 5).

For the Company’s loans, held-to-maturity debt securities, construction loans, net investment in leases and financings that resulted from the acquisition of properties that did not qualify as sale leaseback transactions, the Company analyzed its historical realized loss experience to estimate its Expected Loss.

The Company adjusted its Expected Loss through the use of third-party market data that provided current and future economic conditions that may impact the performance of the commercial real estate assets securing its investments.

The Company considers a loan or sales-type lease to be non-performing and places it on non-accrual status at such time as:

(1) interest payments become 90 days delinquent;

(2) it has a maturity default;

or (3) management determines it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan or sales-type lease.

Non-accrual loans or sales-type leases are returned to accrual status when they have become contractually current and management believes all amounts contractually owed will be received.

The Company will record a specific allowance on a non-performing loan or sales-type lease if the Company determines that the collateral fair value less costs to sell is less than the carrying value of the collateral-dependent asset.

The specific allowance is increased (decreased) through "Provision for (recovery of) loan losses"

or "Provision for losses on net investment in leases"

in the Company’s consolidated statements of operations and is decreased by charge-offs.

During delinquency and the foreclosure process, there are typically numerous points of negotiation with the borrower or tenant as the Company works toward a settlement or other alternative resolution, which can impact the potential for repayment or receipt of collateral.

The Company’s policy

Notes to Consolidated Financial Statements

is to charge off a loan when it determines, based on a variety of factors, that all commercially reasonable means of recovering the loan balance have been exhausted.

This may occur at different times, including when the Company receives cash or other assets in a pre-foreclosure sale or takes control of the underlying collateral in full satisfaction of the loan upon foreclosure or deed-in-lieu, or when the Company has otherwise ceased significant collection efforts.

The Company considers circumstances such as the foregoing to be indicators that the final steps in the loan collection process have occurred and that a loan is uncollectible.

At this point, a loss is confirmed and the loan and related allowance will be charged off.

The Company made the accounting policy election to record accrued interest on its loan portfolio separate from its loans receivable and other lending investments and to exclude accrued interest from its amortized cost basis disclosures (refer to Note 7).

As of December 31, 2022 and 2021, accrued interest was $ 0.1 million and $ 1.6 million, respectively, and is recorded in "Accrued interest and operating lease income receivable, net"

on the Company’s consolidated balance sheets.

The Company places loans on non-accrual status once interest on the loan becomes 90 days delinquent and reverses 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 years ended December 31, 2022, 2021 and 2020, the Company did not reverse any accrued interest on its loan portfolio.

The Company’s two impaired loans are collateral dependent and impairment is measured using the estimated fair value of the collateral, less costs to sell.

The Company generally uses the income approach through internally developed valuation models to estimate the fair value of the collateral for such loans.

In some cases, the Company obtains external "as is"

appraisals for loan collateral, generally when third party participations exist.

Valuations are performed or obtained at the time a loan is determined to be impaired or designated non-performing, and they are updated if circumstances indicate that a significant change in value has occurred.

In limited cases, appraised values may be discounted when real estate markets rapidly deteriorate.

A loan is also considered impaired if its terms are modified in a troubled debt restructuring ("TDR").

A TDR occurs when the Company has granted a concession and the debtor is experiencing financial difficulties.

Impairments on TDR loans are generally measured based on the present value of expected future cash flows discounted at the effective interest rate of the original loan.

Management evaluates available-for-sale debt securities held in "Loans receivable and other lending investments, net"

for impairment if the security’s fair value is less than its amortized cost.

If the Company has an impaired security, it will then determine if:

(1) the Company has the intent to sell the security;

(2) it is more likely than not that it will be required to sell the security before recovery;

or (3) it does not expect to recover the entire amortized cost basis of the security.

If the Company does not intend to sell the security, it is more likely than not that the entity will not be required to sell the security or it does not expect to recover its amortized cost, the Company will record an allowance for credit losses.

The credit loss component of the allowance will be recorded (or reversed, if necessary) as an "Impairment of assets"

in the Company’s consolidated statements of operations, and the remainder of the allowance will be recorded in "Accumulated other comprehensive income (loss)"

on the Company’s consolidated balance sheets.

Loss on debt extinguishments — The Company recognizes the difference between the reacquisition price of debt and the net carrying amount of extinguished debt currently in earnings.

Such amounts may include prepayment penalties or the write-off of unamortized debt issuance costs, and are recorded in “Loss on early extinguishment of debt, net” in the Company’s consolidated statements of operations.

Derivative instruments and hedging activity — The Company’s use of derivative financial instruments, including derivative financial instruments at some of its equity method investments, is primarily limited to the utilization of interest rate swaps, interest rate caps or other instruments to manage interest rate risk exposure.

The Company does not enter into derivatives for trading purposes.

The Company recognizes its derivatives as either assets or liabilities on the Company’s consolidated balance sheets at fair value.

If certain conditions are met, a derivative may be specifically designated as a hedge of the exposure to changes in the fair value of a recognized asset or liability, a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability.

Notes to Consolidated Financial Statements

For derivatives designated and qualifying as cash flow hedges, changes in the fair value of the derivatives, including the Company’s pro rata share of derivatives at equity method investments, are reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into interest expense or earnings from equity method investments in the same periods during which the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s debt.

For the Company’s derivatives not designated as hedges, the changes in the fair value of the derivatives are reported in "Other expense"

in the Company’s consolidated statements of operations.

Stock-based compensation — Compensation cost for stock-based awards is measured on the grant date and adjusted over the period of the employees’ services to reflect:

(i) actual forfeitures;

and (ii) the outcome of awards with performance or service conditions through the requisite service period.

Compensation cost for market-based awards is determined using a Monte Carlo model to simulate a range of possible future stock prices for the Company’s common stock, which is reflected in the grant date fair value.

All compensation cost for market-based awards in which the service conditions are met is recognized regardless of whether the market-condition is satisfied.

Compensation costs are recognized ratably over the applicable vesting/service period and recorded in "General and administrative"

in the Company’s consolidated statements of operations.

Income taxes — The Company has elected to be qualified and taxed as a REIT under section 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code").

The Company is subject to federal income taxation at corporate rates on its REIT taxable income;

the Company, however, is allowed a deduction for the amount of dividends paid to its shareholders, thereby subjecting the distributed net income of the Company to taxation at the shareholder level only.

While the Company must distribute at least 90% of its taxable income to maintain its REIT status, the Company typically distributes all of its taxable income, if any, to eliminate any tax on undistributed taxable income.

In addition, the Company is allowed several other deductions in computing its REIT taxable income, including non-cash items such as depreciation expense and certain specific allowance amounts that the Company deems to be uncollectable.

These deductions allow the Company to reduce its dividend payout requirement under federal tax laws.

The Company intends to operate in a manner consistent with, and its election to be treated as, a REIT for tax purposes.

Beginning in 2018, the Tax Cuts and Jobs Act reduced the corporate tax rate to 21% from 35% and net income from foreclosure property, if any, is subject to a 21% tax rate.

As of December 31, 2021, the Company had $ 614.6 million of REIT net operating loss ("NOL") carryforwards at the corporate REIT level that can generally be used to offset both ordinary taxable income and capital gain net income in future years.

For the year ended December 31, 2022, the Company expects to report REIT taxable income before the deduction for dividends paid and the NOL deduction.

The Company will fully utilize its NOL carryforward in its year ended December 31, 2022.

The Company’s tax years from 2018 through 2021 remain subject to examination by major tax jurisdictions.

The Company recognizes interest expense and penalties related to uncertain tax positions, if any, as "Income tax (expense) benefit"

in the Company’s consolidated statements of operations.

The Company may participate in certain activities from which it would be otherwise precluded and maintain its qualification as a REIT.

These activities are conducted in entities that elect to be treated as taxable subsidiaries under the Code, subject to certain limitations.

As such, the Company, through its taxable REIT subsidiaries ("TRS"), is engaged in various real estate related opportunities, primarily related to managing activities related to certain foreclosed assets, as well as managing various investments in equity affiliates.

As of December 31, 2022, $ 430.1 million of the Company’s assets were owned by TRS entities.

The Company’s TRS entities are not consolidated with the REIT for federal income tax purposes and are taxed as corporations.

For financial reporting purposes, current and deferred taxes are provided for on the portion of earnings recognized by the Company with respect to its interest in TRS entities.

Notes to Consolidated Financial Statements

The following represents the Company’s TRS income tax benefit (expense) ($ in thousands):

For the Years Ended December 31,

Current tax benefit (expense) (1)(2)

Total income tax (expense) benefit

(1) For the years ended December 31, 2022, 2021 and 2020, excludes a REIT tax expense of $ 13.5 million, $ 0.1 million, $ 0.1 million, respectively.

(2) Under the Tax Cuts and Jobs Act, the alternative minimum tax credit carryforward is a refundable tax credit over a four year period beginning in 2018 and ending in 2021 upon which the full amount of the credit will be allowed.

The CARES Act enacted on March 27, 2020 permits corporate taxpayers to accelerate the full amount of its alternative minimum tax credits.

The Company filed a claim for refund and received a $ 3.0 million refund in 2020 for which the benefit had been recognized in 2017.

An additional refund of alternative minimum taxes in the amount of $ 0.7 million was received during the year ended December 31, 2021 for which a tax benefit was recorded.

During the year ended December 31, 2022, the Company’s TRS entities generated a taxable loss of $ 7.1 million for which the Company did not recognize a net current tax benefit or expense.

As of December 31, 2021, the Company’s TRS entities had $ 165.4 million of NOL carryforwards that can generally be used to offset both ordinary taxable income and capital gain net income in future years.

The NOL carryforwards will begin to expire in 2036, of which $ 73.6 million will fully expire in 2037, if unused.

NOL carryforwards generated in 2018 and thereafter do not expire and are limited to 80% of taxable income when utilized.

The amount of NOL carryforwards as of December 31, 2022 will be determined upon finalization of the Company’s 2022 tax return.

Total cash paid for taxes for the years ended December 31, 2022, 2021 and 2020 was $ 14.6 million, $ 0.3 million and $ 0.8 million, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes, as well as operating loss and tax credit carryforwards.

The Company applied the corporate tax rate enacted December 22, 2017 under the Tax Cuts and Jobs Act effective for years beginning after 2017 to value its deferred tax assets and liabilities.

The Company evaluates whether its deferred tax assets are realizable and recognizes a valuation allowance if, based on the available evidence, both positive and negative, it is more likely than not that some portion or all of its deferred tax assets will not be realized.

When evaluating whether its deferred tax assets are realizable, the Company considers, among other matters, estimates of expected future taxable income, nature of current and cumulative losses, existing and projected book/tax differences, tax planning strategies available, and the general and industry specific economic outlook.

This analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods.

Based on an assessment of all factors, including historical losses and continued volatility of the activities within the TRS entities, it was determined that full valuation allowances were required on the net deferred tax assets as of December 31, 2022 and 2021, respectively.

Changes in estimates of our valuation allowance, if any, are included in “Income tax (expense) benefit” in the consolidated statements of operations.

The valuation allowance was reduced to reflect the change in value of our net deferred tax assets that reflects a reduced rate of tax under the Tax Cuts and Jobs Act.

Deferred tax assets and liabilities of the Company’s TRS entities were as follows ($ in thousands):

Fair Values —The Company is required to disclose fair value information with regard to its financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practical to estimate fair value.

The Financial Accounting Standards Board ("FASB") guidance defines fair value as the price that would be received to sell an asset or

paid to transfer a liability in an orderly transaction between market participants on the measurement date.

The following fair value hierarchy prioritizes the inputs to be used in valuation techniques to measure fair value:

unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

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

The Company determines the estimated fair values of financial assets and liabilities based on a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the Company and the Company’s own assumptions about market participant assumptions.

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

As of December 31, 2023

Deferred tax assets (1)

Valuation allowance

Net deferred tax assets (liabilities)

(1) Deferred tax assets as of December 31, 2022 include temporary differences related primarily to asset basis of $ 16.1 million, deferred expenses and other items of $ 5.7 million, NOL carryforwards of $ 40.8 million and other credits of $ 2.3 million.

Deferred tax assets as of December 31, 2021 include temporary differences related primarily to asset basis of $ 18.7 million, deferred expenses and other items of $ 8.0 million, NOL carryforwards of $ 40.3 million and other credits of $ 2.4 million.

The Company has determined that the change in tax law associated with the Tax Cuts and Jobs Act will not have a material effect on whether its deferred tax assets are realizable.

Earnings per share — The Company uses the two-class method in calculating earnings per share ("EPS") when it issues securities other than common stock that contractually entitle the holder to participate in dividends and earnings

Notes to Consolidated Financial Statements

of the Company when, and if, the Company declares dividends on its common stock.

Basic earnings per share ("Basic EPS") for the Company’s common stock are computed by dividing net income allocable to common shareholders by the weighted average number of shares of common stock outstanding for the period, respectively.

Diluted earnings per share ("Diluted EPS") is calculated similarly, however, it reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower earnings per share amount.

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

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

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

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

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

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

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

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

After repayment of the mortgage indebtedness and prepayment penalties, a senior term loan secured by certain of the assets (refer to Note 10), payments to terminate derivative contracts, payments to joint venture partners, and payments of promotes, transaction expenses and amounts due under employee incentive plans, the Company retained net cash proceeds of $ 1.2 billion from the transaction.

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

to SAFE for $ 122.0 million and entered into three Ground Leases with SAFE.

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

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

Net Lease Venture —In February 2014, the Company partnered with a sovereign wealth fund to form a venture to acquire and develop net lease assets (the “Net Lease Venture”) and gave a right of first offer to the venture on all new net lease investments.

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

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

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

Net Lease Venture was part of the Net Lease Sale.

As of December 31, 2022, $ 3.1 million of “Noncontrolling interests” was attributable to the Net Lease Venture and represented proceeds from the Net Lease Sale that were not yet distributed to the Company’s partners in the venture as of December 31, 2022.

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

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

During the year ended December 31, 2022, the Company recorded $ 0.4 million of management fees from Net Lease Venture II in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

During the year ended December 31, 2021 and 2020, the Company recorded $ 1.7 million and $ 1.5 million, respectively, of management fees from Net Lease Venture II in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

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

As of December 31, 2022, $ 2.0 million of “Real estate and other assets available and held for sale and

Notes to Consolidated Financial Statements

classified as discontinued operations” was attributable to the Net Lease Venture II and represented proceeds from the Net Lease Sale that were not yet distributed to the Company as of December 31, 2022.

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

There are also some residual assets and liabilities from the Net Lease Sale that are classified as “Real estate and other assets available and held for sale and classified as discontinued operations” and “Liabilities associated with real estate held for sale and classified as discontinued operations,” respectively, on the Company’s consolidated balance sheets as of December 31, 2022.

For the years ended December 31, 2022, 2021 and 2020, the operations of such assets are classified in “Net income from discontinued operations” in the Company’s consolidated statements of operations.

