What changed in this filing

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Item 1. Financial Statements

2024-07-30 compared with 2024-05-07 · 318 added, 201 removed, 816 unchanged (39% of the section changed)

3 unchanged sentences

(In thousands)

March 31, 2024

June 30, 2024

December 31, 2023

Net investment in sales-type leases ($ 907 and $ 465 of allowances as of March 31, 2024 and December 31, 2023, respectively)

Ground Lease receivables, net ($ 692 and $ 369 of allowances as of March 31, 2024 and December 31, 2023, respectively)

Net investment in sales-type leases ($ 1,522 and $ 465 of allowances as of June 30, 2024 and December 31, 2023, respectively)

Ground Lease receivables, net ($ 773 and $ 369 of allowances as of June 30, 2024 and December 31, 2023, respectively)

Real estate, at cost

4 unchanged sentences

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

Loans receivable, net - related party ($ 2,392 and $ 2,429 of allowances as of March 31, 2024 and December 31, 2023, respectively)

Loans receivable, net - related party ($ 2,356 and $ 2,429 of allowances as of June 30, 2024 and December 31, 2023, respectively)

Equity investments

13 unchanged sentences

shareholders' equity:

Common stock, $ 0.01 par value, 400,000 shares authorized, 71,435 and 71,077 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Common stock, $ 0.01 par value, 400,000 shares authorized, 71,435 and 71,077 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

6 unchanged sentences

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

(2) As of March 31, 2024 and December 31, 2023, includes $ 6.6 million and $ 7.1 million, respectively, due from related parties.

(2) As of June 30, 2024 and December 31, 2023, includes $ 5.2 million and $ 7.1 million, respectively, due from related parties.

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

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Interest income from sales-type leases

8 unchanged sentences

General and administrative (3)

Provision for credit losses

Provision for (recovery of) credit losses

Other expense

1 unchanged sentence

Income (loss) from operations before other items

Earnings from equity method investments

Earnings (losses) from equity method investments

Net income (loss) before income taxes

1 unchanged sentence

Net income (loss)

Net (income) attributable to noncontrolling interests

Net (income) loss attributable to noncontrolling interests

Net income (loss) attributable to Safehold Inc.

4 unchanged sentences

(1) Refer to Note 6.

(2) For the three months ended March 31, 2024, includes $ 5.5 million of management fees from related parties.

(3) For the three months ended March 31, 2023, includes $ 8.3 million of general and administrative expenses incurred to related parties that includes management fees and expense reimbursements to the Former Manager (refer to Note 1).

(2) For the three and six months ended June 30, 2024, includes $ 4.4 million and $ 9.9 million, respectively, of management fees from related parties.

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

(3) For the six months ended June 30, 2023, includes $ 8.3 million of general and administrative expenses incurred to related parties that includes management fees and expense reimbursements to the Former Manager (refer to Note 1).

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

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Net income (loss)

Other comprehensive income:

Other comprehensive income (loss):

Reclassification of (gains) losses on derivatives into earnings

2 unchanged sentences

Comprehensive income (loss)

Comprehensive (income) attributable to noncontrolling interests

Comprehensive (income) loss attributable to noncontrolling interests

Comprehensive income (loss) attributable to Safehold Inc.

8 unchanged sentences

Income (Loss)

Balance at March 31, 2024

Net income (loss)

Issuance of common stock, net / amortization

Dividends declared ($ 0.177 per share)

Change in accumulated other comprehensive income (loss)

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Redemption of noncontrolling interests

Balance at June 30, 2024

Balance at March 31, 2023

Net income (loss)

Issuance of common stock, net / amortization

Dividends declared ($ 0.177 per share)

Change in accumulated other comprehensive income (loss)

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Balance at June 30, 2023

Balance at December 31, 2023

Net income (loss)

Issuance of common stock, net / amortization

Dividends declared ($ 0.354 per share)

Change in accumulated other comprehensive income

Change in accumulated other comprehensive income (loss)

Change in noncontrolling interests

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Balance at March 31, 2024

Redemption of noncontrolling interests

Balance at June 30, 2024

Balance at December 31, 2022

Impact from adoption of new accounting standard

Net income (loss)

Issuance of common stock, net / amortization

Dividends declared ($ 0.354 per share)

Change in accumulated other comprehensive income

Change in accumulated other comprehensive income (loss)

Contributions from noncontrolling interests, net

1 unchanged sentence

Merger consideration (refer to Note 1 and Note 3)

Balance at March 31, 2023

Balance at June 30, 2023

(1) Refer to Note 3.

3 unchanged sentences

(In thousands)

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

16 unchanged sentences

Changes in accounts payable, accrued expenses and other liabilities

Cash flows used in operating activities

Cash flows provided by (used in) operating activities

Cash flows from investing activities:

6 unchanged sentences

Funding reserves received from Ground Lease tenant net of disbursements

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

Return of deposits on Ground Lease investments

Funding of cash collateral for debt obligations

1 unchanged sentence

Other investing activities

Cash flows used in investing activities

Cash flows provided by (used in) investing activities

Cash flows from financing activities:

5 unchanged sentences

Payments for withholding taxes upon vesting for stock-based compensation

Redemption of redeemable noncontrolling interests

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Cash flows provided by financing activities

Cash flows provided by (used in) financing activities

Changes in cash, cash equivalents and restricted cash

5 unchanged sentences

Total cash and cash equivalents and restricted cash

Supplemental disclosure of cash flow information:

Supplemental disclosure of non-cash investing and financing activity:

2 unchanged sentences

Dividends declared to common shareholders

Accruals for payments of withholding taxes upon vesting for stock-based compensation

Non-cash interest accrued to debt balances

Accrued finance costs

Accrued offering costs

Real estate transferred to real estate available and held for sale

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

61 unchanged sentences

(“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 paid SpinCo Manager an annual management fee of $ 25.0 million for the term ended March 31, 2024.