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

Real estate, at cost

accumulated depreciation

Total real estate, net

Net investment in leases

Loans receivable held for sale

Other investments

Finance lease right of use assets

Accrued interest and operating lease income receivable, net

Deferred operating lease income receivable, net

Deferred expenses and other assets, net

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

Accounts payable, accrued expenses and other liabilities

Finance lease liabilities

As of December 31, 2022

Net investment in sales-type leases (1)

Ground Lease receivables (1)

Loans receivable, net - related party (1)

Cash and cash equivalents (2)

Restricted cash (2)

Debt obligations, net (1)

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

Notes to Consolidated Financial Statements

The transaction described above involving the Company's net lease business qualified for discontinued operations and the following table summarizes net income from discontinued operations for the years ended December 31, 2022, 2021 and 2020 ($ in thousands):

For the Years Ended December 31,

Operating lease income

Interest income

Interest income from sales-type leases

Total revenues

Costs and expenses:

Interest expense (1)

Real estate expense

Depreciation and amortization (1)

(Recovery of) provision for loan losses

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

Impairment of assets

Other expense (2)

Total costs and expenses

Income from sales of real estate

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

Loss on early extinguishment of debt, net

Earnings from equity method investments

Selling profit from sales-type leases

Net income from discontinued operations before income taxes

Income tax expense

Net income from discontinued operations

Net (income) from discontinued operations attributable to noncontrolling interests

Net income from discontinued operations attributable to iStar Inc.

(1) For the years ended December 31, 2022, 2021 and 2020, the Company recorded $ 1.3 million, $ 8.4 million and $ 8.2 million, respectively, of “Interest expense” in its consolidated statements of operations from its Ground Leases with SAFE.

During the years ended December 31, 2021 and 2020, the Company recognized $ 1.5 million and $ 1.5 million, respectively, of “Depreciation and amortization” in its consolidated statements of operations from its Ground Leases with SAFE.

Notes to Consolidated Financial Statements

Represents the reversal of other expenses recognized in connection with the settlement of interest rate hedges during the year ended December 31, 2022.

Notes to Consolidated Financial Statements

(2) The following table presents cash flows provided by operating activities and cash flows used in investing activities from discontinued operations for the years ended December 31, 2022, 2021 and 2020 ($ in thousands):

Total debt obligations, net

(1) The fair value of the Company’s net investment in sales-type leases, Ground Lease receivables and loans receivable, net – related party are classified as Level 3 within the fair value hierarchy .

The fair value of the Company’s debt obligations traded in secondary markets are classified as Level 1 within the fair value hierarchy and the fair value of the Company’s debt obligations not traded in secondary markets are classified as Level 3 within the fair value hierarchy.

(2) The Company determined the carrying values of its cash and cash equivalents and restricted cash approximated their fair values and are classified as Level 1 within the fair value hierarchy.

Redeemable Noncontrolling Interests —In February 2022, the Company sold 108,571 Caret units (refer to Note 12) for $ 19.0 million to third-party investors and received a commitment from an existing shareholder (which is affiliated with one of the Company’s independent directors) for the purchase of 28,571 Caret units for $ 5.0 million.

As part of the sale, the Company agreed to use commercially reasonable efforts to provide public market liquidity for the Caret units by seeking to provide a listing of the Caret units, or securities into which they may be exchanged, within two years of the sale.

In the event public market liquidity of the Caret units is not achieved within such two year period at a value not less than the purchase price for the Caret units, reduced by an amount equal to the amount of subsequent cash distributions made to the investors on account of such Caret units, the investors have the right to cause Caret Ventures LLC to redeem their Caret units at their original purchase price as so reduced.

The Company classifies these redeemable Caret units in accordance with Accounting Standards Codification (“ASC”) 480:

Distinguishing Liabilities from Equity.

ASC 480-10-S99-3A requires that equity securities redeemable at the option of the holder be classified outside of permanent stockholders’ equity.

The Company classifies redeemable Caret units as “Redeemable noncontrolling interests” in its consolidated balance sheets and consolidated statements of changes in equity.

The redeemable noncontrolling interest’s carrying amount is equal to the higher of (i) the initial carrying amount, increased or decreased for the redeemable noncontrolling interest’s share of net income or loss and dividends;

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.

During the year ended December 31, 2022, redeemable noncontrolling interests were allocated $ 0.6 million of net income (refer to Note 4).

Acquisitions —The Company evaluates each acquisition transaction to determine whether the acquired asset meets the definition of a business.

Under ASC 805, an acquisition does not qualify as a business when (i) substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets;

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

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.

Transaction costs related to asset acquisitions are capitalized as part of the cost basis of the acquired assets, while transaction costs related to business combinations are expensed as incurred.

The Company’s acquisition of iStar was accounted for as a business combination.

For business combinations, the Company recognizes and measures identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the Company’s consolidated balance sheets.

I n a business combination, the difference, if any, between the purchase consideration and the fair value of identifiable net assets acquired is either recorded as goodwill or as a bargain purchase gain.

Fair values are based on available information including discounted cash flow analysis or similar fair value models.

Fair value estimates are also made using significant assumptions such as capitalization rates, discount rates, fair market lease rates and other market data.

The fair value of the Company’s interests in equity investments acquired is calculated using the fair value of the investments held by the venture, which are valued using methods as described above, and considers the Company’s economics in the venture.

The fair value of financial instruments, which could include loans receivable or net investment in sales-type leases, is based on current market conditions and loan or lease agreements in place.

The fair value of tangible assets, which could include land, buildings, building improvements and tenant improvements is determined as if these assets are vacant.

Intangible assets may include the value of right of use lease assets, above-market leases and in-place leases.

As lessee, right of use lease assets and lease liabilities are measured at the present value of lease payments not yet paid, discounted at the implied rate charged by the lessor if that rate is readily determinable, or if that rate is not readily determinable, the Company's incremental borrowing rate, as of the date of the acquisition.

As lessee, operating lease right of use assets are included in “Deferred expenses and other assets, net” and operating lease liabilities are recorded in “Accounts payable, accrued expenses and other liabilities” on the Company’s consolidated balance sheets.

As lessee, above-market operating lease intangibles, in-place operating lease intangibles and below-market lease assets are each recorded at their fair values and included in “Deferred expenses and other assets, net” on the Company’s consolidated balance sheets.

The table below shows the Company’s purchase consideration for the acquisition of iStar ($ in thousands):

Total Company shares as purchase price (1)

Stock price of the Company’s common stock (2)

Fair value of the Company's stock transferred

Cash consideration paid by the Company to iStar

Purchase consideration

(1) The total post-Merger shares of the Company to be held by iStar shareholders includes 12.7 million shares that were issued as consideration for the investment in Old SAFE previously held by iStar as of March 30, 2023 that were retired in connection with the Merger.

Accordingly, these shares are excluded from the purchase consideration as they are reflected as a treasury stock repurchase and retirement by Old SAFE.

(2) Based on the closing price of Old SAFE’s common stock as of March 30, 2023, representing the final closing price prior to the effective time of the Merger.

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 $ 18.9 million of Merger expenses during the year ended December 31, 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 year ended December 31, 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 6) which was originated at the time of the Merger in conjunction with the Spin-Off.

During the year ended December 31, 2022, the Company recorded $ 7.7 million of Merger

expenses and $ 2.1 million of related non-recurring charges, both of which are recorded in “Other expense” in the Company’s consolidated statements of operations.

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 December 31, 2023, the Company has incurred $ 26.6 million of Merger expenses.

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

Cash and cash equivalents

Equity investments (1)

Deferred tax asset (2)

Deferred expenses and other assets (2)(3)

Total assets acquired

Accounts payable, accrued expenses and other liabilities (2)(4)

Debt obligations (5)

Total liabilities assumed

Net identifiable (liabilities assumed) assets acquired

Purchase consideration

net identifiable liabilities assumed

(1) Equity investments were valued using discount rates between 7.2 % and 13.9 % and are classified as Level 3 within the fair value hierarchy.

(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 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 December 31, 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.

(4) Accounts payable, accrued expenses and other liabilities primarily includes a $ 14.2 million operating lease liability .

In addition, under the Merger Agreement, iStar was required to fund its share of merger-related costs and to provide sufficient cash to fund any unresolved corporate obligations and accrued liabilities or costs yet-to-be incurred prior to the Merger.

Accounts payable, accrued expenses and other liabilities includes approximately $ 8.7 million of obligations assumed from iStar, which are offset with corresponding amounts in cash and cash equivalents and amounts receivable in deferred expenses and other assets, net sufficient to settle such obligations.

(5) Debt obligations were valued using a discount rate of 6.7 % and are classified as Level 3 within the fair value hierarchy.

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

The following table summarizes the Company's pro forma revenues and net income (loss) for the years ended December 31, 2023 and 2022 as if the Merger described in Note 1 was completed on January 1, 2022 ($ in thousands):

For the Years Ended December 31,

Cash flows provided by operating activities

Cash flows provided by (used in) investing activities

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

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

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

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

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

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

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

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

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

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

Pro forma revenues

Pro forma net income (loss)

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 year ended December 31, 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 year ended December 31, 2022, pro forma net loss includes $ 171.9 million of losses on extinguishment of debt, which are non-recurring in nature.

From the date of the Merger closing through December 31, 2023, $ 1.0 million of total revenues and $ 7.1 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 fair value, or the estimated fair value of a reporting unit of a company, is below its book value.

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.

New Accounting Pronouncements —In August 2023, the FASB issued ASU 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement (“ASU 2023-05”).

ASU 2023-05 requires a joint venture to initially measure all contributions received upon its formation at fair value and is effective for all joint venture entities with a formation date on or after January 1, 2025.

ASU 2023-05 is to be applied on a prospective basis, while retrospective application can be elected for joint ventures formed before the effective date.

The Company is currently evaluating ASU 2023-05 but does not expect this standard to have a material impact on its consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 requires greater disaggregation of information in the rate reconciliation, income taxes paid disaggregated by jurisdiction and certain other amendments to improve income tax disclosures.

The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

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

Note 4—Real Estate

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

Land, at cost

Buildings and improvements, at cost

accumulated depreciation

Real estate, net

Real estate available and held for sale (1)

Total real estate

(1) As of December 31, 2022 and 2021, the Company had $ 4.0 million and $ 0.3 million, respectively, of residential homes/condominiums available for sale in its operating properties portfolio.

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

During the year ended December 31, 2022, the Company sold an operating property with a carrying value of $ 14.4 million and recognized gains of $ 25.2 million in “Income from sales of real estate” in the Company’s consolidated statements of operations.

During the year ended December 31, 2021, the Company sold a commercial operating property with a carrying value of $ 96.8 million and recognized gains of $ 25.6 million and sold residential operating properties and recognized gains of $ 0.7 million in “Income from sales of real estate” in the Company’s consolidated statements of operations.

Real Estate Available and Held for Sale— During the year ended December 31, 2021, the Company transferred an operating property with a carrying value of $ 96.8 million to held for sale prior to its disposition in 2021.

Impairments— During the years ended December 31, 2022, 2021 and 2020, the Company recorded aggregate impairments on real estate assets totaling $ 2.4 million, $ 0.6 million and $ 3.1 million, respectively.

During the year ended

Notes to Consolidated Financial Statements

December 31, 2022, the Company recognized an aggregate impairment of $ 2.4 million on residential homes held for sale and on an operating property based on the expected cash flows to be received.

During the year ended December 31, 2021, the Company recorded an impairment of $ 0.6 million on an operating property.

During the year ended December 31, 2020, the Company recorded an impairment of $ 3.1 million on a real estate asset held for sale.

Tenant Reimbursements— The Company receives reimbursements from tenants for certain facility operating expenses including common area costs, insurance, utilities and real estate taxes and are included in “Operating lease income” in the Company’s consolidated statements of operations.

Tenant expense reimbursements were $ 3.1 million, $ 2.9 million and $ 3.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Allowance for Doubtful Accounts— As of both December 31, 2022 and 2021, the allowance for doubtful accounts related to real estate tenant receivables was $ 0.1 million.

These amounts are included in “Accrued interest and operating lease income receivable, net” on the Company’s consolidated balance sheets.

Future Minimum Operating Lease Payments— Future minimum operating lease payments to be collected under non-cancelable operating leases, excluding lease payments for assets that are classified as discontinued operations and customer reimbursements of expenses, in effect as of December 31, 2022, are as follows by year ($ in thousands):

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

Note 5—Net Investment in Leases

In June 2021, the Company acquired two parcels of land for $ 42.0 million each and simultaneously entered into two Ground Leases with the respective tenants.

Each Ground Lease also provides for a leasehold improvement allowance up to a maximum of $ 83.0 million.

The Company also concurrently entered into an agreement pursuant to which SAFE would acquire the Ground Leases from the Company.

If certain construction conditions are not met within a specified time period, SAFE will have no obligation to acquire the Ground Leases or fund the leasehold improvement allowances.

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

One Ground Lease was entered into with the seller of the land and did not qualify for sale leaseback accounting, and as such, was accounted for as a financing transaction and $ 42.0 million was recorded in “Loans receivable held for sale” on the Company’s consolidated balance sheet at the time of acquisition.

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

There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the properties and Ground Leases from the Ground Lease Plus Fund.

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

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

Notes to Consolidated Financial Statements

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

The Company is currently evaluating ASU 2023-09 but does not expect this standard to have a material impact on its consolidated financial statements.

Note 4—Net Investment in Sales-type Leases and Ground Lease Receivables

The Company classifies certain of its Ground Leases as sales-type leases and records the leases within "Net investment in sales-type leases" on the Company’s consolidated balance sheets and records interest income in "Interest income from sales-type leases" in the Company’s consolidated statements of operations.

In addition, the Company may enter into transactions whereby it acquires land and enters into Ground Leases directly with the seller.

These Ground Leases qualify as sales-type leases and, as such, do not qualify for sale leaseback accounting and are accounted for as financing receivables in accordance with ASC 310 - Receivables and are included in "Ground Lease receivables" on the

Company’s consolidated balance sheets.

The Company records interest income from Ground Lease receivables in "Interest income from sales-type leases" in the Company’s consolidated statements of operations.

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 and was recorded in “Net investment in sales-type leases” and “Real estate-related intangible assets, net” on the Company’s consolidated balance sheet.

In September 2022, the Company sold a Ground Lease to a third-party for $ 136.0 million and recognized a gain of $ 55.8 million in “Gain on sale of Ground Leases” in the Company’s consolidated statements of operations for the year ended December 31, 2022.

$ 9.5 million of the gain was attributable to noncontrolling interests, of which $ 0.7 million was attributable to redeemable noncontrolling interests.

In December 2022, $ 8.5 million of proceeds from this transaction were distributed to noncontrolling interests inclusive of the portion distributed to redeemable noncontrolling interests.

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.

Each party’s commitment is discretionary.

The joint venture is a voting interest entity and the Company consolidates the joint venture in its financial statements due to its controlling interest.

The Company’s joint venture partners’ interest is recorded in “Noncontrolling interests” on the Company’s consolidated balance sheets.

The Company receives a management fee, measured on an asset-by-asset basis, equal to 25 basis points on invested equity for such asset for the first five years following its acquisition, and 15 basis points on invested equity thereafter.

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

During the year ended December 31, 2023, the joint venture acquired three Ground Leases for an aggregate purchase price of $ 60.1 million, of which $ 36.2 million has been funded as of December 31, 2023.

In November 2023, the Company sold a Ground Lease to a third-party for $ 4.2 million and recognized a gain of $ 0.4 million in “Gain on sale of Ground Leases” in the Company’s consolidated statements of operations for the year ended December 31, 2023.

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

December 31, 2023

3 unchanged sentences

Present value discount

Net investment in leases (1)

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

As of December 31, 2021, the risk rating on the Company’s net investment in leases was 1.0 .

Allowance for Losses on Net Investment in Leases —Changes in the Company’s allowance for losses on net investment in leases for the years ended December 31, 2022 and 2021 were as follows ($ in thousands):

December 31, 2022

December 31, 2021

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

Provision for (recovery of) losses on net investment in leases included in discontinued operations (1)

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

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

During the year ended December 31, 2021, the Company recorded a recovery of losses on net investment in leases of $ 10.9 million.

The recovery of losses on net investment in leases for the year ended December 31, 2021 resulted primarily from the cash flows the Company received upon disposition of the Company’s net investment in leases included in “Real estate and other assets available and held for sale and classified as discontinued operations” and “Net investment in leases” on the Company’s consolidated balance sheets.

Note 6—Land and Development

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

Land and land development, at cost

accumulated depreciation

Total land and development, net

Dispositions— During the years ended December 31, 2022, 2021 and 2020, the Company sold land parcels and residential lots and units and recognized land development revenue of $ 61.8 million, $ 189.1 million and $ 164.7 million, respectively.

During the years ended December 31, 2022, 2021 and 2020, the Company recognized land development cost of sales of $ 63.4 million, $ 172.0 million and $ 177.7 million, respectively, from its land and development portfolio.

Impairments— During the year ended December 31, 2022, the Company recorded an impairment of $ 12.7 million on a land and development asset due to a change in business strategy.

During the year ended December 31, 2020, the Company recorded an aggregate impairment of $ 2.7 million on two land and development assets.

Notes to Consolidated Financial Statements

Note 7—Loans Receivable and Other Lending Investments, net

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

December 31, 2022

December 31, 2021

Construction loans

Senior mortgages

Corporate/Partnership loans

Subtotal - gross carrying value of construction loans (1)

Senior mortgages

Subordinate mortgages

Subtotal - gross carrying value of loans

Other lending investments

Held-to-maturity debt securities

Available-for-sale debt securities

Subtotal - other lending investments

Total gross carrying value of loans receivable and other lending investments

Allowance for loan losses

Total loans receivable and other lending investments, net

(1) As of December 31, 2022, 100 % of gross carrying value of construction loans had completed construction.

Notes to Consolidated Financial Statements

Allowance for Loan Losses — Changes in the Company’s allowance for loan losses were as follows for the years ended December 31, 2022, 2021 and 2020 ($ in thousands):

General Allowance

Maturity Debt

Year Ended December 31, 2022

Allowance for loan losses at beginning of period

Provision for (recovery of) loan losses (1)

Charge-offs (1)

Allowance for loan losses at end of period

( 30,277,457 )

( 29,379,846 )

Allowance for credit losses

Net investment in sales-type leases (2)

(1) As of December 31, 2023, total discounted cash flows were approximately $ 3,225 million and the discounted unguaranteed estimated residual value was $ 30.4 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 December 31, 2023, $ 16.4 million was attributable to noncontrolling interests.

The following table presents a rollforward of the Company’s net investment in sales-type leases and Ground Lease receivables for the year ended December 31, 2023 ($ in thousands):

Net Investment in

Sales-type Leases

Beginning balance

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

Origination/acquisition/fundings (1)

Provision for credit losses

Ending balance (2)

(1) The net investment in sales-type leases is initially measured at the present value of the fixed and determinable lease payments, including any guaranteed or unguaranteed estimated residual value of the asset at the end of the lease, discounted at the rate implicit in the lease.

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

As of December 31, 2023, the Company’s weighted average accrual rate for its net investment in sales-type leases and Ground Lease receivables was 5.2 % and 5.4 % , respectively.

As of December 31, 2023, the weighted average remaining life of the Company’s 34 Ground Lease receivables was 97.9 years.

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 year ended December 31, 2023 were as follows ($ in thousands):

Net investment in sales-type leases

Year Ended December 31, 2023

Allowance for loan losses at beginning of period

Recovery of loan losses (1)

Allowance for loan losses at end of period

Allowance for credit losses at beginning of period

Impact from adoption of new accounting standard (refer to Note 3) (1)

Provision for (recovery of) credit losses (2)

Allowance for credit losses at end of period (3)

Ground Lease receivables

Year Ended December 31, 2023

Allowance for loan losses at beginning of period

Adoption of new accounting standard (2)

Provision for loan losses (1)

Charge-offs (3)

Allowance for loan losses at end of period

(1) During the year ended December 31, 2022, the Company recorded a provision for (recovery of) loan losses of $ 45.0 million in its consolidated statements of operations.

The provision in 2022 was due primarily to a $ 22.2 million specific provision on the Company’s held-to-maturity debt security, which was recorded at its repayment proceeds and a provision of $ 23.8 million on one loan prior to it being transferred to held for sale.

During the year ended December 31, 2021, the Company recorded a recovery of loan losses of $ 8.1 million in its consolidated statement of operations resulting from the repayment of loans during the period and an improving macroeconomic impact of the COVID-19 pandemic on commercial real estate markets, of which $ 1.0 million related to a provision for credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities".

During the year ended December 31, 2020, the Company recorded a provision for loan losses of $ 8.9 million in its consolidated statement of operations resulting from the macroeconomic impact of the COVID-19 pandemic on commercial real estate markets, of which $ 1.5 million related to a recovery of credit losses for unfunded loan commitments and is recorded as a reduction to "Accounts payable, accrued expenses and other liabilities"

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

(2) On January 1, 2020, the Company recorded an increase to its allowance for loan losses of $ 2.3 million upon the adoption of ASU 2016-13, of which $ 2.5 million related to expected credit losses for unfunded loan commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."

(3) During the year ended December 31, 2020, the Company charged-off $ 25.9 million from the specific allowance due to the sale of a non-performing loan.

Notes to Consolidated Financial Statements

The Company’s investment in loans and other lending investments and the associated allowance for loan losses were as follows ($ in thousands):

Evaluated for

Impairment (1)

As of December 31, 2022

Construction loans (2)

Allowance for loan losses

As of December 31, 2021

Construction loans (2)

Held-to-maturity debt securities

Available-for-sale debt securities (3)

Allowance for loan losses

(1) The carrying value of these loans includes amortized fees of $ 0.1 million and $ 0.8 million as of December 31, 2022 and 2021, respectively.

The Company’s loans individually evaluated for impairment represent loans on non-accrual status and the unamortized amounts associated with these loans are not currently being amortized into income.

(2) The carrying value of these loans includes an unamortized net discount of $ 0.2 million as of December 31, 2021.

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

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

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

Notes to Consolidated Financial Statements

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

Year of Origination

Prior to 2018

Senior mortgages

Corporate/partnership loans

Subordinate mortgages

(1) As of December 31, 2022, excludes $ 29.5 million for one loan on non-accrual status.

Notes to Consolidated Financial Statements

Allowance for credit losses at beginning of period

Impact from adoption of new accounting standard (refer to Note 3) (1)

Provision for (recovery of) credit losses (2)

Allowance for credit losses at end of period (3)

(1) On January 1, 2023, the Company recorded an allowance for credit losses on net investment in sales-type leases of $ 0.4 million and an allowance for credit losses on Ground Lease receivables of $ 0.2 million upon the adoption of ASU 2016-13.

The Company also recorded an allowance for credit losses of $ 0.1 million related to expected credit losses for unfunded commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."

(2) During the year ended December 31, 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 $ 0.2 million, respectively.

The provision for credit losses was due primarily to a declining macroeconomic forecast since December 31, 2022.

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

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 December 31, 2023 ($ in thousands):

Year of Origination

Prior to 2019

Senior mortgages

Corporate/partnership loans

Subordinate mortgages

(1) As of December 31, 2021, excludes $ 59.6 million for one loan on non-accrual status.

Notes to Consolidated Financial Statements

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

As of December 31, 2022

Senior mortgages

Subordinate mortgages

As of December 31, 2021

Senior mortgages (1)

Corporate/Partnership loans

Subordinate mortgages

(1) Loan past due was transferred to held for sale as of December 31, 2022.

Impaired Loans —In the fourth quarter 2022, the Company classified a loan with a carrying value of $ 29.1 million as non-performing upon maturity default.

In the fourth quarter 2020, the Company sold a non-performing loan with a carrying value of $ 15.2 million and received proceeds of $ 11.0 million.

In addition, the Company recorded a $ 4.2 million loan loss provision and simultaneously charged-off of the remaining unpaid balance.

The Company’s impaired loans, presented by class, were as follows ($ in thousands):

Ground Lease receivables

Stabilized properties

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 December 31, 2023, are as follows by year ($ in thousands):

with Inflation

Total undiscounted cash flows

During the years ended December 31, 2023, 2022 and 2021, the Company recognized interest income from sales-type leases in its consolidated statements of operations as follows ($ in thousands):

Net Investment

in Sales-type

Year Ended December 31, 2023

Total interest income from sales-type leases

Year Ended December 31, 2022

Total interest income from sales-type leases

Year Ended December 31, 2021

Total interest income from sales-type leases

Note 5—Real Estate, Real Estate-Related Intangibles and Real Estate Available and Held for Sale

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

December 31, 2023

December 31, 2022

Land and land improvements, at cost

Buildings and improvements, at cost

accumulated depreciation

Total real estate, net

Real estate-related intangible assets, net

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 year ended December 31, 2023, the Company acquired $ 9.7 million of real property that is being marketed for sale and is recorded in real estate available and held for sale.

During the year ended December 31, 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 December 31, 2023

Above-market lease assets, net (1)

In-place lease assets, net (2)

Other intangible assets, net

As of December 31, 2022

With an allowance recorded:

Senior mortgages (1)

(1) The Company has one non-accrual loan as of December 31, 2022 and 2021 that is considered impaired and included in the table above.

The Company did no t record any interest income on impaired loans for the years ended December 31, 2022, 2021 and 2020.

The Company’s average recorded investment in impaired loans and interest income recognized, presented by class, was as follows ($ in thousands):

Years Ended December 31,

With an allowance recorded:

Senior mortgages

Loans receivable held for sale —In December 2022, the Company began marketing a non-performing loan for sale and classified the loan in “Loans receivable held for sale” on the Company’s consolidated balance sheet.

Prior to its transfer to loans receivable held for sale, the Company recorded a provision for loan losses of $ 23.8 million on the loan based on the Company’s intent to sell the loan based on a bid received from a third-party.

The loan is recorded on the Company’s consolidated balance sheet at the estimated sales price of $ 37.7 million.

Notes to Consolidated Financial Statements

In March 2021, the Company acquired land and simultaneously structured and entered into with the seller a Ground Lease on which a multi-family project will be constructed.

The Company funded $ 16.1 million at closing and the Ground Lease documents provided for future funding obligations to the Ground Lease tenant of approximately $ 11.9 million of deferred purchase price and $ 52.0 million of leasehold improvement allowance upon achievement of certain milestones.

At closing, the Company entered into an agreement with SAFE pursuant to which, subject to certain conditions being met, SAFE would acquire the ground lessor entity from the Company.

The Company determined that the transaction did not qualify as a sale leaseback transaction and recorded the Ground Lease in “Loans receivable held for sale” on the Company’s consolidated balance sheet.

Subsequent to closing, the Company funded approximately $ 6.0 million of the deferred purchase price to the Ground Lease tenant.

The Company sold the ground lessor entity (and SAFE assumed all future funding obligations to the Ground Lease tenant) to SAFE in September 2021 for $ 22.1 million and recorded no gain or loss on the sale.

In June 2021, the Company acquired a parcel of land for $ 42.0 million and simultaneously entered into a Ground Lease (refer to Note 5).

The Company also concurrently entered into an agreement pursuant to which SAFE would acquire the Ground Lease from the Company.

The Ground Lease was entered into with the seller of the land and did not qualify for sale leaseback accounting, and as such, was accounted for as a financing transaction and $ 42.0 million was recorded in “Loans receivable held for sale” on the Company’s consolidated balance sheet at the time of acquisition.

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

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

Above-market lease assets, net (1)

In-place lease assets, net (2)

Other intangible assets, net

(1) Above-market lease assets are recognized during asset acquisitions when the present value of market rate rental cash flows over the term of a lease is less than the present value of the contractual in-place rental cash flows.

Above-market lease assets are amortized over the non-cancelable term of the leases.

(2) In-place lease assets are recognized during asset acquisitions and are estimated based on the value associated with the costs avoided in originating leases comparable to the acquired in-place leases as well as the value associated with lost rental revenue during the assumed lease-up period.

In-place lease assets are amortized over the non-cancelable term of the leases.

The amortization of real estate-related intangible assets had the following impact on the Company’s consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021 ($ in thousands):

Income Statement

For the Years Ended December 31,

Intangible asset

Above-market lease assets (decrease to income)

Operating lease income

In-place lease assets (decrease to income)

Depreciation and amortization

Other intangible assets (decrease to income)

Operating lease income

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

(1) As of December 31, 2023, the weighted average amortization period for the Company’s real estate-related intangible assets was approximately 80.4 years.

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

As of December 31, 2023

Available-for-Sale Securities (1)

Municipal debt securities

Held-to-Maturity Securities (2)

Debt securities

(1) During the year ended December 31, 2022, the Company sold its available-for-sale securities and recognized a gain of $ 2.9 million, which is recorded in “Other income” in the Company’s consolidated statements of operations .

(2) During the year ended December 31, 2022, the Company received $ 75.0 million of repayments and recorded a $ 22.2 million provision in ‘Provision for (recovery of) loan losses” in its consolidated statements of operations on its debt security.

Notes to Consolidated Financial Statements

Note 8—Other Investments

The Company’s other investments and its proportionate share of earnings (losses) from equity method investments were as follows ($ in thousands):

Carrying Value

Equity in Earnings (Losses)

Below-market lease liabilities (1)

As of December 31, 2022

Below-market lease liabilities (1)

(1) Below-market lease liabilities are recognized during asset acquisitions when the present value of market rate rental cash flows over the term of a lease exceeds the present value of the contractual in-place rental cash flows.

Below-market lease liabilities are amortized over the non-cancelable term of the leases.

The amortization of real estate-related intangible liabilities had the following impact on the Company’s consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021 ($ in thousands):

Income Statement

For the Years Ended December 31,

Real estate equity investments

Safehold Inc.

("SAFE") (1)

Intangible liability

Below-market lease liabilities (increase to income)

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 December 31, 2023, are as follows by year ($ in thousands):

Note 6—Loan 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, which was amended on October 4, 2023, 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, as amended, the

“Star Holdings Term Loan Facility”).

During the year ended December 31, 2023, the Company recorded $ 7.1 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 December 31, 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 any loans remain outstanding under the Incremental Term Loan Facility.

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 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.

The Star Holdings Term Loan Facility contains certain customary covenants, including affirmative covenants on reporting, maintenance of property, continued ownership of interests in the Company as well as negative covenants relating to investments, indebtedness and liens, fundamental changes, asset dispositions, repayments, distributions and affiliate transactions.

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 year ended December 31, 2023, the Company recorded a provision for credit losses of $ 2.4 million on the Secured Term Loan Facility which was originated at the time of the Merger in conjunction with the Spin-Off.

Note 7—Equity Investments

The Company’s equity investments and its proportionate share of earnings (losses) from equity investments were as follows ($ in thousands):

Earnings from

Carrying Value

Equity Method Investments

For the Year Ended

Equity investment

425 Park Avenue

Ground Lease Plus Fund (1)

Other real estate equity investments (2)

Other strategic investments (3)

(1) As of December 31, 2022, the Company owned 33.9 million shares of SAFE common stock which, based on the closing price of $ 28.62 on December 31, 2022, had a market value of $ 1.0 billion.

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

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

For the years ended December 31, 2022, 2021 and 2020, equity in earnings includes $ 0.9 million, $ 60.7 million and $ 14.4 million, respectively, of dilution gains resulting from SAFE equity offerings.

During the year ended December 31, 2022, the Company distributed shares of SAFE common stock to its shareholders in the form of a dividend and realized a loss of $ 49.3 million on the distribution in equity in earnings from equity method investments.