The annual fee declines to $ 15.0 million, $ 10.0 million and $ 5.0 million, respectively, for each of the following annual terms, and adjusts to 2.0 % of the gross book value of Star Holdings’ assets, excluding shares of the Company’s common stock, thereafter.

Star Holdings paid SpinCo Manager an annual management fee of $ 25.0 million for the term ended March 31, 2024, and will pay an annual fee of $ 15.0 million for the term ended March 31, 2025.

The annual fee declines to $ 10.0 million and $ 5.0 million, respectively, for each of the following annual terms, and adjusts to 2.0 % of the gross book value of Star Holdings’ assets, excluding shares of the Company’s common stock, 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.

10 unchanged sentences

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

As of March 31, 2024, the total assets of these consolidated VIEs were $ 74.5 million and total liabilities were $ 30.0 million.

As of June 30, 2024, the total assets of these consolidated VIEs were $ 75.2 million and total liabilities were $ 30.0 million.

Safehold Inc.

3 unchanged sentences

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

The Company 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 March 31, 2024.

Note 3—Summary of Significant Accounting Policies

8 unchanged sentences

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

As of March 31, 2024

As of June 30, 2024

As of December 31, 2023

11 unchanged sentences

Notes to Consolidated Financial Statements

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 such 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.

Because public market liquidity was not achieved by February 2024, 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 their original purchase price less the amount of distributions previously made on such units.

Because public market liquidity was not achieved by February 2024, the investors in the February 2022 transaction had the right to cause their Caret units purchased in February 2022 to be redeemed by Portfolio Holdings at their original purchase price less the amount of distributions previously made on such units.

During the three months ended March 31, 2024, the redemption option was extended to April 2024.

In April 2024, all of the investors in the February 2022 transaction exercised this right and elected to have their Caret units redeemed at the original purchase price less the amount of distributions previously made on such units .

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

The Company classified 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;

The Company classified 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 was 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.

30 unchanged sentences

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

The Company recorded $ 18.7 million of Merger expenses during the three months ended March 31, 2023, of which $ 13.9 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 three months ended March 31, 2023, the Company also recorded $ 0.6 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.

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 March 31, 2024, the Company has incurred $ 26.6 million of Merger expenses.

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

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

During the six months ended June 30, 2023, the Company also recorded $ 0.9 million of related non-recurring charges in “Other expense” and a provision for credit losses of $ 2.3 million on the Secured Term Loan Facility (refer to Note 6) which was originated at the time of the Merger in conjunction with the Spin-Off.

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

Safehold Inc.

31 unchanged sentences

Notes to Consolidated Financial Statements

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

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

Three Months Ended

Six Months Ended

June 30, 2023

Pro forma revenues

1 unchanged sentence

The pro forma revenues and net income 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.

Due to the Merger closing on March 31, 2023, the revenue and net income of the acquiree for the three months ended March 31, 2023 had an immaterial impact on the Company’s total revenues and net income for the three months ended March 31, 2023.

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

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

8 unchanged sentences

Early adoption is permitted.

The Company does not expect the adoption of ASU 2023-07 to have a material impact on its consolidated financial statements.

The Company is currently evaluating ASU 2023-07 but does not expect the adoption of ASU 2023-07 to have a material impact on its consolidated financial statements.

In December 2023, the FASB issued ASU No.

21 unchanged sentences

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

Since formation, 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 March 31, 2024.

Since formation, the joint venture acquired eight Ground Leases for an aggregate purchase price of $ 146.7 million, of which $ 88.9 million has been funded as of June 30, 2024.

In January 2024, the Company acquired a Ground Lease from the Ground Lease Plus Fund for $ 38.3 million, excluding $ 36.5 million funded by the Company pursuant to a leasehold improvement allowance (refer to Note 14).

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

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

Net investment in sales-type leases (2)

(1) As of March 31, 2024, total discounted cash flows were approximately $ 3,312 million and the discounted unguaranteed estimated residual value was $ 30.8 million.

(1) As of June 30, 2024, total discounted cash flows were approximately $ 3,350 million and the discounted unguaranteed estimated residual value was $ 31.2 million.

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.

(2) As of March 31, 2024 and December 31, 2023, $ 16.5 million and $ 16.4 million, respectively, was attributable to noncontrolling interests.

(2) As of June 30, 2024 and December 31, 2023, $ 16.5 million and $ 16.4 million, respectively, was attributable to noncontrolling interests.

Safehold Inc.

Notes to Consolidated Financial Statements

The following table presents a rollforward of the Company’s net investment in sales-type leases and Ground Lease receivables for the three months ended March 31, 2024 and 2023 ($ in thousands):

The following table presents a rollforward of the Company’s net investment in sales-type leases and Ground Lease receivables for the six months ended June 30, 2024 and 2023 ($ in thousands):

Net Investment in

Sales-type Leases

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

Beginning balance

Origination/acquisition/fundings (1)

Provision for credit losses

(Provision for) recovery of credit losses

Ending balance (2)

1 unchanged sentence

Sales-type Leases

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Beginning balance

1 unchanged sentence

Origination/acquisition/fundings (1)

Recovery of credit losses

(Provision for) recovery of credit losses

Ending balance (2)

1 unchanged sentence

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 March 31, 2024 and December 31, 2023, all of the Company’s net investment in sales-type leases and Ground Lease receivables were current in their payment status.