(2) During the year ended December 31, 2022, one of the Company’s real estate equity investments closed on the sale of a multifamily property.

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

(3) During the years ended December 31, 2021 and 2020, the Company identified observable price changes in an equity security held by the Company as evidenced by orderly private issuances of similar securities by the same issuer.

In accordance with ASC 321, the Company remeasured its equity investment at fair value and recognized aggregate mark-to-market gains during the years ended December 31, 2021 and 2020 of $ 18.9 million and $ 23.9 million, respectively, in “Other income” in the Company’s consolidated statements of operations.

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

Safehold Inc.

—Refer to Note 1 – Merger with Safehold Inc.

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

In January 2019, the Company purchased 12.5 million newly designated limited partnership units (the “Investor Units”) in SAFE’s operating partnership (“SAFE OP”), at a purchase price of $ 20.00 per unit, for a total purchase price of $ 250.0 million.

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

Following the exchange, the Investor Units were retired.

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

The Stockholder’s Agreement:

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

● provides the Company certain preemptive rights.

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

In addition, the Company is also the external manager of a venture in which SAFE is a member.

Following are the key terms of the management agreement with SAFE:

● The Company receives a fee equal to 1.0 % of total SAFE equity (as defined in the management agreement) up to $ 1.5 billion;

1.25 % of total SAFE equity (for incremental equity of $ 1.5 billion - $ 3.0 billion);

Notes to Consolidated Financial Statements

of total SAFE equity (for incremental equity of $ 3.0 billion - $ 5.0 billion);

and 1.5 % of total SAFE equity (for incremental equity over $ 5.0 billion);

● Fee to be paid in cash or in shares of SAFE common stock, at the discretion of SAFE’s independent directors;

● The stock is locked up for two years , subject to certain restrictions;

● There is no additional performance or incentive fee;

● The management agreement is non-terminable by SAFE through June 30, 2023 except for cause;

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

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

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

In December 2022, the Company paid a non-cash dividend of approximately 6.63 million shares of SAFE common stock to its shareholders.

During the year ended December 31, 2021, the Company purchased 1.0 million shares of SAFE's common stock for $ 69.5 million, for an average cost of $ 72.96 per share, in open market purchases made in accordance with Rules 10b5-1 and 10b-18 under the Securities and Exchange Act of 1934, as amended.

In addition, in the fourth quarter 2021 the Company purchased 24,108 shares of SAFE’s common stock for $ 1.8 million, for an average cost of $ 73.86 per share, in an open market transaction.

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

In November 2020, the Company acquired 1.1 million shares of SAFE’s common stock in a private placement for $ 65.0 million.

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

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

During the years ended December 31, 2022, 2021 and 2020, the Company recorded $ 20.3 million, $ 14.9 million and $ 12.7 million, respectively, of management fees pursuant to its management agreement with SAFE.

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

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

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

During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 12.5 million, $ 7.5 million and $ 5.0 million, respectively, of expense reimbursements pursuant to its management agreement with SAFE.

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

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

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

The transaction included a combination of:

(i) a newly created Ground Lease and a $ 7.2 million leasehold improvement allowance, which was fully

Notes to Consolidated Financial Statements

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

The Company sold the Ground Lease to SAFE in September 2020 for $ 34.0 million and recognized a gain of $ 6.1 million in “Income from sales of real estate” in connection with the sale and in January 2021 sold the leasehold first mortgage to an entity in which the Company has a 53 % noncontrolling equity interest (refer to “Other strategic investments” below) for $ 63.3 million .

In June 2020, Net Lease Venture II (see Note 3) acquired the leasehold interest in an office laboratory property in Honolulu, HI and simultaneously entered into a 99 year Ground Lease with SAFE.

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

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

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

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

In October 2020, the Company provided a $ 22.5 million loan to the ground lessee of a Ground Lease originated at SAFE.

The loan was for the Ground Lease tenant’s recapitalization of an existing multi-family property.

The Company received $ 2.3 million of consideration from SAFE in connection with this transaction.

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

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

The Company received $ 1.9 million of consideration from SAFE in connection with this transaction.

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

In March 2021, the Company acquired land and simultaneously structured and entered into with the seller a Ground Lease on which a multi-family project will be constructed.

At closing, the Company entered into an agreement with SAFE pursuant to which, subject to certain conditions being met, SAFE would acquire the ground lessor entity from the Company.

The Company sold the ground lessor entity to SAFE in September 2021 and recognized no gain or loss on the sale (refer to Note 7 - Loans receivable held for sale).

The Company also committed to provide a $ 75.0 million construction loan to the Ground Lease tenant.

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

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

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

The Company had previously acquired such purchase option agreement from a third-party property owner for $ 1.0 million and incurred $ 0.2 million of expenses.

Under the option agreement, upon certain conditions being met by an outside developer who may become the Ground Lease tenant, SAFE has the right to acquire for $ 215.0 million a property and hold a Ground Lease under approximately 1.1 million square feet of office space that may be developed on the property.

No gain or loss was recognized by the Company as a result of the sale.

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

The purchase price to be paid for each is $ 42.0 million, plus an amount necessary for the Company to achieve the greater of a 1.25 x multiple and a 9 % return on its investment.

In addition, each Ground Lease provides for a leasehold improvement allowance up to a maximum of $ 83.0 million, which obligation would be assumed by SAFE upon acquisition.

If certain construction conditions are not met within a specified time period, SAFE will have no obligation to acquire the Ground Leases or fund the leasehold improvement allowances.

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

There can be no assurance that the conditions to closing will be satisfied and that SAFE will acquire the properties and Ground Leases from the Ground Lease Plus Fund.

In November 2021, the Company and SAFE entered into an agreement pursuant to which SAFE would acquire land and a related Ground Lease originated by the Company when certain construction related conditions are met by a specified time period.

The purchase price to be paid is $ 33.3 million, plus an amount necessary for the Company to achieve the greater of a 1.25 x multiple and a 12 % return on its investment.

In addition, the Ground Lease provides for a leasehold improvement allowance up to a maximum of $ 51.8 million, which obligation would be assumed by SAFE upon acquisition.

If certain construction conditions are not met within a specified time period, SAFE will have no obligation to acquire the Ground Lease or fund the leasehold improvement allowance.

There can be no assurance that the conditions to

Notes to Consolidated Financial Statements

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

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

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

During the years ended December 31, 2021 and 2020, the Company recorded $ 2.3 million and $ 2.4 million respectively, of interest income on the mezzanine loan.

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

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

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

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

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

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

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

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

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

The Loan Fund received $ 5.0 million of consideration from SAFE in connection with this transaction.

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

Leasehold Loan Fund (2)

(1) As of December 31, 2023, the Company has a basis difference of $ 19.4 million in the Ground Lease Plus Fund that will be amortized over a weighted average remaining term of 105.0 years using the effective interest method.

During the year ended December 31, 2023, $ 2.4 million of the basis difference was amortized as an increase to earnings from equity method investments.

(2) As of December 31, 2023, the Company has a basis difference of $ 11.2 million in the Leasehold Loan Fund that will be amortized over a weighted average remaining term of 3.1 years using the effective interest method.

During the year ended December 31, 2023, $ 3.0 million 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.

venture acquired the Ground Lease in November 2019.

The Company has a 54.8 % noncontrolling equity interest in the venture and is the manager of the venture.

iStar was the manager prior to the Merger.

32 Old Slip —In June 2021, the Company acquired a 29.2 % noncontrolling equity interest in a Ground Lease at an office property in New York City.

Ground Lease Plus Fund —In connection with Merger, the Company acquired from iStar an investment fund that iStar managed that targets the origination and acquisition of Ground Leases for commercial real estate projects that are in a pre-development phase (the “Ground Lease Plus Fund”).

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

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

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

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

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

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

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

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

Other real estate equity investments —As of December 31, 2022, the Company’s other real estate equity investments include equity interests of 95 % in real estate ventures comprised of investments of $ 32.4 million in three operating properties.

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

Notes to Consolidated Financial Statements

In August 2018, the Company provided a mezzanine loan with a principal balance of $ 33.0 million to an unconsolidated entity in which the Company owns a 50 % equity interest.

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

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

During the years ended December 31, 2021 and 2020, the Company recorded $ 2.3 million, $ 2.4 million, respectively, of interest income on the mezzanine loan.

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

In January 2021, the Company sold two loans for $ 83.4 million to a newly formed entity in which the Company owns a 53.0 % noncontrolling equity interest (the “Loan Fund”).

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

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

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

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

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

The Company receives a fee from its partner in exchange for managing the entity and is also entitled to a promote payment on investments in the Ground Lease Plus Fund.

The Ground Lease Plus Fund had first look rights through December 2023 on qualifying pre-development projects that the Company has elected to not originate.

In November 2021, iStar acquired land for $ 33.3 million and simultaneously structured and entered into a Ground Lease on which a multi-family project will be constructed (refer also to Note 14).

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

At the time of iStar’s acquisition in November 2021, the Company and iStar entered into an agreement pursuant to which the Company would acquire the land and related Ground Lease from the Ground Lease Plus Fund when certain construction related conditions are met by a specified time period.

In January 2024, the Company acquired the Ground Lease from the Ground Lease Plus Fund for $ 38.3 million.

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.

In January 2022, iStar sold the two Ground Leases to the Ground Lease Plus Fund, which remain subject to the June 2021 agreement with the Company, and recognized an aggregate $ 0.5 million of gains on the sale.

Leasehold Loan Fund —In connection with the Merger, the Company acquired from iStar an investment fund that iStar managed that targets customers that may require a mortgage leasehold loan as well as a Ground Lease (the “Leasehold Loan Fund”).

The Company owns a 53.0 % noncontrolling equity interest in the Leasehold Loan Fund.

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

The Company accounts for this investment as an equity method investment and receives a fixed annual administrative fee and an asset management fee from its partner in exchange for managing the entity.

The Company is also entitled to a promote payment on certain investments in the Leasehold Loan Fund.

In February 2022, the Leasehold Loan Fund committed to provide a $ 130.0 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 life science property.

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

As of December 31, 2023, the Leasehold Loan Fund 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.

Summarized investee financial information — The following table presents the investee level summarized financial information of the Company’s equity method investments ($ in thousands):

As of December 31, 2023, the Leasehold Loan Fund funded $ 40.3 million of the commitment.

Summarized investee financial information — The following table presents the investee level summarized financial information of the Company’s equity method investments as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 ($ in thousands):

As of December 31,

For the Years Ended December 31,

Balance Sheets

Income Statements

Total liabilities

Noncontrolling interests

Net income (loss) attributable to parent entities

Total equity attributable to parent entities

During the years ended December 31, 2022, 2021 and 2020, SAFE represented a significant subsidiary of the Company.

For detailed financial information regarding SAFE, please refer to its financial statements, which are publicly available on the website of the Securities and Exchange Commission at http://www.sec.gov under the ticker symbol "SAFE"

and are incorporated herein by reference.

Notes to Consolidated Financial Statements

Note 9—Other Assets and Other Liabilities

Year Ended December 31,

Total revenues

Total expenses

Net income attributable to parent entities

Note 8—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):

1 unchanged sentence

December 31, 2022

Intangible assets, net (2)

Restricted cash

Operating lease right-of-use assets (3)

Operating lease right-of-use asset (1)

Interest rate hedge assets

Deferred finance costs, net (2)

Other assets (3)

Other receivables

Purchase deposits

Leasing costs, net

Corporate furniture, fixtures and equipment, net

Deferred financing fees, net

Deferred expenses and other assets, net

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

(2) Intangible assets, net includes above market and in-place lease assets and lease incentives related to the acquisition of real estate assets.

Accumulated amortization on intangible assets, net was $ 0.1 million and $ 10.2 million as of December 31, 2022 and 2021, respectively.

The amortization of above market leases and lease incentive assets decreased operating lease income in the Company’s consolidated statements of operations by $ 0.1 million, $ 0.3 million and $ 0.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

The amortization expense for in-place leases was $ 0.1 million, $ 1.0 million and $ 0.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

As of December 31, 2022, the weighted average remaining amortization period for the Company’s intangible assets was approximately 5.8 years.

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

Right-of use lease assets initially equal the lease liability.

The lease liability (see table below) equals the present value of the minimum rental payments due under the lease discounted at the rate implicit in the lease or the Company's incremental secured borrowing rate for similar collateral.

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

During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 4.8 million, $ 4.9 million and $ 4.7 million, respectively, in “General and administrative” and $ 0.7 million, $ 0.6 million and $ 0.6 million, respectively, in “Real estate expense” in its consolidated statements of operations relating to operating leases.

(4) Other assets primarily includes prepaid expenses, deposits for certain real estate assets and management fees and expense reimbursements due from SAFE (refer to Note 8).

(5) Accumulated amortization of leasing costs was $ 0.1 million and $ 1.1 million as of December 31, 2022 and 2021, respectively.

(6) Accumulated depreciation on corporate furniture, fixtures and equipment was $ 12.3 million and $ 14.8 million as of December 31, 2022 and 2021, respectively.

(1) Operating lease right-of-use asset (and operating lease liability below) relates to a property that is majority-owned by a third party and is ground leased to the Company.

The Company is obligated to pay the owner of the property $ 0.5 million, subject to adjustment for changes in the CPI, per year through 2044;

however, the Company’s Ground Lease tenant at the property pays this expense directly under the terms of a master lease.

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 the years ended December 31, 2023, 2022 and 2021, the Company recognized $ 0.5 million, $ 0.4 million and $ 0.4 million, respectively, in "Real estate expense" and $ 0.5 million, $ 0.4 million and $ 0.4 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 % .

T he Company also has operating leases for office space that it assumed from iStar in connection with the Merger (refer to Note 10).

(2) Accumulated amortization of deferred finance costs was $ 11.0 million and $ 5.7 million as of December 31, 2023 and 2022, respectively.

(3) As of December 31, 2023, includes $ 6.9 million of management fees due from Star Holdings.

Through December 31, 2023, the Company has earned $ 19.4 million of management fees from Star Holdings and as of December 31, 2023, $ 30.6 million of the transaction price is attributable to performance obligations that remain unsatisfied.

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

1 unchanged sentence

December 31, 2022

Interest payable

Other liabilities (1)

Dividends declared and payable

Operating lease liability (2)

Management fee payable

Accrued expenses (3)

Operating lease liabilities (see table above)

Accrued interest payable

Accounts payable, accrued expenses and other liabilities

(1) Certain items have been reclassified to “Liabilities associated with real estate held for sale and classified as discontinued operations” (refer to Note 3).

(2) As of December 31, 2022 and 2021, "Other liabilities"

includes $ 21.2 million and $ 20.1 million, respectively, of deferred income.

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

Notes to Consolidated Financial Statements

(1) As of December 31, 2022, other liabilities includes $ 3.1 million due to the Former Manager for allocated payroll costs and costs it paid on the Company’s behalf.

(2) Refer to Note 10.

(3) As of December 31, 2023, accrued expenses primarily includes accrued compensation, legal, audit and property expenses As of December 31, 2022, accrued expenses primarily includes accrued legal, audit and property expenses.