As of March 31, 2024, 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 March 31, 2024, the weighted average remaining life of the Company’s 34 Ground Lease receivables was 97.9 years.

(2) As of June 30, 2024 and December 31, 2023, all of the Company’s net investment in sales-type leases and Ground Lease receivables were current in their payment status.

As of June 30, 2024, the Company’s weighted average accrual rate for its net investment in sales-type leases and Ground Lease receivables was 5.3 % and 5.5 % , respectively.

As of June 30, 2024, the weighted average remaining life of the Company’s 39 Ground Lease receivables was 97.7 years.

Safehold Inc.

Notes to Consolidated Financial Statements

Allowance for Credit Losses —Changes in the Company’s allowance for credit losses on net investment in sales-type leases and Ground Lease receivables for the three months ended March 31, 2024 and 2023 were as follows ($ in thousands):

Allowance for Credit Losses —Changes in the Company’s allowance for credit losses on net investment in sales-type leases for the three and six months ended June 30, 2024 and 2023 were as follows ($ in thousands):

Net investment in sales-type leases

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Allowance for credit losses at beginning of period

Provision for credit losses (1)

Provision for (recovery of) credit losses (1)

Allowance for credit losses at end of period (2)

Ground Lease receivables

Three Months Ended March 31, 2024

Three Months Ended June 30, 2023

Allowance for credit losses at beginning of period

Provision for credit losses (1)

Provision for (recovery of) credit losses (1)

Allowance for credit losses at end of period (2)

Net investment in sales-type leases

Three Months Ended March 31, 2023

Six Months Ended June 30, 2024

Allowance for credit losses at beginning of period

Provision for (recovery of) credit losses (1)

Allowance for credit losses at end of period (2)

Six Months Ended June 30, 2023

Allowance for credit losses at beginning of period

Impact from adoption of new accounting standard (3)

Recovery of credit losses (1)

Provision for (recovery of) credit losses (1)

Allowance for credit losses at end of period (2)

(1) During the three and six months ended June 30, 2024, the Company recorded a provision for credit losses on net investment in sales-type leases of $ 0.6 million and $ 1.1 million, respectively.

The provision for credit losses was due primarily to current market conditions, including an increase in the Ground Lease cost to value ratio on the Company’s portfolio of Ground Leases since March 31, 2024 and December 31, 2023.

During the three and six months ended June 30, 2023, the Company recorded a provision for (recovery of) credit losses on net investment in sales-type leases of $ 11 thousand and ($ 20 ) thousand, respectively.

The provision for credit losses for the three months ended June 30, 2023 was due primarily to a declining macroeconomic forecast since March 31, 2023.

The recovery of credit losses for the six months ended June 30, 2023 was due primarily to an improving macroeconomic forecast since December 31, 2022.

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

(3) On January 1, 2023, the Company recorded an allowance for credit losses on net investment in sales-type leases of $ 0.4 million upon the adoption of ASU 2016-13, of which an aggregate of $ 6 thousand related to expected credit losses for unfunded commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."

Safehold Inc.

Notes to Consolidated Financial Statements

Changes in the Company’s allowance for credit losses on Ground Lease receivables for the three and six months ended June 30, 2024 and 2023 were as follows ($ in thousands):

Ground Lease receivables

Three Months Ended March 31, 2023

Three Months Ended June 30, 2024

Allowance for credit losses at beginning of period

Provision for (recovery of) credit losses (1)

Allowance for credit losses at end of period (2)

Three Months Ended June 30, 2023

Allowance for credit losses at beginning of period

Provision for (recovery of) credit losses (1)

Allowance for credit losses at end of period (2)

Six Months Ended June 30, 2024

Allowance for credit losses at beginning of period

Provision for (recovery of) credit losses (1)

Allowance for credit losses at end of period (2)

Six Months Ended June 30, 2023

Allowance for credit losses at beginning of period

Impact from adoption of new accounting standard (3)

1 unchanged sentence

Allowance for credit losses at end of period (2)

(1) During the three months ended March 31, 2024, the Company recorded a provision for credit losses on net investment in sales-type leases and Ground Lease receivables of $ 0.5 million and $ 0.3 million, respectively.

During the three months ended March 31, 2023, the Company recorded a recovery of credit losses on net investment in sales-type leases and Ground Lease receivables of $ 31 thousand and $ 25 thousand, respectively.

The recovery of credit losses on net investment in sales-type leases and Ground Lease receivables was due primarily to an improving macroeconomic forecast since December 31, 2023.

(1) During the three and six months ended June 30, 2024, the Company recorded a provision for credit losses on Ground Lease receivables of $ 0.1 million and $ 0.4 million, respectively.

During the three and six months ended June 30, 2023, the Company recorded a provision for (recovery of) credit losses on Ground Lease receivables of $ 23 thousand and ($ 2 ) thousand, respectively.

The provision for credit losses for the three months ended June 30, 2023 was due primarily to a declining macroeconomic forecast since March 31, 2023.

The recovery of credit losses for the six months ended June 30, 2023 was due primarily to an improving macroeconomic forecast since December 31, 2022.

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

(3) 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, of which an aggregate of $ 0.1 million related to expected credit losses for unfunded commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."

(3) On January 1, 2023, the Company recorded an allowance for credit losses on Ground Lease receivables of $ 0.3 million upon the adoption of ASU 2016-13, of which an aggregate of $ 0.1 million related to expected credit losses for unfunded commitments and was recorded in "Accounts payable, accrued expenses and other liabilities."

Safehold Inc.