Note 9—Debt Obligations, net

The Company’s debt obligations were as follows ($ in thousands):

Carrying Value as of

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

December 31, 2023

December 31, 2022

Interest Rates

Maturity Date (2)

Secured credit facilities:

Revolving Credit Facility

Senior Term Loan

Total secured credit facilities

Unsecured notes:

3.125 % senior convertible notes (3)

Secured credit financing:

April 2027 to November 2069

Total secured credit financing (3)

Unsecured financing:

2.80 % senior notes

2 unchanged sentences

February 2052

Total unsecured notes

Other debt obligations:

5.15 % senior notes

2021 Unsecured Revolver

Adjusted SOFR

2023 Unsecured Revolver

Adjusted SOFR

Trust preferred securities

Adjusted SOFR

Total unsecured financing

Total debt obligations

Debt discounts and deferred financing costs, net

Debt premium, discount and deferred financing costs, net

Total debt obligations, net

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

(i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.50 % or (c) LIBOR plus 1.00 % and subject to a margin ranging from 1.00 % to 1.50 % ;

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

The Company terminated the Revolving Credit Facility in August 2022.

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

(i) a base rate, which is the greater of (a) prime, (b) federal funds plus 0.50 % or (c) LIBOR plus 1.00 % and subject to a margin of 1.75 % ;

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

(3) During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 3.5 million, $ 9.0 million, $ 9.0 million, respectively, of contractual interest on the 3.125 % Convertible Notes .

Refer to Unsecured Notes below.

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

(5) The Company can prepay these senior notes without penalty beginning May 1, 2025.

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

(7) The Company capitalized interest relating to development activities of $ 1.5 million, $ 1.0 million and $ 1.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

Unsecured Debt

(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 December 31, 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 December 31, 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 3.34 % , 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 December 31, 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 December 31, 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”).

The 2.80 % Notes were issued at 99.127 % of par.

The Company may redeem the 2.80 % Notes in whole at any time or in part from time to time prior to March 15, 2031, at the Company’s option and sole discretion, at a redemption price equal to the greater of:

(i) 100 % of the principal amount of the 2.80 % Notes being redeemed;

and (ii) a make-whole premium calculated in accordance with the indenture, plus, in each case, accrued and unpaid interest thereon to, but not including, the applicable redemption date.

If the 2.80 % Notes are redeemed on or after March 15, 2031, the redemption price will be equal to 100 % of the principal amount of the 2.80 % Notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date.

In November 2021, Portfolio Holdings, then known as Safehold Operating Partnership LP, (as issuer) and the Company (as guarantor), issued $ 350.0 million aggregate principal amount of 2.85 % senior notes due January 2032 (the “ 2.85 % Notes”).

The 2.85 % Notes were issued at 99.123 % of par.

The Company may redeem the 2.85 % Notes in whole at any time or in part from time to time prior to October 15, 2031, at the Company’s option and sole discretion, at a redemption price equal to the greater of:

(i) 100 % of the principal amount of the 2.85 % Notes being redeemed;

and (ii) a make-whole premium calculated in accordance with the indenture, plus, in each case, accrued and unpaid interest thereon to, but not including, the applicable redemption date.

If the 2.85 % Notes are redeemed on or after October 15, 2031, the redemption price will be equal to 100 % of the principal amount of the 2.85 % Notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date.

In January 2022, Portfolio Holdings, then known as Safehold Operating Partnership LP, (as issuer) and the Company (as guarantor), issued $ 475.0 million aggregate principal amount of privately-placed 3.98 % senior notes due February 2052 (the “ 3.98 % Notes”).

Safehold Operating Partnership LP elected to draw these funds in March 2022.

The Company may, at its option, prepay at any time all, or from time to time any part of, the 3.98 % Notes, in an amount not less than 5 % of the aggregate principal amount of the 3.98 % Notes then outstanding in the case of a partial prepayment, at 100 % of the principal amount so prepaid, and the applicable make-whole amount calculated in accordance with the indenture, for such tranche determined for the prepayment date with respect to such principal amount;

provided, that, so long as no default or event of default shall then exist, at any time on or after November 15, 2051, the Company may, at its option, prepay all or any part of the 3.98 % Notes at 100 % of the principal amount so prepaid, together with, in each case, accrued interest to the prepayment date, without any make-whole amount.

In May 2022, Portfolio Holdings, then known as Safehold Operating Partnership LP, (as issuer) and the Company (as guarantor), issued $ 150.0 million aggregate principal amount of privately-placed 5.15 % senior notes due May 2052 (the “ 5.15 % Notes”).

The structure of the 5.15 % Notes features a stairstep coupon rate in which the Company will pay cash interest at a rate of 2.50 % in years 1 through 10, 3.75 % in years 11 through 20, and 5.15 % in years 21 through 30.

The difference between the 5.15 % stated rate and the cash interest rate will accrue in each semi-annual payment period and be paid in kind by adding such accrued interest to the outstanding principal balance, to be repaid at maturity in May 2052.

The Company may, at its option, prepay at any time all, or from time to time any part of, the 5.15 % Notes, in an amount not less than 5 % of the aggregate principal amount of the 5.15 % Notes then outstanding in the case of a partial prepayment, at 100 % of the principal amount so prepaid, and the applicable make-whole amount calculated in accordance with the indenture;

provided, that, so long as no default or event of default shall then exist, at any time on or after February 13, 2052, the Company may, at its option, prepay all or any part of the 5.15 % Notes at 100 % of the principal amount so prepaid, together with, in each case, accrued interest to the prepayment date, without any make-whole amount.

2021 Unsecured Revolver — In March 2021, Portfolio Holdings, then known as Safehold Operating Partnership LP, (as borrower) and the Company (as guarantor), entered into an unsecured revolving credit facility with an initial maximum aggregate principal amount of up to $ 1.0 billion (the “2021 Unsecured Revolver”).

In December 2021, the Company obtained additional lender commitments increasing the maximum availability to $ 1.35 billion.

The 2021 Unsecured Revolver has an initial maturity of March 2024 with two 12-month extension options exercisable by the Company, subject to certain conditions, and bears interest at an annual rate of Adjusted SOFR, as defined in the applicable

agreement, plus 0.90 %, subject to the Company’s credit ratings.

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.

The Company also pays a facility fee of 0.10 %, subject to the Company’s credit ratings.

As of December 31, 2023, there was $ 233.0 million of undrawn capacity on the 2021 Unsecured Revolver.

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 0.90 % , subject to the Company’s credit ratings, with a maturity of July 31, 2025.

As of December 31, 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 three-month Adjusted Term SOFR plus 1.50 % and mature in October 2035.

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

(i) a ratio of total unencumbered assets to total unsecured debt of at least 1.33 x;

and (ii) a consolidated fixed charge coverage ratio of at least 1.15 x, as such terms are defined in the documents governing the 2021 Unsecured Revolver and the 2023 Unsecured Revolver, as applicable.

In addition, the 2021 Unsecured Revolver and the 2023 Unsecured Revolver contain customary affirmative and negative covenants.

Among other things, these covenants may restrict the Company or certain of its subsidiaries’ ability to incur additional debt or liens, engage in certain mergers, consolidations and other fundamental changes, make other investments or pay dividends.

The Company’s 2.80 % Notes, 2.85 % Notes, 3.98 % Notes and 5.15 % Notes are subject to a financial covenant requiring a ratio of unencumbered assets to unsecured debt of at least 1.25 x and contain customary affirmative and negative covenants.

The Company’s 3.98 % Notes and 5.15 % Notes contain a provision whereby they will be deemed to include additional financial covenants and negative covenants to the extent such covenants are incorporated into Portfolio Holdings’ and/or the Company’s existing or future material credit facilities, including the 2021 Unsecured Revolver and 2023 Unsecured Revolver, and to the extent such covenants are more favorable to the lenders under such material credit facilities than the covenants contained in the 3.98 % Notes and 5.15 % Notes.

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

As of December 31, 2023, the Company was in compliance with all of its financial covenants.

Future Scheduled Maturities — As of December 31, 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):

Total principal maturities

Unamortized discounts and deferred financing costs, net

Debt premium, discount and deferred financing costs, net

Total debt obligations, net

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

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

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

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

Notes to Consolidated Financial Statements

Discontinued Operations).

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

Revolving Credit Facility —The Company had a secured revolving credit facility with a maximum capacity of $ 350.0 million and a maturity of September 2022 (the “Revolving Credit Facility”).

The Company terminated the Revolving Credit Facility in August 2022.

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

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

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

Unsecured Notes — As of December 31, 2022, the Company has senior unsecured notes outstanding with varying fixed-rates and maturities ranging from October 2024 to February 2026.

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

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

The Company’s senior unsecured notes are interest only, are generally redeemable at the option of the Company and contain certain financial covenants (see below).

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

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

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

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

The convertible notes received by the Company were retired.

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

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

The convertible notes received by the Company were retired.

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

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

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

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

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

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

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

Notes to Consolidated Financial Statements

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

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

Debt Covenants

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

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

(1) As of December 31, 2023, the Company’s weighted average maturity for its secured mortgages was 27.5 years .

Note 10—Commitments and Contingencies

Unfunded Commitments —The Company generally funds construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria.

The Company refers to these arrangements as Performance-Based Commitments.

As of December 31, 2022, the maximum amount of fundings the Company may be required to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments are as follows ($ in thousands):

Performance-Based Commitments

Other Commitments —Total operating lease expense for the years ended December 31, 2022, 2021 and 2020 was $ 5.2 million, $ 5.2 million and $ 5.4 million, respectively.

Future minimum lease obligations under non-cancelable operating leases, excluding lease obligations for liabilities included in discontinued operations, as of December 31, 2022 are as follows ($ in thousands):

Operating (1)

Lease Commitments —Future minimum lease obligations under non-cancelable operating leases as of December 31, 2023 are as follows ($ in thousands):

Total undiscounted cash flows (1)

1 unchanged sentence

Lease liabilities

(1) Includes cash flows that relate to a property that is majority-owned by a third party and is ground leased to the Company.

The Company is obligated to pay the owner of the property $ 0.5 million, subject to adjustment for changes in the CPI, per year through 2044;

however, the Company’s Ground Lease tenant at the property pays this expense directly under the terms of a master lease.

(2) The lease liability equals the present value of the minimum rental payments due under the lease discounted at the rate implicit in the lease or the Company’s incremental secured borrowing rate for similar collateral.

For operating leases, lease liabilities were discounted at the Company’s weighted average incremental secured borrowing rate for similar collateral estimated to be 5.7 % and the weighted average remaining lease term is 8.5 years.

Legal Proceedings —The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to the Company’s business as a finance and investment company focused on the commercial real estate industry, including foreclosure-related proceedings.

The Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding that would have a material adverse effect on the Company’s consolidated financial statements.

Notes to Consolidated Financial Statements

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 years ended December 31, 2022 and 2021.

During the nine months ended December 31, 2023, the Company made payments of $ 4.3 million related to its operating leases.

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 December 31, 2023, the Company had $ 115.0 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 14).

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

As of December 31, 2023, the Company had an aggregate $ 283.1 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 .

Other Commitments — Through the Leasehold Loan Fund, the Company will generally fund construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria.

We refer to these arrangements as performance-based commitments.

As of December 31, 2023, the Company had $ 111.1 million of such commitments.

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

Based on its current knowledge, and after consultation with legal counsel, the Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding that would have a material adverse effect on the Company’s consolidated financial statements.

Note 11—Risk Management and Derivatives

Risk management

In the normal course of its on-going business operations, the Company encounters economic risk.

There are three main components of economic risk:

interest rate risk, credit risk and market risk.

The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different points in time and potentially at different bases, than its interest-earning assets.

Credit risk is the risk of default on the Company’s lending investments or leases that result from a borrower’s or tenant’s inability or unwillingness to make contractually required payments.

Market risk reflects changes in the value of loans and other lending investments due to changes in interest rates or other market factors, including the rate of prepayments of principal and the value of the collateral underlying loans, the valuation of real estate assets by the Company as well as changes in foreign currency exchange rates.

Risk concentrations —Concentrations of credit risks arise when a number of borrowers or tenants related to the Company’s investments are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions.

Substantially all of the Company’s real estate and net investment in leases, including those classified in real estate and other assets available and held for sale and classified as discontinued operations, and assets collateralizing its loans receivable are located in the United States.

As of December 31, 2022, the Company’s portfolio contains concentrations in the following property types:

Ground Leases, land and development, multifamily, hotel, entertainment/leisure, condominium, retail and other property types.

The Company underwrites the credit of prospective borrowers and tenants and often requires them to provide some form of credit support such as corporate guarantees, letters of credit and/or cash security deposits.

Although the Company’s loans and real estate assets are geographically diverse and the borrowers and tenants operate in a variety of industries, to the extent the Company has a significant concentration of interest or operating lease revenues from any single borrower or tenant, the inability of that borrower or tenant to make its payment could have a material adverse effect on the Company.

The Company’s use of derivative financial instruments has historically been limited to the utilization of interest rate swaps, interest rate caps and foreign exchange contracts.

The principal objective of such financial instruments is to minimize the risks and/or costs associated with the Company’s operating and financial structure and to manage its exposure to interest rates and foreign exchange rates.

The Company may have derivatives that are not designated as hedges because they do not meet the strict hedge accounting requirements.

Although not designated as hedges, such derivatives are entered into to manage the Company’s exposure to interest rate movements and other identified risks.

Notes to Consolidated Financial Statements

The Company did not have any derivative financial instruments as of December 31, 2022.

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

Derivative Liabilities

In the normal course of its ongoing business operations, the Company encounters credit risk.

Credit risk is the risk of default on the Company’s leases that result from a tenant’s inability or unwillingness to make contractually required payments.

Risk concentrations —Concentrations of credit risks arise when the Company has multiple leases with a particular tenant or credit party, or a number of the Company’s tenants are engaged in similar business activities, or activities in the

same geographic region, or have similar economic features, such that their ability to meet contractual obligations, including those to the Company, could be similarly affected by changes in economic conditions.

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 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, interest rate caps and treasury locks to manage interest rate risk exposure.

The Company does not enter into derivatives for trading purposes.

The Company recognizes derivatives, if any, as either assets or liabilities on the Company’s consolidated balance sheets at fair value.

Interest rate hedge assets are recorded in "Deferred expenses and other assets, net" and interest rate hedge liabilities are recorded in "Accounts payable, accrued expenses and other liabilities" on the Company’s consolidated balance sheets.

For the Company’s derivatives designated and qualifying as cash flow hedges, changes in the fair value of the derivatives are reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s debt.

If an interest rate hedge is terminated prior to maturity it could result in a net derivative instrument gain or loss that continues to be reported in accumulated other comprehensive (loss) and is reclassified into earnings over the period of the original forecasted hedged transaction.

However, if it is probable that the original forecasted hedged transaction will not occur by the end of the original specified time period, the derivative instrument gain or loss reported in accumulated other comprehensive income (loss) will be reclassified into earnings immediately.

If a derivative includes an other-than-insignificant financing element at inception, when the Company is deemed to be the lender all cash inflows and outflows of the derivative are considered cash flows from investing activities in the Company’s consolidated statements of cash flows and when the Company is deemed to be the borrower all cash inflows and outflows of the derivative are considered cash flows from financing activities in the Company’s consolidated statements of cash flows.

For the Company’s derivatives not designated as hedges, the changes in the fair value of the derivatives are reported in "Interest expense" in the Company’s consolidated statements of operations.

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements.

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

December 31, 2023

December 31, 2022

Balance Sheet

As of December 31, 2021

Derivatives Designated in Hedging Relationships

Derivative Type

Interest rate swaps

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

(1) Over the next 12 months, the Company expects that $ 2.0 million related to its proportionate share of cash flow hedges held by SAFE will be reclassified from “Accumulated other comprehensive income (loss)” as a decrease to earnings from equity method investments.

The table below presents the effect of the Company’s derivative financial instruments, including the Company’s share of derivative financial instruments at certain of its equity method investments, in the consolidated statements of operations and the consolidated statements of comprehensive income (loss) ($ in thousands):

Deferred expenses and other assets, net

Interest rate swaps

Accounts payable, accrued expenses and other liabilities

(1) As of December 31, 2023, the Company has two interest rate swap derivatives outstanding that mature in April 2028 and have an aggregate $ 500.0 million notional amount, which hedge in-place floating-rate debt.

The Company also has three designated derivatives outstanding that protect the Company against interest rate volatility with respect to long-term debt to be placed in the future, which have an aggregate $ 400.0 million notional amount, one of which matures in December 2024 and two that mature in December 2025.

These designated hedges protect the Company against interest rate volatility with respect to future debt with a tenor of approximately 30 years .

During the years ended December 31, 2023, 2022 and 2021, the Company recorded $ 13.6 million, $ 40.4 million and $ 13.3 million, respectively, of unrealized gains in accumulated other comprehensive income (loss).

(2) The fair value of the Company’s derivatives is estimated using valuation techniques utilized by a third-party specialist using observable inputs such as interest rates and contractual cash flow and are classified as Level 2 within the fair value hierarchy.

Over the next 12 months, the Company expects that $ 2.6 million related to cash flow hedges will be reclassified from "Accumulated other comprehensive income (loss)" as a decrease to interest expense.

(3) During the years ended December 31, 2023 and 2022, the Company received $ 11.4 million and $ 11.0 million, respectively, in settlement of certain interest rate hedges.

During the year ended December 31, 2021, the Company paid $ 19.9 million to terminate certain interest rate hedges.

Credit Risk-Related Contingent Features —The Company reports derivative instruments, if any, on a gross basis in its consolidated financial statements.

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.

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 for the years ended December 31, 2023, 2022 and 2021 ($ in thousands):

Amount of Gain

Location of Gain

(Loss) Recognized in

(Loss) Reclassified

Location of Gain (Loss)

Accumulated Other

from Accumulated

Derivatives Designated in

When Recognized in

When Recognized

Comprehensive

Other Comprehensive

Hedging Relationships

Derivatives Designated in Hedging Relationships

Income into Earnings

1 unchanged sentence

Interest rate swaps

Earnings from equity method investments

For the Year Ended December 31, 2021

Interest rate swaps

Net income from discontinued operations

Interest expense

Interest rate swaps (1)

Earnings from equity method investments

For the Year Ended December 31, 2022

Interest rate swaps

Net income from discontinued operations

Interest expense

For the Year Ended December 31, 2021

Interest rate swaps

Earnings from equity method investments

Notes to Consolidated Financial Statements

Interest expense

(1) For the year ended December 31, 2023, $ 15.2 million was reclassified to “Other income” in the Company’s consolidated statements of operations due to a hedge forecasted for permanent debt that did not occur.

Note 12—Equity

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

Cumulative Preferential Cash

Dividends (1)(2)

Shares Issued

(in thousands)

Preference (3)

(in thousands)

(1) Holders of shares of the Series D, G and I preferred stock are entitled to receive dividends, when and as declared by the Company’s Board of Directors, out of funds legally available for the payment of dividends.

Dividends are cumulative from the date of original issue and are payable quarterly in arrears on or before the 15th day of each March, June, September and December or, if not a business day, the next succeeding business day.

Any dividend payable on the preferred stock for any partial dividend period will be computed on the basis of a 360 - day year consisting of twelve 30 - day months.

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

(2) The Company declared and paid dividends of $ 8.0 million, $ 6.1 million and $ 9.4 million on its Series D, G and I Cumulative Redeemable Preferred Stock during both the years ended December 31, 2022 and 2021, respectively.

The character of the 2022 dividends was 100 % capital gain distribution.

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

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

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

Dividends —To maintain its qualification as a REIT, the Company must annually distribute, at a minimum, an amount equal to 90% of its taxable income, excluding net capital gains, and must distribute 100% of its taxable income (including net capital gains) to eliminate corporate federal income taxes payable by the REIT.

The Company has recorded NOLs in the past and may record NOLs in the future, which may reduce its taxable income in future periods and lower or eliminate entirely the Company’s obligation to pay dividends for such periods in order to maintain its REIT qualification.

As of December 31, 2021, the Company had $ 614.6 million of NOL carryforwards at the corporate REIT level that can generally be used to offset both ordinary taxable income and capital gain net income in future years.

In its year ended December 31, 2022, the Company expects to report REIT taxable income before the deduction for dividends paid and will fully utilize its NOL carryforward.

Because taxable income differs from cash flow from operations due to non-cash revenues and expenses (such as depreciation and certain asset impairments), in certain circumstances, the Company may generate operating cash flow in excess of its dividends, or alternatively, may need to make dividend payments in excess of operating cash flows.

The Company declared common stock dividends of $ 31.8 million, or $ 0.375 per share, for the year ended December 31, 2022 and $ 35.1 million, or $ 0.485 per share, for the year ended December 31, 2021.

The Company designated all of its 2022 dividends as a capital gain distribution.

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

In addition, in December 2022 the Company paid a dividend of 6.63 million shares of SAFE common stock, or $ 2.19 per share of the Company’s common stock, to its shareholders.

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

The Company did not repurchase any shares of its common stock during the year ended December 31, 2022.

During the year ended December 31, 2021, the Company repurchased 5.5 million shares of its outstanding common stock for $ 122.4 million, for an average cost of $ 22.38 per share.

During the year ended December 31, 2020, the Company repurchased 4.2 million shares of its outstanding common stock for $ 48.4 million, for an average cost of $ 11.48 per share.

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

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

Notes to Consolidated Financial Statements

Accumulated Other Comprehensive Income (Loss) —"Accumulated other comprehensive income (loss)” reflected in the Company’s shareholders’ equity is comprised of the following ($ in thousands):

December 31, 2022

December 31, 2021

Unrealized gains on available-for-sale securities

Unrealized gains (losses) on cash flow hedges

Accumulated other comprehensive income (loss)

Note 14—Stock-Based Compensation Plans and Employee Benefits

Stock-Based Compensation —The Company recorded stock-based compensation expense, including the expense related to performance incentive plans (see below), of ($ 27.7 ) million, $ 69.3 million and $ 39.4 million, respectively, during the years ended December 31, 2022, 2021 and 2020 in "General and administrative"

in the Company’s consolidated statements of operations.

As of December 31, 2022, there was $ 5.2 million of total unrecognized compensation cost related to all unvested restricted stock units that is expected to be recognized over a weighted average remaining vesting/service period of 1.08 years.

Performance Incentive Plans —The Company’s Performance Incentive Plans ("iPIP") are designed to provide, primarily to senior executives and select professionals engaged in the Company’s investment activities, long-term compensation which has a direct relationship to the realized returns on investments included in the plans.

Awards vest over six years , with 40 % being vested at the end of the second year and 15 % each year thereafter.

As of December 31, 2022, there are five iPIP Plans, each covering a two-year investment period beginning with the 2013-2014 Plan through the 2021-2022 Plan.

2019-2022 iPIP Plans —The Company’s 2019-2020 and 2021-2022 iPIP plans are equity-classified awards which are measured at the grant date fair value and recognized as compensation cost in "General and administrative"

in the Company’s consolidated statements of operations and "Noncontrolling interests"

in the Company’s consolidated statements of changes in equity over the requisite service period.

Investments in the 2019-2022 iPIP plans will be held by consolidated subsidiaries of the Company and have two ownership classes, class A units and class B units.

The Company owns 100 % of the class A units and the class B units were issued to employees as long-term compensation.

Except for certain clawback provisions, participants can retain vested class B units upon their termination of employment with the Company.

The class B units are entitled to distributions from the net cash realized from the investments in the plan after the Company, through its ownership of the class A units, has received a specified return on its invested capital and a return of its invested capital.

Distributions on the class B units are also subject to reductions under a total shareholder return ("TSR") adjustment.

The fair value of the class B units was determined using a model that forecasts the underlying cash flows from the investments within the entity to which the class B units have ownership rights.

During the years ended December 31, 2022, 2021 and 2020, the Company recorded $ 4.6 million, $ 3.8 million and $ 3.4 million, respectively, of expense related to the 2019-2022 iPIP plans.

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

provided, however, that (a) the cash portion will be increased if the Company does not have sufficient shares available under shareholder approved equity plans;

and (b) if the principal remaining material asset in a plan is unsold SAFE shares, the Company may elect to distribute SAFE shares in lieu of cash and Company stock.

The following is a summary of the status of the Company’s equity-classified iPIP plans and changes during the year ended December 31, 2022.

iPIP Investment Pool

Points at beginning of period

Points at end of period

Notes to Consolidated Financial Statements

As of December 31, 2022, investments with an aggregate gross book value of $ 764 million, including 26.7 million shares of SAFE common stock acquired by the Company, were attributable to the 2019-2020 Plan and investments with an aggregate gross book value of $ 406 million, including 5.0 million shares of SAFE common stock acquired by the Company, were attributable to the 2021-2022 Plan.

2013-2018 iPIP Plans —The remainder of the Company’s iPIP plans, as shown in the table below, are liability-classified awards and are remeasured each reporting period at fair value until the awards are settled.

Certain employees will be granted awards that entitle employees to receive the residual cash flows from the investments in the plans after the Company has received a specified return on its invested capital and a return of its invested capital.

Awards are also subject to reductions under a TSR adjustment.

The fair value of awards is determined using a model that forecasts the Company’s projected investment performance.

Settlement of the awards will be 50 % in cash and 50 % in shares of the Company’s common stock or in shares of SAFE’s common stock owned by the Company.

The following is a summary of the status of the Company’s liability-classified iPIP plans and changes during the year ended December 31, 2022.

iPIP Investment Pool

Points at beginning of period

Points at end of period

During the years ended December 31, 2022, 2021 and 2020, the Company recorded ($ 38.3 ) million, $ 58.2 million and $ 30.7 million, respectively, of expense related to the 2013-2018 iPIP plans.

The reduction in expense for the year ended December 31, 2022 was primarily due to a decrease in the price per share of SAFE common stock.

As of December 31, 2022, investments with an aggregate gross book value of $ 13 million were attributable to the 2013-2014 Plan and investments with an aggregate gross book value of $ 159 million, including 7.6 million shares of SAFE common stock acquired by the Company, were attributable to the 2017-2018 Plan.

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

During the year ended December 31, 2022, the Company made distributions to participants in the 2013-2014 investment pool.

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

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

During the year ended December 31, 2022, the Company made distributions to participants in the 2015-2016 investment pool.

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

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

During the year ended December 31, 2021, the Company made distributions to participants in the 2015-2016 investment pool.

The iPIP participants received total distributions in the amount of $ 10.7 million as compensation, comprised of cash and 243,044 shares of the Company’s common stock with a fair value of $ 22.66 per share, which are fully-vested and issued under the 2009 LTIP (see below).

After deducting statutory minimum tax withholdings, a total of 131,757 shares of the Company’s common stock were issued.

During the year ended December 31, 2020, the Company made distributions to participants in the 2015-2016 investment pool.

The iPIP participants received total distributions in the amount of $ 1.5 million as compensation, comprised of cash and 54,245 shares of the Company’s common stock with a fair value of $ 14.51 per share, which are fully-vested and issued under the 2009 LTIP (see below).

After deducting statutory minimum tax withholdings, a total of 32,825 shares of the Company’s common stock were issued.

Notes to Consolidated Financial Statements

As of December 31, 2022 and 2021, the Company had accrued compensation costs relating to iPIP of $ 45.8 million and $ 116.6 million, respectively, which are included in “Accounts payable, accrued expenses and other liabilities” on the Company’s consolidated balance sheets.

Long-Term Incentive Plan —The Company’s 2009 Long-Term Incentive Plan (the “2009 LTIP”) is designed to provide incentive compensation for officers, key employees, directors and advisors of the Company.

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 December 31, 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 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 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 December 31, 2023, the Company has not 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”).

The 2017 Equity Incentive Plan provided for grants of stock options, shares of restricted common stock, phantom shares, dividend equivalent rights and other equity-based awards, including long-term incentive plan units.

Grants under the 2017 Equity Incentive Plan were recognized as compensation costs ratably over the applicable vesting period and recorded in “General and administrative” in the Company’s consolidated statements of operations.

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 December 31, 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.

The LTIP is designed to provide incentive compensation for officers, key employees, directors and advisors of the Company.

The LTIP provides for awards of stock options, shares of restricted stock, phantom shares, restricted stock units, dividend equivalent rights and other share-based performance awards.

All awards under the 2009 LTIP are made at the discretion of the Company’s Board of Directors or a committee of the Board of Directors.

The Company’s shareholders approved the 2009 LTIP in 2009 and approved the performance-based provisions of the 2009 LTIP, as amended, in 2014.

In May 2021, the Company’s shareholders approved an increase in the number of shares available for issuance under the 2009 LTIP from a maximum of 8.9 million to 9.9 million and extended the expiration date of the 2009 LTIP from May 2029 to May 2031.

As of December 31, 2022, an aggregate of 2.3 million shares remain available for issuance pursuant to future awards under the Company’s 2009 LTIP.

Restricted Stock Units — Changes in non-vested restricted stock units (“Units”) during the year ended December 31, 2022 were as follows (number of shares and $ in thousands, except per share amounts):

All awards under the LTIP are made at the discretion of the Company’s Board of Directors.

Grants under the LTIP are recognized as compensation costs ratably over the applicable vesting period and recorded in “General and administrative” in the Company’s consolidated statements of operations.

In March 2023, the Company granted awards to employees with an aggregate grant date fair value of $ 25.0 million, or $ 28.89 per share.

In June 2023, the Company issued an aggregate 24,336 vested shares of its common stock with a grant date fair value of $ 23.58 per share to its directors in consideration for their annual service as directors.

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 December 31, 2023, an aggregate of 433,481 shares of the Company’s common stock remain available for awards under the LTIP.

Changes in non-vested restricted stock units during the year ended December 31, 2023 were as follows (number of shares and $ in thousands, except per share amounts):

Nonvested at beginning of period

Nonvested at end of period

The total fair value of Units vested during the years ended December 31, 2022, 2021 and 2020 was $ 7.3 million, $ 1.7 million and $ 3.6 million, respectively.

The weighted average grant date fair value per share of Units granted during the years ended December 31, 2022, 2021 and 2020 was $ 24.77 , $ 18.59 and $ 14.68 , respectively.

Directors’ Awards —Non-employee directors are awarded CSEs or restricted share awards at the time of the annual shareholders’ meeting in consideration for their services on the Company’s Board of Directors.

During the year ended December 31, 2022, the Company awarded to non-employee Directors 38,953 restricted shares of common stock at a fair value per share of $ 16.33 at the time of grant for their annual equity awards and also issued 29,377 common stock equivalents ("CSEs") at a fair value of $ 8.28 per CSE in respect of dividend equivalents on outstanding CSEs.

Dividends will accrue as and when dividends are declared by the Company on shares of its common stock, but will not be paid unless and until the CSEs and restricted shares of common stock vest and are settled.

As of December 31, 2022, a combined total of 160,040 CSEs and restricted shares of common stock granted to members of the Company’s Board of Directors remained outstanding under the Company’s Non-Employee Directors Deferral Plan, with an aggregate intrinsic value of $ 1.2 million.

401(k) Plan —The Company has a savings and retirement plan (the "401(k) Plan"), which is a voluntary, defined contribution plan.

The total fair value of restricted stock units that vested during the year ended December 31, 2023 was $ 0.4 million and the weighted average grant date fair value per share of restricted stock units granted during the year ended December 31, 2023 was $ 28.87 .