Notes to Consolidated Financial Statements

The Company’s amortized cost basis in Ground Lease receivables, presented by year of origination and by stabilized or development status, was as follows as of March 31, 2024 ($ in thousands):

The Company’s amortized cost basis in net investment in sales-type leases and Ground Lease receivables, presented by year of origination and by stabilized or development status, was as follows as of June 30, 2024 ($ in thousands):

Year of Origination

Prior to 2020

Net investment in sales-type leases

Stabilized properties

Development properties

Year of Origination

Prior to 2020

Ground Lease receivables

1 unchanged sentence

Development properties

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

Net investment in sales-type leases

Stabilized properties

Development properties

Year of Origination

Prior to 2019

Ground Lease receivables

1 unchanged sentence

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 March 31, 2024, are as follows by year ($ in thousands):

Future Minimum Lease Payments under Sales-type Leases —Future minimum lease payments to be collected under sales-type leases accounted for under ASC 842 - Leases, excluding lease payments that are not fixed and determinable, in effect as of June 30, 2024, are as follows by year ($ in thousands):

with Inflation

2024 (remaining nine months)

2024 (remaining six months)

Total undiscounted cash flows

During the three months ended March 31, 2024 and 2023, the Company recognized interest income from sales-type leases in its consolidated statements of operations as follows ($ in thousands):

Safehold Inc.

Notes to Consolidated Financial Statements

During the three and six months ended June 30, 2024 and 2023, the Company recognized interest income from sales-type leases in its consolidated statements of operations as follows ($ in thousands):

Net Investment

in Sales-type

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Total interest income from sales-type leases

1 unchanged sentence

in Sales-type

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Total interest income from sales-type leases

Net Investment

in Sales-type

Six Months Ended June 30, 2024

Total interest income from sales-type leases

Net Investment

in Sales-type

Six Months Ended June 30, 2023

Total interest income from sales-type leases

Safehold Inc.

2 unchanged sentences

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

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

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

(1) During the three months ended March 31, 2024, the Company transferred $ 0.9 million of real property that is being marketed for sale to real estate available and held for sale.

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

As of March 31, 2024

As of June 30, 2024

Above-market lease assets, net (1)

11 unchanged sentences

Notes to Consolidated Financial Statements

The amortization of real estate-related intangible assets had the following impact on the Company’s consolidated statements of operations for the three months ended March 31, 2024 and 2023 ($ in thousands):

The amortization of real estate-related intangible assets had the following impact on the Company’s consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 ($ in thousands):

Income Statement

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Intangible asset

5 unchanged sentences

Operating lease income

Income Statement

For the Six Months Ended June 30,

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

2024 (remaining nine months)

(1) As of March 31, 2024, the weighted average amortization period for the Company’s real estate-related intangible assets was approximately 80.7 years.

2024 (remaining six months)

(1) As of June 30, 2024, the weighted average amortization period for the Company’s real estate-related intangible assets was approximately 81.0 years.

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

As of March 31, 2024

As of June 30, 2024

Below-market lease liabilities (1)

3 unchanged sentences

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

Safehold Inc.

Notes to Consolidated Financial Statements

The amortization of real estate-related intangible liabilities had the following impact on the Company’s consolidated statements of operations for the three months ended March 31, 2024 and 2023 ($ in thousands):

The amortization of real estate-related intangible liabilities had the following impact on the Company’s consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 ($ in thousands):

Income Statement

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Intangible liability

1 unchanged sentence

Operating lease income

Future Minimum Operating Lease Payments —Future minimum lease payments to be collected under non-cancelable operating leases, excluding lease payments that are not fixed and determinable, in effect as of March 31, 2024, are as follows by year ($ in thousands):

2024 (remaining nine months)

(1) During the three months ended March 31, 2024 and 2023, the Company recognized $ 4.6 million and $ 3.7 million, respectively, of percentage rent in “Operating lease income” in the Company’s consolidated statements of operations.

Income Statement

For the Six Months Ended June 30,

Intangible liability

Below-market lease liabilities (increase to income)

Operating lease income

Safehold Inc.

Notes to Consolidated Financial Statements

Future Minimum Operating Lease Payments —Future minimum lease payments to be collected under non-cancelable operating leases, excluding lease payments that are not fixed and determinable, in effect as of June 30, 2024, are as follows by year ($ in thousands):

2024 (remaining six months)

(1) During the three months ended June 30, 2024 and 2023, the Company recognized $ 0.2 million and $ 0.3 million, respectively, of percentage rent in “Operating lease income” in the Company’s consolidated statements of operations.

During the six months ended June 30, 2024 and 2023, the Company recognized $ 4.8 million and $ 4.0 million, respectively, of percentage rent in “Operating lease income” in the Company’s consolidated statements of operations.

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 three months ended March 31, 2024, the Company recorded $ 2.4 million of interest income on the Star Holdings Term Loan Facility, which is recorded in “Interest income – related party” in the Company’s consolidated statements of operations.

As of March 31, 2024, the Star Holdings Term Loan Facility had a principal balance of $ 115.0 million and a carrying value of $ 112.2 million.

During the three and six months ended June 30, 2024, the Company recorded $ 2.4 million and $ 4.7 million, respectively, of interest income on the Star Holdings Term Loan Facility, which is recorded in “Interest income – related party” in the Company’s consolidated statements of operations.

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

As of June 30, 2024, the Star Holdings Term Loan Facility had a principal balance of $ 115.0 million and a carrying value of $ 112.2 million.

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.

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

Safehold Inc.

Notes to Consolidated Financial Statements

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 three months ended March 31, 2024, the Company recorded a recovery of credit losses of $ 68 thousand on the Star Holdings Term Loan Facility, including amounts on the Incremental Term Loan Facility, which was undrawn as of March 31, 2024 and December 31, 2023.

As of March 31, 2024 and December 31, 2023, the Company had $ 0.1 million and $ 0.1 million, respectively, of accrued interest receivable which is recorded in “Deferred expenses and other assets, net” on the Company’s consolidated balance sheets.

During the three months ended March 31, 2024, the Company did not reverse any accrued interest on its loan asset.

During the three and six months ended June 30, 2024, the Company recorded a recovery of credit losses of $ 36 thousand and $ 0.1 million, respectively, on the Star Holdings Term Loan Facility, including amounts on the Incremental Term Loan Facility, which was undrawn as of June 30, 2024 and December 31, 2023.

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

As of June 30, 2024 and December 31, 2023, the Company had $ 0.1 million and $ 0.1 million, respectively, of accrued interest receivable which is recorded in “Deferred expenses and other assets, net” on the Company’s consolidated balance sheets.

The Company did not reverse any accrued interest on its loan asset during the three and six months ended June 30, 2024 and 2023.

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

Earnings (losses) from

Carrying Value

Equity Method Investments

Equity Method Investments (1)

For the Three Months Ended

For the Six Months Ended

Equity investment

2 unchanged sentences

Leasehold Loan Fund (2)

(1) As of March 31, 2024, the Company has a basis difference of $ 19.2 million in the Ground Lease Plus Fund that will be amortized over a weighted average remaining term of 106.3 years using the effective interest method.

During the three months ended March 31, 2024, $ 0.2 million of the basis difference was amortized as an increase to earnings from equity method investments.

(2) As of March 31, 2024, the Company has a basis difference of $ 10.2 million in the Leasehold Loan Fund that will be amortized over a weighted average remaining term of 2.8 years using the effective interest method.

During the three months ended March 31, 2024, $ 1.0 million of the basis difference was amortized as an increase to earnings from equity method investments.

(1) As of June 30, 2024, the Company has a basis difference of $ 19.3 million in the Ground Lease Plus Fund that will be amortized over a weighted average remaining term of 106.1 years using the effective interest method.

During the three and six months ended June 30, 2024, ($ 0.1 ) million and $ 0.1 million, respectively, of the basis difference was amortized as an increase (decrease) to earnings from equity method investments.

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

(2) As of June 30, 2024, the Company has a basis difference of $ 8.1 million in the Leasehold Loan Fund that will be amortized over a weighted average remaining term of 2.7 years using the effective interest method.

During the three and six months ended June 30, 2024, $ 2.2 million and $ 3.2 million, respectively, of the basis difference was amortized as an increase to earnings from equity method investments.

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

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.

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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).

2 unchanged sentences

In January 2024, the Company acquired the Ground Lease from the Ground Lease Plus Fund for $ 38.3 million, excluding $ 36.5 million funded by the Company pursuant to a leasehold improvement allowance (refer to Note 14).

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 June 2021, the Company entered into two agreements (refer to Note 14) 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.

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In September 2021, the construction loan commitment was transferred to the Leasehold Loan Fund.

As of March 31, 2024, the Leasehold Loan Fund funded $ 69.4 million of the commitment.

The construction loan was repaid in full in April 2024.

The Leasehold Loan Fund funded $ 69.4 million of the commitment prior to its repayment.

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.

As of March 31, 2024, the Leasehold Loan Fund has not funded any of the commitment.

As of June 30, 2024, 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.

As of March 31, 2024, the Leasehold Loan Fund funded $ 40.8 million of the commitment.

As of June 30, 2024, the Leasehold Loan Fund funded $ 40.8 million of the commitment.

Safehold Inc.

2 unchanged sentences

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

March 31, 2024

June 30, 2024

December 31, 2023

11 unchanged sentences

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

During both the three months ended March 31, 2024 and 2023, the Company recognized $ 0.1 million in “Real estate expense” and $ 0.1 million in “Other income” from its operating lease right-of-use asset.

During both the three months ended June 30, 2024 and 2023, the Company recognized $ 0.1 million in “Real estate expense” and $ 0.1 million in “Other income” from its operating lease right-of-use asset.

During both the six months ended June 30, 2024 and 2023, the Company recognized $ 0.3 million in “Real estate expense” and $ 0.3 million in “Other income” from its operating lease right-of-use asset.

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

The Company also has operating leases for office space that it assumed from iStar in connection with the Merger (refer to Note 10).

(2) Accumulated amortization of deferred finance costs was $ 12.3 million and $ 11.0 million as of March 31, 2024 and December 31, 2023, respectively.

(3) As of March 31, 2024, includes $ 19.1 million of cash posted as temporary replacement collateral in a pool that has asset substitution rights related to certain of the Company’s debt obligations.

As of March 31, 2024 and December 31, 2023, includes $ 6.2 million and $ 6.9 million, respectively, of management fees due from Star Holdings.

Through March 31, 2024, the Company has earned $ 24.9 million of management fees from Star Holdings and as of March 31, 2024, $ 25.1 million of the transaction price is attributable to performance obligations that remain unsatisfied.

(2) Accumulated amortization of deferred finance costs was $ 1.0 million and $ 11.0 million as of June 30, 2024 and December 31, 2023, respectively.

(3) As of June 30, 2024, includes $ 19.1 million of cash posted as temporary replacement collateral in a pool that has asset substitution rights related to certain of the Company’s debt obligations.

As of June 30, 2024 and December 31, 2023, includes $ 4.3 million and $ 6.9 million, respectively, of management fees due from Star Holdings.

Through June 30, 2024, the Company has earned $ 29.3 million of management fees from Star Holdings and as of June 30, 2024, $ 20.7 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):

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

Dividends declared and payable

Operating lease liability (1)

Operating lease liabilities (1)

Accrued expenses (2)

1 unchanged sentence

(1) Refer to Note 10.