As of December 31, 2023, there was $ 17.1 million of total unrecognized compensation cost related to all unvested restricted stock units that is expected to be recognized over a weighted average remaining vesting/service period of 1.75 years.

Caret Performance Incentive Plan — 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 of executives of iStar, and Old SAFE’s directors and service providers.

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, 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 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”).

Following the effectiveness of the Caret Assignment Agreement, Old SAFE amended and restated the Original Caret Performance Incentive Plan (the “Amended Caret Performance Incentive Plan”).

Prior to the Merger, the Old SAFE compensation committee, and following the Merger, the Company’s compensation committee, approved the award of 76,801 new Caret units with an estimated grant date fair value of $ 8.1 million to executive officers and other employees, other than the Company’s Chief Executive Officer and the Company’s President and Chief Investment Officer, including 15,000 Caret units to the Company’s Chief Financial Officer.

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 December 31, 2023, there was $ 6.5 million of total unrecognized compensation cost related to all unvested Caret units that is expected to be recognized over a remaining vesting/service period of 3.25 years.

As of December 31, 2023, and after giving effect to the Caret Restructuring and the post-Merger Caret unit awards, Amended Caret Performance Incentive Plan participants held 1,496,982 Caret units, representing 15.4 % of the then-outstanding Caret units and 12.5 % of the then-authorized Caret units.

During the years ended December 31, 2023, 2022 and 2021, the Company recognized $ 1.5 million, $ 0.4 million and $ 0.5 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.

401(K) Plan —The Company has a savings and retirement plan (the "401(k) Plan"), which is a voluntary, defined contribution plan.

All employees are eligible to participate in the 401(k) Plan following completion of three months of continuous service with the Company.

Each participant may contribute on a pretax basis up to the maximum percentage of compensation and dollar amount permissible under Section 402(g) of the Internal Revenue Code not to exceed the limits of Code Sections 401(k), 404 and 415.

Each participant may contribute on a pretax basis up to the maximum percentage

of compensation and dollar amount permissible under Section 402(g) of the Internal Revenue Code not to exceed the limits of Code Sections 401(k), 404 and 415.

At the discretion of the Company’s Board of Directors, the Company may make matching contributions on the participant’s behalf of up to 50 % of the participant’s contributions, up to a maximum of 10 % of the participants’ compensation.

The Company made gross contributions of $ 1.1 million, $ 0.9 million and $ 1.1 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

Notes to Consolidated Financial Statements

The Company made gross contributions of $ 0.2 million for the year ended December 31, 2023.

Accumulated Other Comprehensive Income (Loss) —Accumulated other comprehensive income (loss) consists of net unrealized gains (losses) on the Company’s derivative transactions.

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.

See also “ Redeemable Noncontrolling Interests” in Note 3.

Dividends —The Company (then known as iStar) elected to be taxed as a REIT beginning with its taxable year ended December 31, 1998.

To qualify as a REIT, the Company must annually distribute, at a minimum, an amount equal to 90% of its taxable income, excluding net capital gains, and must distribute 100% of its taxable income (including net capital gains) to eliminate corporate federal income taxes payable by the REIT.

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 year ended December 31, 2023, the Company declared cash dividends on its common stock of $ 48.0 million, or $ 0.708 per share.

Dividends paid in 2023 were a return of capital for tax reporting purposes.

During the year ended December 31, 2022, the Company declared cash dividends on its common stock of $ 43.6 million, or $ 0.701 per share.

Dividends paid in 2022 were a return of capital for tax reporting purposes.

During the year ended December 31, 2021, the Company declared cash dividends on its common stock of $ 37.0 million, or $ 0.67224 per share.

Dividends paid in 2021 were a return of capital for tax reporting purposes.

Note 13—Earnings Per Share

Earnings per share ("EPS") is calculated using the two-class method, which allocates earnings among common stock and participating securities, if applicable, to calculate EPS when an entity’s capital structure includes either two or more classes of common stock or common stock and participating securities.

The following table presents a reconciliation of income (loss) allocable to common shareholders used in the basic and diluted EPS calculations ($ in thousands, except for per share data):

EPS is calculated by dividing net income attributable to common shareholders by the weighted average number of shares outstanding for the period.

The following tables present a reconciliation of net income used in the basic and diluted EPS calculations ($ and shares in thousands, except for per share data):

For the Years Ended December 31,

Net income (loss) from continuing operations

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

Preferred dividends

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

Net income (loss)

Net (income) attributable to noncontrolling interests

Net income (loss) attributable to Safehold Inc.

common shareholders for basic and diluted earnings per common share

For the Years Ended December 31,

Earnings allocable to common shares:

Earnings attributable to common shares:

Numerator for basic and diluted earnings per share:

Net loss from continuing operations and allocable to common shareholders

Net income from discontinued operations

Net (income) from discontinued operations attributable to noncontrolling interests

Net income (loss) allocable to common shareholders

Net income (loss) attributable to Safehold Inc.

common shareholders - basic

Net income (loss) attributable to Safehold Inc.

common shareholders - diluted

Denominator for basic and diluted earnings per share:

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

Weighted average common shares outstanding for basic earnings per common share

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

Weighted average common shares outstanding for diluted earnings per common share

Basic and diluted earnings per common share:

Net loss from continuing operations and allocable to common shareholders

Net income from discontinued operations and allocable to common shareholders

Net income (loss) allocable to common shareholders

(1) For the year ended December 31, 2022, 2021 and 2020, the effect of certain of the Company’s restricted stock awards were anti-dilutive due to the Company having a net loss from continuing operations and allocable to common shareholders for the period.

For the years ended December 31, 2022 and 2021, 2,737,451 and 6,441,572 shares, respectively, of the 3.125 % Convertible Notes were anti-dilutive due to the Company having a net loss from continuing operations and allocable to common shareholders for the period.

For the year ended December 31, 2020, no shares of common stock would have been issuable upon conversion of the 3.125 % Convertible Notes, and therefore the 3.125 % Convertible Notes had no effect on diluted EPS for such period .

Note 16—Fair Values

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The following fair value hierarchy prioritizes the inputs to be used in valuation techniques to measure fair value:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Notes to Consolidated Financial Statements

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

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

Assets required to be marked-to-market and reported at fair value every reporting period are classified as being valued on a recurring basis.

Assets not required to be recorded at fair value every period may be recorded at fair value if a specific provision or other impairment is recorded within the period to mark the carrying value of the asset to market as of the reporting date.

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

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

Fair Value Using

As of December 31, 2022

Non-recurring basis:

Real estate, net (1)

Impaired land and development (2)

Loans receivable held for sale (refer to Note 7)

As of December 31, 2021

Recurring basis:

Derivative liabilities (3)

Available-for-sale securities (3)

(1) The Company recorded a $ 1.8 million impairment on an operating property with an estimated fair value of $ 0.8 million.

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

(2) The Company recorded a $ 12.7 million on a land and development asset with an estimated fair value of $ 26.3 million.

The estimated fair value is based on future cash flows expected to be received using a discount rate of 12.5 % .

(3) The fair value of the Company’s derivatives are based upon widely accepted valuation techniques utilized by a third-party specialist using observable inputs such as interest rates and contractual cash flow and are classified as Level 2.

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

As of December 31, 2021, derivative liabilities are recorded in “Liabilities associated with real estate held for sale and classified as discontinued operations” on the Company’s consolidated balance sheet.

The following table summarizes changes in Level 3 available-for-sale securities reported at fair value on the Company’s consolidated balance sheets for the years ended December 31, 2022 and 2021 ($ in thousands):

Beginning balance

Sales and Repayments

Realized gain recorded in other income

Unrealized losses recorded in other comprehensive income

Ending balance

Notes to Consolidated Financial Statements

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

As of December 31, 2022

As of December 31, 2021

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

Loans receivable and other lending investments, net (1)

Loans receivable held for sale (1)

Cash and cash equivalents (2)

Restricted cash (2)

Debt obligations, net (1)(3)

Total debt obligations, net

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

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

Restricted cash is recorded in “Deferred expenses and other assets, net” on the Company’s balance sheet.

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

(3) As of December 31, 2022 and 2021, the fair value of the Company’s unsecured notes and Senior Term Loan are classified as Level 1 within the fair value hierarchy.

As of December 31, 2021, the fair value of the Company’s 3.125 % Senior Convertible Notes was $ 527.5 million.

Derivatives —The Company may use interest rate swaps, interest rate caps and foreign exchange contracts to manage its interest rate and foreign currency risk.

The valuation of these instruments is determined using discounted cash flow analysis on the expected cash flows of each derivative.

This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities.

The Company incorporates credit valuation adjustments to appropriately reflect both its own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements.

In adjusting the fair value of its derivative contracts for the effect of non-performance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

The Company has determined that the significant inputs used to value its derivatives fall within Level 2 of the fair value hierarchy.

Impaired real estate — The Company reviews real estate assets to be held for use and land and development assets for impairment in value whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Such estimate of cash flows considers factors such as expected future operating income trends, as well as the effects of demand, competition and other economic factors.

If the Company determines a real estate asset available and held for sale is impaired, it records an impairment charge to adjust the asset to its estimated fair market value less costs to sell.

Due to the nature of individual real estate properties, the Company generally uses a discounted cash flow methodology through internally developed valuation models to estimate the fair value of the assets.

This approach requires the Company to make judgments with respect to significant unobservable inputs, which may include discount rates, capitalization rates and the timing and amounts of estimated future cash flows.

For income producing properties, cash flows generally include property revenues, operating costs and capital expenditures that are based on current observable market rates and estimates for market rate growth and occupancy levels.

For other real estate, cash flows may include lot and unit sales that are based on current observable market rates and estimates for annual market rate growth, operating costs, costs of completion and the inventory sell out pricing and timing.

The Company will also consider comparable market transactions, if available.

In some cases, the

Notes to Consolidated Financial Statements

Company obtains external “as is” appraisals for real estate assets and appraised values may be discounted when real estate markets rapidly deteriorate.

The Company has determined that significant inputs used in its internal valuation models and appraisals fall within Level 3 of the fair value hierarchy.

Additionally, in certain cases, if the Company is under contract to sell an asset, it will mark the asset to the contracted sales price less costs to sell.

The Company considers this to be a Level 3 input under the fair value hierarchy.

Loans receivable and other lending investments, net —The Company estimates the fair value of its performing loans and other lending investments using a discounted cash flow methodology.

This method discounts estimated future cash flows using rates management determines best reflect current market interest rates that would be offered for loans with similar characteristics and credit quality.

The Company determined that the significant inputs used to value its loans and other lending investments fall within Level 3 of the fair value hierarchy.

For certain lending investments, the Company uses market quotes, to the extent they are available, that fall within Level 2 of the fair value hierarchy or broker quotes that fall within Level 3 of the fair value hierarchy.

The Company estimates the fair value of its non-performing loans using a discounted cash flow methodology through internally developed valuation models to estimate the fair value of the collateral.

This approach requires the Company to make judgments in respect to significant unobservable inputs, which may include discount rates, capitalization rates and the timing and amounts of estimated future cash flows.

For other real estate, cash flows may include lot and unit sales that are based on current observable market rates and estimates for annual revenue growth, operating costs, costs of completion and the inventory sell out pricing and timing.

The Company will also consider comparable market transactions, if available.

In some cases, the Company obtains external “as is” appraisals for loan collateral, generally when third party participations exist, and appraised values may be discounted when real estate markets rapidly deteriorate.

The Company has determined that significant inputs used in its internal valuation models and appraisals fall within Level 3 of the fair value hierarchy.

Debt obligations, net —For debt obligations traded in secondary markets, the Company uses market quotes, to the extent they are available, to determine fair value and are considered Level 2 on the fair value hierarchy.

For debt obligations not traded in secondary markets, the Company determines fair value using a discounted cash flow methodology, whereby contractual cash flows are discounted at rates that management determines best reflect current market interest rates that would be charged for debt with similar characteristics and credit quality.

The Company has determined that the inputs used to value its debt obligations under the discounted cash flow methodology fall within Level 3 of the fair value hierarchy.

Note 17—Segment Reporting

The Company has determined that it has four reportable segments based on how management reviews and manages its business.

These reportable segments include:

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

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

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

The Operating Properties segment includes the Company’s activities and operations related to its commercial and residential properties.

The Land and Development segment includes the Company’s activities related to its developable land portfolio.

Notes to Consolidated Financial Statements

The Company evaluates performance based on the following financial measures for each segment.

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

Notes to Consolidated Financial Statements

Year Ended December 31, 2022

Operating lease income

Interest income

Interest income from sales-type leases

Land development revenue

Earnings (losses) from equity method investments

Income from sales of real estate

Total revenue and other earnings

Real estate expense

Land development cost of sales

Other expense

Allocated interest expense

Allocated general and administrative (3)

Segment profit (loss) (4)

Other significant items:

Provision for loan losses

Impairment of assets

Depreciation and amortization

Capitalized expenditures

Year Ended December 31, 2021

Operating lease income

Interest income

Interest income from sales-type leases

Land development revenue

Earnings (losses) from equity method investments

Income from sales of real estate

Total revenue and other earnings

Real estate expense

Land development cost of sales

Other expense

Allocated interest expense

Allocated general and administrative (3)

Segment profit (loss) (4)

Other significant items:

Provision for loan losses

Impairment of assets

Depreciation and amortization

Capitalized expenditures

Year Ended December 31, 2020

Operating lease income

Interest income

Land development revenue

Earnings (losses) from equity method investments

Income from sales of real estate

Total revenue and other earnings

Real estate expense

Land development cost of sales

Other expense

Allocated interest expense

Allocated general and administrative (5)

Segment profit (loss) (4)

Other significant non-cash items:

Provision for loan losses

Impairment of assets

Depreciation and amortization

Capitalized expenditures

Notes to Consolidated Financial Statements

As of December 31, 2022

Real estate, net

Real estate available and held for sale

Total real estate

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

Land and development, net

Loans receivable and other lending investments, net

Loan receivable held for sale

Other investments

Total portfolio assets

Cash and other assets

As of December 31, 2021

Real estate, net

Real estate available and held for sale

Total real estate

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

Net investment in leases

Land and development, net

Loans receivable and other lending investments, net

Loan receivable held for sale

Other investments

Total portfolio assets

Cash and other assets

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

(2) Corporate/Other represents all corporate level and unallocated items including any intercompany eliminations necessary to reconcile to consolidated Company totals.

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

(3) General and administrative excludes stock-based compensation of ($ 27.7 ) million, $ 69.3 million and $ 39.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

For the Years Ended December 31,

Segment profit

(Provision for) recovery of loan losses

Impairment of assets

Stock-based compensation

Depreciation and amortization

Income tax benefit (expense)

Loss on early extinguishment of debt, net

Net income from discontinued operations

Net income (loss)

Notes to Consolidated Financial Statements

Note 18 — Selected Quarterly Financial Data (unaudited)

The following table sets forth the selected quarterly financial data (unaudited) for the Company ($ in thousands, except per share amounts).

Certain amounts have been reclassified from the prior period presentation (Refer to Note 3 - Net Lease Sale and Discontinued Operations).

For the Quarters Ended

September 30,

Net income (loss) from continuing operations

Net income from discontinued operations

Net income (loss) allocable to common shareholders

Earnings per share (1)

Net income (loss) from continuing operations

Net income from discontinued operations

Net income (loss) allocable to common shareholders

Weighted average number of common shares

Net income (loss) from continuing operations

Net income from discontinued operations

Net income (loss) allocable to common shareholders

Earnings per share (1)

Net income (loss) from continuing operations

Net income from discontinued operations

Net income (loss) allocable to common shareholders

Weighted average number of common shares

(1) Basic and diluted EPS are computed independently based on the weighted-average shares of common stock and stock equivalents outstanding for each period.