(2) As of March 31, 2024 and December 31, 2023, accrued expenses includes accrued compensation, legal, audit and property expenses.

(2) As of June 30, 2024 and December 31, 2023, accrued expenses includes accrued compensation, legal, audit and property expenses.

Safehold Inc.

2 unchanged sentences

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

March 31, 2024

June 30, 2024

December 31, 2023

21 unchanged sentences

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

As of March 31, 2024, the weighted average cash interest rate for the Company’s consolidated mortgage debt, based on interest rates in effect at that date, was 3.32 % .

As of June 30, 2024, the weighted average cash interest rate for the Company’s consolidated mortgage debt, based on interest rates in effect at that date, was 3.33 % .

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 March 31, 2024, 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 7), unsecured senior notes and trust preferred securities were 4.04 % and 3.57 % , respectively.

As of June 30, 2024, 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 7), unsecured senior notes and trust preferred securities were 4.04 % and 3.58 % , respectively.

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

(3) As of March 31, 2024, $ 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.

(3) As of June 30, 2024, $ 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 March 31, 2024, the Company’s mortgages are full term interest only, bear interest at a weighted average interest rate of 3.99 % and have maturities between April 2027 and November 2069.

As of June 30, 2024, 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”).

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Notes to Consolidated Financial Statements

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 had an initial maturity of March 2024 with two 12-month extension options exercisable by the Company, subject to certain conditions, and accrues interest at an annual rate of applicable SOFR plus 0.90 %, subject to the Company’s credit ratings .

2024 Unsecured Revolver —In April 2024, the Company entered into a $ 2.0 billion unsecured revolving credit facility (the “2024 Unsecured Revolver”), which replaced the Company’s 2021 Unsecured Revolver (see below) and 2023 Unsecured Revolver (see below), each of which were terminated.

At the time of termination, $ 916 million was drawn on the 2021 Unsecured Revolver, all of which rolled over into the 2024 Unsecured Revolver.

The 2024 Unsecured Revolver has a borrowing rate of Adjusted SOFR, as defined in the applicable agreement, plus 0.85 %, subject to the Company’s credit ratings, with an extended maturity date of May 1, 2029, which includes two six-month extension options.

The Company also pays a facility fee of 0.10 %, subject to the Company’s credit ratings.

As of June 30, 2024, there was $ 1.0 billion of undrawn capacity on the 2024 Unsecured Revolver.

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”), which amount was increased to $ 1.35 billion in December 2021.

The 2021 Unsecured Revolver had an initial maturity of March 2024 with two 12-month extension options exercisable by the Company, subject to certain conditions, and accrued interest at an annual rate of applicable SOFR plus 0.90 %, subject to the Company’s credit ratings .

In March 2024, the Company exercised one of its options to extend the maturity to March 2025.

As of March 31, 2024, there was $ 439.0 million of undrawn capacity on the 2021 Unsecured Revolver.

In April 2024, the Company entered into the 2024 Unsecured Revolver, which replaced the 2021 Unsecured Revolver (refer to Note 15).

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 March 31, 2024, there was $ 500.0 million of undrawn capacity on the 2023 Unsecured Revolver.

In April 2024, the Company entered into the 2024 Unsecured Revolver, which replaced the 2023 Unsecured Revolver (refer to Note 15).

The 2024 Unsecured Revolver replaced 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) entered into a $ 500 million unsecured revolving credit facility (the “2023 Unsecured Revolver”).

The 2023 Unsecured Revolver accrued interest at a rate of Adjusted SOFR, as defined in the applicable agreement, plus 0.90 % , subject to the Company’s credit ratings.

The 2024 Unsecured Revolver replaced the 2023 Unsecured Revolver.

Trust Preferred Securities —The Company assumed trust preferred securities from iStar in connection with the 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:

Commercial Paper Program — In June 2024, Portfolio Holdings, as issuer, entered into a new U.S.

commercial paper program (the “Commercial Paper Program”) on a private placement basis, pursuant to which the Company may issue up to $ 750.0 million of short-term, unsecured commercial paper notes (the “Notes”) outstanding at any time, which are guaranteed by the Company.

Under the Commercial Paper Program, the Company may issue the Notes from time to time and will use the proceeds for general corporate purposes.

The Commercial Paper Program is backed by the Company’s 2024 Unsecured Revolver.

The Notes will be sold under customary terms in the commercial paper market and will rank pari passu with all of Portfolio Holding’s other unsecured senior indebtedness.

The interest rates will vary based on the ratings assigned to the Notes by credit rating agencies and market conditions at the time of issuance.

As of June 30, 2024, the Company had no outstanding balance under the Commercial Paper Program.

Borrowings reduce amounts otherwise available under the 2024 Unsecured Revolver.

The documents governing the Commercial Paper Program contain customary representations, warranties, covenants, defaults and indemnification provisions, and provide the terms under which the Notes will be sold pursuant to an exemption from the federal and state securities laws.

Debt Covenants —The Company is subject to financial covenants under the 2024 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.

and (ii) a consolidated fixed charge coverage ratio of at least 1.15 x, as such terms are defined in the documents governing the 2024 Unsecured Revolver, as applicable.

In addition, the 2024 Unsecured Revolver contains customary affirmative and negative covenants.

Safehold Inc.

Notes to Consolidated Financial Statements

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, 5.15 % Notes and 6.10 % 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 6.10 % Notes are also subject to a financial covenant limiting the incurrence of any secured debt that would cause the Company’s secured debt to total assets ratio to exceed 50 %.

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 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 2024 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 March 31, 2024, the Company was in compliance with all of its financial covenants.

Safehold Inc.

Notes to Consolidated Financial Statements

Future Scheduled Maturities —As of March 31, 2024, future scheduled maturities of outstanding debt obligations, assuming all extensions that can be exercised at the Company’s option, are as follows ($ in thousands):

2024 (remaining nine months)

As of June 30, 2024, the Company was in compliance with all of its financial covenants.

Future Scheduled Maturities —As of June 30, 2024, future scheduled maturities of outstanding debt obligations, assuming all extensions that can be exercised at the Company’s option, are as follows ($ in thousands):

2024 (remaining six months)

Total principal maturities

1 unchanged sentence

Total debt obligations, net

(1) As of March 31, 2024, the Company’s weighted average maturity for its secured mortgages was 27.3 years.

(1) As of June 30, 2024, the Company’s weighted average maturity for its secured mortgages was 27.0 years.

Safehold Inc.

Notes to Consolidated Financial Statements

Note 10—Commitments and Contingencies

Lease Commitments —Future minimum lease obligations under non-cancelable operating leases as of March 31, 2024 are as follows ($ in thousands):

2024 (remaining nine months)

Lease Commitments —Future minimum lease obligations under non-cancelable operating leases as of June 30, 2024 are as follows ($ in thousands):

2024 (remaining six months)

Total undiscounted cash flows (1)

7 unchanged sentences

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.

During the three months ended March 31, 2024, the Company made payments of $ 1.4 million related to its operating leases.

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

During the three and six months ended June 30, 2024, the Company made payments of $ 1.4 million and $ 2.8 million, respectively, 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 March 31, 2024, the Company had $ 70.2 million of such commitments, excluding commitments to be funded by noncontrolling interests.

As of June 30, 2024, the Company had $ 50.6 million of such commitments, excluding commitments to be funded by noncontrolling interests.

The Company also has unfunded forward commitments related to agreements that it entered into for the acquisition of new Ground Leases or additions to existing Ground Leases if certain conditions are met (refer to Note 14).

These commitments may also include leasehold improvement allowances that will be funded to the Ground Lease tenants

Safehold Inc.

Notes to Consolidated Financial Statements

when certain conditions are met.

As of March 31, 2024, the Company had an aggregate $ 262.5 million of such commitments.

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

As of June 30, 2024, the Company had an aggregate $ 150.4 million of such commitments.

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

1 unchanged sentence

We refer to these arrangements as performance-based commitments.

As of March 31, 2024, the Company had $ 105.9 million of such commitments.

As of June 30, 2024, the Company had $ 103.3 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.

Safehold Inc.

Notes to Consolidated Financial Statements

Note 11—Risk Management and Derivatives

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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

Safehold Inc.

Notes to Consolidated Financial Statements

reclassified into earnings over the period of the original forecasted hedged transaction.

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.

4 unchanged sentences

Notes to Consolidated Financial Statements

The table below presents the Company’s derivatives as well as their classification on the consolidated balance sheets as of March 31, 2024 and December 31, 2023 ($ in thousands):

March 31, 2024

The table below presents the Company’s derivatives as well as their classification on the consolidated balance sheets as of June 30, 2024 and December 31, 2023 ($ in thousands):

June 30, 2024

December 31, 2023

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Accounts payable, accrued expenses and other liabilities

(1) As of March 31, 2024, 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.

(1) As of June 30, 2024, 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 $ 350.0 million notional amount, one of which matures in December 2024 and two that mature in December 2025.

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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 (loss) for the three months ended March 31, 2024 and 2023 ($ in thousands):

The table below presents the effect of the Company’s derivative financial instruments in the consolidated statements of operations and the consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023 ($ in thousands):

Amount of Gain

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Derivatives Designated in Hedging Relationships

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

Interest rate swaps

Interest expense

For the Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

Interest rate swaps

Interest expense

Note 12—Equity

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 March 31, 2024, the Company has one class of common stock outstanding.

For the Six Months Ended June 30, 2024

Interest rate swaps

Interest expense

For the Six Months Ended June 30, 2023

Interest rate swaps

Interest expense

Safehold Inc.

Notes to Consolidated Financial Statements

Note 12—Equity

As of June 30, 2024, the Company has one class of common stock outstanding.

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

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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 March 31, 2024, the Company has no t sold any shares of its common stock through the Primary Sales Agreement.

Through June 30, 2024, the Company has no t sold any shares of its common stock through the Primary Sales Agreement.

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

7 unchanged sentences

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

As of March 31, 2024, there were no shares available for issuance for future awards under Old SAFE’s 2017 Equity Incentive Plan.

As of June 30, 2024, 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.

4 unchanged sentences

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 March 31, 2024, an aggregate of 89,998 shares of the Company’s common stock remains available for awards under the LTIP.

As of March 31, 2024, there was $ 12.5 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 2.2 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

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

Safehold Inc.

Notes to Consolidated Financial Statements

Incentive Plan”).

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.

In May 2024, the Company issued an aggregate 32,300 shares of its common stock with a grant date fair value of $ 20.78 per share to its directors that vest after one year in consideration for their annual service as directors.

In addition, in May 2024, the Company’s shareholders approved an increase to the LTIP of 1,000,000 shares.

As of June 30, 2024, an aggregate of 1,054,733 shares of the Company’s common stock remains available for awards under the LTIP.

As of June 30, 2024, there was $ 9.9 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 2.0 years.

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.

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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 March 31, 2024, there was $ 6.1 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 3.00 years.