Accordingly, the sum of the quarterly EPS amounts may not agree to the total for the year.

Schedule II—Valuation and Qualifying Accounts and Reserves

($ in thousands)

For the Year Ended December 31, 2020

Continuing Operations

Reserve for loan losses (1)(2)

Allowance for doubtful accounts (2)

Allowance for deferred tax assets (2)

Discontinued Operations

Reserve for loan losses (1)(2)

Reserve for losses on net investment in leases

Allowance for doubtful accounts (2)

For the Year Ended December 31, 2021

Continuing Operations

Reserve for loan losses (1)(2)

Allowance for doubtful accounts (2)

Allowance for deferred tax assets (2)

Discontinued Operations

Reserve for loan losses (1)(2)

Reserve for losses on net investment in leases

Allowance for doubtful accounts (2)

For the Year Ended December 31, 2022

Continuing Operations

Reserve for loan losses (1)(2)

Allowance for doubtful accounts (2)

Allowance for deferred tax assets (2)

Discontinued Operations

Allowance for doubtful accounts (2)

(1) Refer to Note 7 to the Company’s consolidated financial statements.

(2) Refer to Note 3 to the Company’s consolidated financial statements.

Net income (loss) attributable to Safehold Inc.

common shareholders - basic

Net income (loss) attributable to Safehold Inc.

common shareholders - diluted

(1) For the year ended December 31, 2023, the effect of 31,557 of the Company’s restricted stock awards were antidilutive due to the Company having a net loss for the period.

For the years ended December 31, 2022 and 2021, 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 14—Related Party Transactions

Prior to the Merger, the Company was externally managed by an affiliate of iStar.

iStar was an active real estate investor for over 20 years and had an extensive network for sourcing investments, which included relationships with brokers, corporate tenants and developers that it has established over its long operating history.

Management Agreement

A summary of the terms of the management agreement with iStar prior to the Merger is below:

SFTY Manager, LLC, a wholly-owned subsidiary of iStar Inc.

Management Fee

Annual fee of 1.00 % of total equity (up to $ 1.5 billion)

Annual fee of 1.25 % of total equity (for incremental equity of $ 1.5 billion to $ 3.0 billion)

Annual fee of 1.375 % of total equity (for incremental equity of $ 3.0 billion to $ 5.0 billion) and

Annual fee of 1.50 % of total equity (for incremental equity over $ 5.0 billion)

Management Fee Consideration

At the discretion of the Company’s independent directors, payment will be made in cash or in shares of the Company’s common stock (valued at the greater of:

(i) the volume weighted average market price during a specified pricing period;

or (ii) the initial public offering price of $ 20.00 per share)

Restriction from selling common stock received for management fees for two years from the date of such issuance (restriction will terminate in the event of and effective with the termination of the management agreement)

Incentive Fee

Non-terminable through June 30, 2023, except for cause.

Automatic annual renewals thereafter, subject to non-renewal upon certain findings by the Company’s independent directors and payment of termination fee.

Termination Fee

3 x prior year’s management fee

During the years ended December 31, 2023, 2022 and 2021, the Company recorded $ 5.2 million, $ 20.3 million and $ 14.9 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.

Expense Reimbursements

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 iStar under the management agreement.

During the years ended December 31, 2023, 2022 and 2021, the Company was allocated $ 3.1 million, $ 12.5 million and $ 7.5 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

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.

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.

In June 2022, the Company acquired land and simultaneously structured and entered into a Ground Lease as part of the Ground Lease tenant’s recapitalization of a mixed-use property.

The Company also committed to provide an additional $ 35.0 million to the Ground Lease tenant if certain construction and leasing milestones are met.

The Leasehold

Loan Fund, in which an affiliate of an existing shareholder (which is affiliated with one of the Company’s independent directors) owns a noncontrolling equity interest, committed to provide a $ 105.0 million loan to the Company’s Ground Lease tenant for the recapitalization of the leasehold.

The Company paid the Leasehold Loan Fund $ 5.0 million of additional consideration in connection with this investment.

In April 2022, the Company acquired an existing Ground Lease from iStar for $ 9.0 million.

In March 2022, the Company acquired land for a purchase price of $ 28.5 million and simultaneously structured and entered into a Ground Lease as part of the Ground Lease tenant’s recapitalization of a hotel property.

One of the Company’s independent directors has an indirect ownership interest in the entity that is the Ground Lease tenant and controls the company that indirectly manages that entity.

In March 2022, the Company paid iStar $ 0.3 million to terminate a purchase option that allowed iStar to purchase the land at the expiration of its Ground Lease with the Company.

iStar sold the leasehold to a third party in March 2022.

In March 2022, the Company acquired three land properties from iStar for a total purchase price of $ 122.0 million and simultaneously structured and entered into three Ground Lease’s directly with the Ground Lease tenant.

In February 2022, the Company acquired land and simultaneously structured and entered into a Ground Lease as part of the Ground Lease tenant’s recapitalization of a life science development property.

The Leasehold Loan Fund, in which an affiliate of an existing shareholder (which is affiliated with one of the Company’s independent directors) owns a noncontrolling equity interest, committed to provide a $ 130.0 million loan to the Company’s Ground Lease tenant for the recapitalization of the leasehold.

The Company paid the Leasehold Loan Fund $ 9.0 million of additional consideration in connection with this investment.

In November 2021, the Company entered into an agreement pursuant to 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.

The purchase price to be paid is $ 33.3 million, plus an amount necessary for iStar to achieve the greater of a 1.25 x multiple or a 12 % return on its investment.

In December 2021, iStar contributed the Ground Lease to the Ground Lease Plus Fund.

The terms of the Company’s commitment under the agreement did not change upon iStar’s contribution of the Ground Lease to the Ground Lease Plus Fund and in January 2024 the Company acquired the Ground Lease from the Ground Lease Plus Fund for $ 38.3 million.

The Company has a noncontrolling interest in the Ground Lease Plus Fund and an affiliate of an existing shareholder (which is affiliated with one of the Company’s independent directors) has a noncontrolling interest in the Ground Lease Plus Fund.

In addition, the Ground Lease documents contain future funding obligations to the Ground Lease tenant of approximately $ 51.8 million of leasehold improvement allowance upon achievement of certain milestones.

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 December 31, 2023, the Company funded $ 23.7 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 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.

The purchase price to be paid for each is $ 42.0 million, plus an amount necessary for iStar to achieve the greater of a 1.25 x multiple and a 9 % return on its investment.

In addition, each Ground Lease provides for a leasehold improvement allowance up to a maximum of $ 83.0 million, which obligation would be assumed by the Company upon acquisition.

In January 2022, iStar sold the Ground Leases to the Ground Lease Plus Fund in which the Company owns a noncontrolling

interest and an existing shareholder (which is affiliated with one of the Company’s independent directors) owns a noncontrolling interest.

There can be no assurance that the conditions to closing will be satisfied and that the Company will acquire the properties and Ground Leases from the Ground Lease Plus Fund.

In February 2022, Old SAFE sold an aggregate of 108,571 Caret units, 1.08 % of the authorized Caret units, to a group of investors (refer to Note 3).

In addition, an affiliate of an existing shareholder (which is affiliated with one of the Company’s independent directors) made a commitment to purchase 28,571 Caret units, or 0.29 % of the authorized Caret units, for a purchase price of $ 5.0 million.

As part of the sale, 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 public 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, shortly before the closing of the Merger, iStar sold and affiliates of MSD Partners bought 5,405,406 shares of Old SAFE’s common stock then owned by iStar.

On March 31, 2023, in conjunction with the closing of the Merger, affiliates of MSD Partners also purchased 100,000 Caret units (refer to Note 11) from the Company for an aggregate purchase price of $ 20.0 million.

Additionally, on March 31, 2023, existing third-party Caret unit holders purchased an aggregate of 22,500 Caret units from the Company for an aggregate $ 4.5 million.

Star Holdings

On March 31, 2023, immediately prior to the closing of the Merger, the Company (then known as iStar Inc.) completed the Spin-Off, resulting in the spin-off of its remaining legacy assets and certain other assets pursuant to a separation and distribution agreement (the “Separation and Distribution Agreement”), dated as of March 31, 2023, by and between the Company and Star Holdings.

The Separation and Distribution Agreement sets forth, among other things, Star Holdings’ agreements with the Company regarding the principal transactions necessary to separate Star Holdings from the Company.

It also sets forth other agreements that govern certain aspects of Star Holdings’ relationship with the Company after the Spin-Off relating to the transfer of assets and assumption of liabilities, cash assets, release of claims, insurance, non-solicitation, segregation of accounts and other matters.

The Separation and Distribution Agreement also includes a mutual release by Star Holdings, on the one hand, and the Company, on the other hand, of the other party from certain specified liabilities, as well as mutual indemnification covenants pursuant to which Star Holdings and the Company have agreed to indemnify each other from certain specified liabilities.

SpinCo Manager has entered into a management agreement with Star Holdings, pursuant to which it will operate and pursue the orderly monetization of Star Holding’s assets.

Pursuant to the management agreement, Star Holdings pays to 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 Holding's assets, excluding shares of the Company’s common stock, for each annual term thereafter.

The management agreement has an initial one-year term and will be automatically renewed for successive one-year terms each anniversary date thereafter unless previously terminated.

The management agreement may be terminated by Star Holdings without cause by not less than one hundred eighty days ’ written notice to SpinCo Manager upon the affirmative vote of at least two -thirds of Star Holdings’ independent directors, provided, however, that if the date of termination occurs prior to the fourth anniversary of the Spin-Off, the termination will be subject to payment of the applicable termination fee to SpinCo Manager.

Star Holdings may also terminate the management agreement at any time, including during the initial term, with 30 days ’ prior written notice from Star Holdings’ board of trustees for “cause,” as defined in the management agreement.

In the event of a termination without cause by Star Holdings prior to the fourth anniversary of the Spin-Off, Star Holdings will pay SpinCo Manager a termination fee of $ 50.0 million minus the aggregate amount of management fees actually paid to SpinCo Manager prior to the termination date.

However, if Star Holdings has completed the liquidation of its assets on or before the termination date, the termination fee will consist of any portion of the annual management fee

that remained unpaid for the remainder of the then current annual term plus, if the termination date occurs on or before the third anniversary of the Spin-Off, the amount of the management fee that would have been payable for the next succeeding annual term, or if the termination date occurs after the third anniversary of the Spin-Off, zero .

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 year ended December 31, 2023, the Company recorded $ 19.4 million in management fees from Star Holdings.

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

As of December 31, 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.

Star Investment Holdings may sell the Selling Stockholder Shares in amounts and at times to be determined by the Star Investment Holdings, subject to receiving the Company’s consent, from time to time but has no obligation to sell any of the Selling Stockholder Shares.

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.

Note 15—Subsequent Events

In January 2024, the Company acquired a Ground Lease from the Ground Lease Plus Fund for $ 38.3 million (refer to Note 14).

Safehold Inc.

Schedule III—Real Estate and Accumulated Depreciation

1 unchanged sentence

($ in thousands)

Initial Cost to

Gross Amount Carried

Initial Cost to Company

at Close of Period

Subsequent to

Acquisition (2)

APARTMENT/RESIDENTIAL

ENTERTAINMENT:

(1) Includes impairments and unit sales.

(2) These properties have land improvements which have depreciable lives of 15 to 20 years .

(3) The aggregate cost for Federal income tax purposes was approximately $ 0.5 billion at December 31, 2022.

(4) Includes $ 11.7 million relating to accumulated depreciation for land and development assets as of December 31, 2022.

Schedule III—Real Estate and Accumulated Depreciation

As of December 31, 2022

($ in thousands)

The following table reconciles real estate, excluding real estate classified as discontinued operations, from January 1, 2020 to December 31, 2022:

Balance at January 1

Improvements and additions

Acquisitions through foreclosure

Other acquisitions

Balance at December 31

The following table reconciles accumulated depreciation, excluding accumulated depreciation for real estate classified as discontinued operations, from January 1, 2020 to December 31, 2022:

Balance at January 1

Balance at December 31

Schedule III—Real Estate and Accumulated Depreciation

As of December 31, 2022

($ in thousands)

The following table reconciles real estate classified as discontinued operations from January 1, 2020 to December 31, 2022:

Balance at January 1

Improvements and additions

Other acquisitions

( 1,537,443 )

Balance at December 31

The following table reconciles accumulated depreciation classified as discontinued operations from January 1, 2020 to December 31, 2022:

Balance at January 1

Balance at December 31

Schedule IV—Mortgage Loans on Real Estate

As of December 31, 2022

($ in thousands)

Type of Loan/Borrower

Underlying Property Type

Mortgages (2)(3)

Senior Mortgages:

Apartment/Residential

Borrower B (4)

Mixed Use/Mixed Collateral

October, 2026

Apartment/Residential

December, 2022

Subordinate Mortgages:

September, 2057

Total mortgages

(1) IO = Interest only.

(2) Amounts are presented net of asset-specific allowances of $ 0.4 million on impaired loans and loans held for sale.

Impairment is measured using the estimated fair value of collateral, less costs to sell.

(3) The carrying amount of mortgages approximated the federal income tax basis.

(4) Classified as held for sale as of December 31, 2022.

The Company has the intent to sell the loan based on a bid received from a third-party and the loan is recorded on the Company’s consolidated balance sheet at the estimated sales price.

Schedule IV—Mortgage Loans on Real Estate (Continued)

As of December 31, 2022

($ in thousands)

Reconciliation of Mortgage Loans on Real Estate:

The following table reconciles Mortgage Loans on Real Estate from January 1, 2020 to December 31, 2022:

Balance at January 1

New mortgage loans

Additions under existing mortgage loans

Deductions (3) :

Collections of principal

Change in provision for loan losses

Transfers to real estate and equity investments

Amortization of premium

Balance at December 31

(1) Balances represent the carrying value of loans, which are net of asset specific allowances.

(2) Amount includes amortization of discount and deferred interest capitalized.

(3) Amounts are presented net of charge-offs for the years ended December 31, 2022 and 2020.

Milwaukee, WI

Washington, DC

Minneapolis, MN

Rohnert Park, CA

Salt Lake City, UT

San Diego, CA

Los Angeles, CA

Washington, DC

Raleigh-Durham, NC

San Diego, CA

Washington, DC

Nashville, TN

San Antonio, TX

Riverside, CA

San Ramon, CA

Washington, DC

North Carolina

Real estate available and held for sale

(1) The aggregate cost for Federal income tax purposes was approximately $ 1.0 billion as of December 31, 2023.

(2) Pledged as collateral under mortgages.

(3) These properties have land improvements with depreciable lives from 7 to 12 years .

(4) Includes real estate available and held for sale.

The following table reconciles real estate and real estate available and held for sale for the years ended December 31, 2023, 2022 and 2021 (in thousands):

For the Years Ended December 31,

Beginning balance

Acquisitions (1)

Transfer to net investment in sales-type lease

Ending balance (2)

(1) Represents real estate available and held for sale.

(2) Includes real estate and real estate available and held for sale.

The following table reconciles accumulated depreciation for the years ended December 31, 2023, 2022 and 2021 (in thousands):

For the Years Ended December 31,

Beginning balance

Ending balance

Changes and Disagreements with Registered Public Accounting Firm on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data