As of March 31, 2024, and after giving effect to the Caret Restructuring and the post-Merger Caret unit awards, Amended Caret Performance Incentive Plan participants held 1,395,082 Caret units, representing 14.5 % of the then-outstanding Caret units and 11.6 % of the then-authorized Caret units.

During the three months ended March 31, 2024, the Company recognized $ 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.

The Company did not incur expense from Caret units during the three months ended March 31, 2023.

As of June 30, 2024, there was $ 3.8 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 2.75 years.

As of June 30, 2024, and after giving effect to the Caret Restructuring and the post-Merger Caret unit awards, Amended Caret Performance Incentive Plan participants held 1,371,254 Caret units, representing 14.4 % of the then-outstanding Caret units and 11.4 % of the then-authorized Caret units.

During the three and six months ended June 30, 2024, the Company recognized ($ 0.3 ) million and $ 0.2 million, respectively, of (income) 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.

During both the three and six months ended June 30, 2023, the Company recognized $ 0.5 million in expense from Caret

Safehold Inc.

Notes to Consolidated Financial Statements

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 $ 0.4 million for the three months ended March 31, 2024.

Safehold Inc.

Notes to Consolidated Financial Statements

The Company made gross contributions of $ 0.5 million for the six months ended June 30, 2024.

Accumulated Other Comprehensive Income (Loss) —Accumulated other comprehensive income (loss) consists of net unrealized gains (losses) on the Company’s derivative transactions.

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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 three months ended March 31, 2024 and 2023, the Company declared cash dividends on its common stock of $ 12.7 million, or $ 0.177 per share, and $ 11.1 million, or $ 0.177 per share, respectively.

During the six months ended June 30, 2024 and 2023, the Company declared cash dividends on its common stock of $ 25.4 million, or $ 0.354 per share, and $ 22.6 million, or $ 0.354 per share, respectively.

Safehold Inc.

4 unchanged sentences

Three Months Ended

Six Months Ended

Net income (loss)

Net (income) attributable to noncontrolling interests

Net (income) loss attributable to noncontrolling interests

Net income (loss) attributable to Safehold Inc.

1 unchanged sentence

Three Months Ended

Six Months Ended

Earnings attributable to common shares:

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common shareholders - diluted

(1) For the three months ended March 31, 2024 and 2023, the effect of 21,792 and 4,650 , respectively, of the Company’s restricted stock awards were antidilutive.

(1) For the three months ended June 30, 2024 and 2023, the effect of 9 thousand and 452 thousand, respectively, of the Company’s restricted stock awards were antidilutive.

For the six months ended June 30, 2024 and 2023, the effect of 31 thousand and 456 thousand, respectively, of the Company’s restricted stock awards were antidilutive.

Note 14—Related Party Transactions

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3 x prior year’s management fee

During the three months ended March 31, 2023, the Company recorded $ 5.2 million in management fees to the Former Manager.

The Company did not incur management fees to the Former Manager for the three months ended June 30, 2023.

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

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

1 unchanged sentence

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

During the three months ended March 31, 2023, the Company was allocated $ 3.1 million in expenses from iStar..

The Company was not allocated any expenses from iStar for the three months ended June 30, 2023.

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

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

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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 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.

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

Safehold Inc.

Notes to Consolidated Financial Statements

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

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.

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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 March 31, 2024, the Company funded $ 36.5 million of the leasehold improvement allowance.

As of June 30, 2024, the Company funded $ 49.3 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.

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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.

One of the agreements expired in June 2024.

There can be no assurance that the conditions to closing will be satisfied and that the Company will acquire the other property and Ground Lease from the Ground Lease Plus Fund.

In February 2022, Old SAFE sold an aggregate of 108,571 Caret units, 1.08 % of the then-authorized Caret units, to a group of investors (refer to Note 3).

1 unchanged sentence

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.

Because public market liquidity was not achieved by February 2024, 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 less the amount of distributions previously made on such units.

Because public market liquidity was not achieved by February 2024, the investors in the February 2022 transaction had the right to cause their Caret units purchased in February 2022 to be redeemed by Portfolio Holdings at such purchase price less the amount of distributions previously made on such units.

In April 2024, all of the investors in the February 2022 transaction exercised this right and elected to have their Caret units redeemed.

Safehold Inc.

Notes to Consolidated Financial Statements

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.

1 unchanged sentence

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.

Safehold Inc.

Notes to Consolidated Financial Statements

Star Holdings

12 unchanged sentences

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

During the three ended March 31, 2024, the Company recorded $ 5.5 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 March 31, 2024,

Safehold Inc.

Notes to Consolidated Financial Statements

Star Holdings owned approximately 18.9 % of the Company’s common stock outstanding through a wholly-owned subsidiary.

During the three and six months ended June 30, 2024, the Company recorded $ 4.4 million and $ 9.9 million, respectively, in management fees from Star Holdings.

During both the three and six months ended June 30, 2023, the Company recorded $ 7.2 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 June 30, 2024, Star Holdings owned approximately 18.9 % of the Company’s common stock outstanding through a wholly-owned subsidiary.

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

1 unchanged sentence

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

Note 15—Subsequent Events

In April 2024, investors in Caret units (refer to Note 3) elected to have their Caret units redeemed at their original purchase price less the amount of distributions previously made on such units.

In April 2024, the Company closed on a new $ 2.0 billion unsecured revolving credit facility (the “2024 Unsecured Revolver”), which replaces the Company’s 2021 Unsecured Revolver and 2023 Unsecured Revolver, each of which were terminated.

At the time of termination, $ 916 million was drawn on the 2021 Unsecured Revolver, all of which rolled over into the 2024 Unsecured Revolver and remains outstanding as of the date hereof.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements