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Item 1A. Risk Factors

2025-02-06 compared with 2024-02-13 · 98 added, 111 removed, 416 unchanged (33% of the section changed)

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● Cybersecurity risk and cyber incidents may adversely affect our business.

● Our business and growth prospects could be adversely affected by future epidemics, pandemics or other health crises, as they were during the peak of the COVID-19 pandemic.

● Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not accurately reflect the current market value of the properties and may decline materially in future periods.

● Our business and growth prospects could be adversely affected by future epidemics, pandemics or other health crises.

● Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect current market values, including the decline in office values, and may decline materially in future periods.

● Our success depends in part on our ability to attract, retain and develop talented employees, and our failure to do so, including the loss of any of our key employees, could adversely impact our business.

● We may decide to further expand our operations through acquisitions, development opportunities and other strategic transactions.

● We are party to several agreements with Star Holdings, and may be unable to collect amounts to which we are contractually entitled, which could negatively affect our performance, financial condition, results of operations and cash flow.

● Star Holdings owns a significant amount of our common stock, all of which serves as collateral for a margin loan.

● Star Holdings owns a significant amount of our common stock, some of which serves as collateral for a margin loan.

● The concentration of our voting power may adversely affect the ability of investors to influence our policies.

● There are various potential conflicts of interest in our relationship with Star Holdings, which could result in decisions that are not in the best interest of our shareholders.

● Our management agreement with Star Holdings and other effects from the Spin-Off could distract management time and attention and give rise to disputes or other unfavorable effects, which could materially and adversely affect our business, financial position or results of operations.

● Our debt obligations, which include the substantial amount of indebtedness we assumed in connection with the Merger, will reduce cash available for distribution and expose us to the risk of default.

● Our management agreement with Star Holdings could distract management time and attention and give rise to disputes or other unfavorable effects, which could materially and adversely affect our business, financial position or results of operations.

● Our debt obligations will reduce cash available for distribution and expose us to the risk of default.

● Our failure to hedge interest rates effectively could materially and adversely affect us.

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● Future issuances of debt or preferred equity securities could adversely affect our common shareholders and result in conflicts of interest.

● Following the Merger and the Spin-Off, the Company may not continue to pay dividends at or above the rate previously paid by us or Old SAFE.

● Our failure to remain qualified as a REIT would subject us to taxes, which would reduce the amount of cash available for distribution to our shareholders.

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We cannot assure you existing tenants will exercise any extension options or that our expiring leases will be renewed or that our properties will be re-leased at lease rates equal to or above their then weighted average lease rates.

Tenants may fail to properly maintain their improvements, and certain improvements may become obsolete over the long terms of our Ground Leases, which may impair the value and the UCA that we are able to realize upon a sale or re-leasing, or require us to make significant investments in order to restore the property to a suitable condition.

For example, one of our tenants under our Park Hotels Portfolio master lease elected to not extend the leases underlying two of the five hotels past December 2025.

In addition, tenants may fail to properly maintain their improvements, and certain improvements may become obsolete

over the long terms of our Ground Leases, which may impair the value and the UCA that we are able to realize upon a sale or re-leasing, or require us to make significant investments in order to restore the property to a suitable condition.

A lack of recourse to creditworthy counterparties may adversely affect us and our tenants.

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Counterparty, geographic and industry concentrations may expose us to financial credit risk.

For the year ended December 31, 2023, our two largest tenants by revenues each accounted for approximately 4.6% of our total revenues.

For the year ended December 31, 2023, 10.3% of our total revenues came from hotel properties and 37.4% came from office properties.

For the year ended December 31, 2024, our two largest tenants by revenues accounted for approximately 4.5% and 4.4%, respectively, of our total revenues.

For the year ended December 31, 2024, 36.9% of our total revenues came from multifamily properties, 36.4% came from office properties and 10.2% came from hotel properties.

We could be materially and adversely affected by negative factors affecting such concentration.

For example, our office assets and business growth prospects may be adversely affected, including adverse impacts on our rents collected, Ground Rent Coverage and UCA as a result of reduced demand for office space and/or reduction in rents at our office properties as a result of an economic downturn or permanent shift in office space demand as a result of the COVID-19 pandemic.

Moreover, certain office assets currently have material vacancies.

If our Ground Lease tenants at such assets fail to re-tenant the building such Ground Leases may default and we may suffer losses.

For one such asset, located in Washington D.C., we entered into a discretionary commitment to fund up to $9.0 million of preferred equity in an entity that owns the leasehold interest.

This preferred equity position is intended to fund any operating cash flow deficits and leasing capital necessary at the property as our tenant explores potential re-leasing or a leasehold sale, though there can be no guarantee that our tenant will be able to re-lease or sell in a timely manner, or at all.

In addition, as of December 31, 2024, our portfolio had regional geographic concentrations based on gross book value (refer to “Our Portfolio” in Item 7.

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The tenant under our Park Hotels Portfolio master lease pays us percentage rent equal to 7.5% of the positive difference between the aggregate annual operating revenues of the five hotels in the portfolio for any year and a threshold amount of approximately $81.4 million.

We received $2.8 million of percentage rent payments from our Park Hotels Portfolio in 2023 (which reflect 2022 operations) and received no percentage rent payments in 2022 (which reflect 2021 operations) or 2021 (which reflect 2020 operations).

We received $3.5 million of percentage rent payments from our Park Hotels Portfolio in 2024 (which reflect 2023 operations), $2.8 million of percentage rent payments from our Park Hotels Portfolio in 2023 (which reflect 2022 operations) and received no percentage rent payments in 2022 (which reflect 2021 operations).

Our tenant elected to not extend the master lease in connection with two of the five hotels past December 2025.

The two hotels not extended were responsible for $1.1 million of the $3.5 million of percentage rent received in 2024.

Any deterioration in the operating performance at any of the hotels in the Park Hotels Portfolio would adversely affect our ability to earn percentage rent under such hotels, and it is possible that poor operating performance at one or more such hotels could reduce or eliminate percentage rent for any annual period notwithstanding stable or improving operating performance at other hotels included in the Park Hotels Portfolio.

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however, we pass this cost on to our tenant under the terms of our master lease.

If the underlying Ground Lease is not renewed by the landlord on or before its expiration in 2044, our lease of the Doubletree Seattle Airport hotel to our tenant would also terminate which would result in the loss to us of the rental income from this hotel as well as any UCA that had not been realized by that time.

If the underlying Ground Lease is not renewed by the landlord on or before its expiration in 2044, our lease of the Doubletree Seattle Airport hotel to our tenant

would also terminate which would result in the loss to us of the rental income from this hotel as well as any UCA that had not been realized by that time.

Certain tenant rights under our Ground Leases may limit the value and the UCA we are able to realize upon lease expiration, sale of our land and Ground Leases or other events.

Certain tenant rights under our Ground Leases may limit the value we are able to realize upon lease expiration, sale of our land or other events, including, among others:

(i) our Park Hotels master lease gives the tenant the right to purchase one or more of the hotels at fair market value if the hotel suffers a major casualty or condemnation event, as defined under the master lease;

(ii) prior to the expiration of the Ground Lease relating to an office property that represents 1.1% of the gross book value of our portfolio as of December 31, 2023, the tenant has the right to demolish the building

and improvements on the property, although it cannot do so during the last five years of the lease without our prior consent.

(i) our Park Hotels Portfolio master lease gives the tenant the right to purchase one or more of the hotels at fair market value if the hotel suffers a major casualty or condemnation event, as defined under the master lease;

(ii) prior to the expiration of the Ground Lease relating to an office property that represents 1.1% of the gross book value of our portfolio as of December 31, 2024, the tenant has the right to demolish the building and improvements on the property, although it cannot do so during the last five years of the lease without our prior consent.

Rent under our Ground Lease must continue to be paid through the end of the lease, even if the tenant demolishes the building and any improvements on the property;

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When underwriting a potential investment and monitoring our portfolio, our estimate of Combined Property Value is based on expected lease terms, information supplied to us by our prospective tenant or tenant and numerous assumptions made by us.

We do not independently investigate or verify the information provided to us by our tenants and no assurance can be given that the information is accurate.

We do not independently investigate or verify the information provided to us by our tenants and

no assurance can be given that the information is accurate.

See "—We rely on Property NOI as reported to us by our tenants." The use of different information or assumptions could result in valuations that are materially lower than those used in our underwriting and portfolio monitoring processes.

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Moreover, no assurance can be given that the market price of our common stock will include any value attributable to the UCA in our owned residual portfolio.

The price for our most recent sale of Caret units, in August 2022, implied a $2.0 billion valuation for 100% of Caret units, but there can be no assurances as to the value that may be attributed to Caret units in the future.

The price for our most recent sale of Caret units, in August 2022, implied a $2.0 billion valuation for 100% of Caret units, but in April 2024 Caret units purchased in February 2022 were redeemed at their original purchase price, less the amount of distributions previously made on such units, pursuant to a redemption option.

There can be no assurances as to the value that may be attributed to Caret units in the future.

In addition, our ability to recognize value through reversion rights may be limited by the rights of our tenants under some of our Ground Leases.

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and (vi) cost overruns and untimely completion of construction (including due to risks beyond the developer’s control, such as weather or labor conditions, inflationary pressures, supply chain disruptions or material shortages).

In addition, if our tenant has obtained leasehold financing to complete construction, and the construction lender forecloses on the mortgage following a default, there is a risk that the mortgagee or a new tenant may not have necessary or sufficient development experience to complete the project or to do so to the same standards as the original developer.

In addition, if our tenant has obtained leasehold financing to complete construction, and the construction lender forecloses on the mortgage following a default, there is a risk that the

mortgagee or a new tenant may not have necessary or sufficient development experience to complete the project or to do so to the same standards as the original developer.

These risks could result in substantial unanticipated delays or expenses and could prevent the initiation or the completion of development, repositioning or redevelopment activities, any of which could materially and adversely affect us.

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The leasehold mortgagee typically has the right to (i) receive notices and cure tenant defaults under the lease, (ii) require us to enter into a new lease with a successor tenant on the same terms as the existing lease and (iii) consent to certain actions.

We may grant a leasehold mortgagee additional time to cure certain non-monetary defaults and may agree to defer certain remedies while the leasehold

mortgagee is endeavoring to cure a default.

We may grant a leasehold mortgagee additional time to cure certain non-monetary defaults and may agree to defer certain remedies while the leasehold mortgagee is endeavoring to cure a default.

In addition, some leasehold mortgage lenders may insist, should a casualty, loss or condemnation occur, upon using insurance proceeds to reduce the tenant’s debt to it rather than restoring or repairing the casualty, loss or condemnation, although the tenant would likely not be able to generate sufficient revenues from the resulting property to pay ground rent to us.

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We are subject to the risk of bankruptcy of our tenants.

We have had, and may in the future have, tenants file for bankruptcy protection.

The bankruptcy or insolvency of a tenant may materially and adversely affect the income produced by our properties or could force us to "take back" a property as a result of a default or a rejection of the lease by a tenant in bankruptcy, any of which could materially and adversely affect us.

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Due to our focus on Ground Leases throughout the U.S., and because most competitors are often locally and/or regionally focused, we do not always encounter the same competitors in each market.

Additionally, the rise in interest rates and increased investment spreads to treasury bonds in the Ground Lease market may attract new competitors, which may result in higher costs for properties, lower returns and impact our ability to grow our business.

Additionally, the rise in interest rates and increased

investment spreads to treasury bonds in the Ground Lease market may attract new competitors, which may result in higher costs for properties, lower returns and impact our ability to grow our business.

Cybersecurity risk and cyber incidents may adversely affect our business.

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A cyber incident may be an intentional attack or unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.

The result of these incidents may include disrupted operations, misstated

or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance cost, litigation and damage to our business relationships.

The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance cost, litigation and damage to our business relationships.

As have many companies, we and our third-party vendors have been impacted by cyber incidents in the past and will likely continue to experience cyber incidents of varying degrees.

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We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but there can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.

Our business and growth prospects could be adversely affected by future epidemics, pandemics or other health crises, as they were during the peak of the COVID-19 pandemic.

During its peak, the COVID-19 pandemic adversely affected our growth.

Epidemics, pandemics or other health crises, including a resurgence of the COVID-19 pandemic could adversely affect us due to, among other factors:

Our business and growth prospects could be adversely affected by future epidemics, pandemics or other health crises.

Epidemics, pandemics or other health crises could adversely affect us due to, among other factors:

● closures of, or other operational issues at, one or more of our properties resulting from government or tenant action;

● deteriorations in our tenants’ financial condition and access to capital which could cause one or more of our tenants to be unable to meet their Ground Lease obligations to us in full, or at all;

● a negative impact on the travel industry, and as a result, the hotel industry, which could adversely affect our hotel assets, which accounted for approximately 10.3%, 11.9% and 14.4% of our total revenues for the years ended December 31, 2023, 2022 and 2021, respectively, including percentage rent;

● a negative impact on the travel industry, and as a result, the hotel industry, due to declines in corporate budgets and consumer travel demand or otherwise, which could adversely affect our hotel assets, which accounted for approximately 10.2%, 10.3% and 11.9% of our total revenues for the years ended December 31, 2024, 2023 and 2022, respectively, including percentage rent;

● the impact on our percentage rent revenues, all of which are based on operating performance at our hotel properties.

We recognized $2.8 million of percentage rent from our Park Hotels Portfolio in 2023 in respect of 2022 operating performance versus no percentage rent in 2022 in respect of 2021 hotel operating performance or 2021 in respect of 2020 hotel performance during the peak of the COVID-19 pandemic;

For example, we received no percentage rent payments from our Park Hotels Portfolio in 2022 (which reflects 2021 operations) and in 2021 (which reflects 2020 operations) due to the impact of the COVID-19 pandemic, and the percentage rent payment in 2023 (which reflects 2022 operations) was below pre-pandemic levels;

● declines in corporate budgets for, and demand for, office space;

● deteriorations in our financial performance which could cause us to be unable to satisfy debt covenants, including cash flow coverage tests in our revolving credit facility, which could trigger a default and acceleration of outstanding borrowings;

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● delays in the supply of products or services that are needed for our and our tenants’ efficient operations.

The after-effects of the COVID-19 pandemic on certain sectors of the economy and commercial real estate markets remain uncertain.

For example, we received no percentage rent payments from our Park Hotels Portfolio in 2022 (which reflect 2021 operations) due to the impact of the COVID-19 pandemic, and the percentage rent payments in 2023 (which reflect 2022 operations) were below pre-pandemic levels.

Although the COVID-19 pandemic has subsided, there could be declines in corporate budgets and consumer demand for travel and declines in corporate budgets for office space, and such declines may continue for several years, which could adversely affect our business.

Percentage rent payments under our Ground Leases are likely to continue to be negatively affected while these conditions persist.

During its peak, the COVID-19 pandemic adversely affected our growth, and its after-effects on certain sectors of the economy and commercial real estate markets remain uncertain.

The possibility of another epidemic, pandemic or other health crisis presents material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.

Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect the full potential impact of the COVID-19 pandemic or resulting shifts in the office sector and may decline materially in future periods.

Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect current market values, including the decline in office values, and may decline materially in future periods.

Our reported estimated UCA and Combined Property Value are based, in part, on valuations associated with each Ground Lease that occur every 12 to 24 months.

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With respect to properties under development or in transition or for which financial statements are not available, we use our internal underwritten estimates of Ground Rent Coverage at stabilization and third-party valuations where available, none of which may take into account current demand shifts.

With respect to other properties, the property NOI available to us at December

31, 2023 may not be indicative of future periods, depending on the direction and magnitude of demand shifts for the entire period.

With respect to other properties, the property NOI available to us at December 31, 2024 may not be indicative of future periods, depending on the direction and magnitude of demand shifts for the entire period.

Given the limitations of the information used in our estimates it is possible that the actual Ground Rent Coverage may be lower than our estimate, now or in the future.

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The Ventures are with an institutional third-party partner.

The combined gross book value of the Ventures is less than 2% of our gross book value.

The combined book value of the Ventures is less than 1% of our gross book value.

The assets owned by these Ventures create higher returns but also may involve additional risk than our typical Ground Leases.

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Additionally, the compensation and benefits packages we may need to offer to remain competitive for these individuals could increase the cost of replacement and retention.

Risks Related to the Spin-Off and Our Relationship with Star Holdings

The Spin-Off may not deliver its intended results.

There are several risks and uncertainties for us related to the Spin-Off, including but not limited to:

● whether Star Holdings may be able to meet its obligations to us and others following the Spin-Off;

● the fact that Star Holdings is a significant stockholder of our common stock and sales of our common stock by Star Holdings could adversely affect the market price of our common stock;

● the fact that certain cash flows payable by Star Holdings to us may be affected by Star Holdings' performance, including amounts payable under the senior secured term loan and management fees payable under the management agreement with Star Holdings, and any adverse impact on Star Holdings' performance may adversely affect Star Holdings' ability to pay amounts due to us.

Any one or more of these risks and uncertainties, or any other complexity resulting from the Spin-Off, may have an adverse effect on our financial condition, results of operations, cash flow and per share market price of our common stock.

We may decide to further expand our operations through acquisitions, development opportunities and other strategic transactions.

We may decide to further expand our operations through acquisitions, development opportunities and other strategic transactions, some of which involve complex challenges.

Our future success will depend, in part, upon our ability to manage our expansion opportunities and other strategic transactions, which may pose substantial challenges for us to integrate new operations into our existing business in an efficient and timely manner, and to successfully monitor our operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls.

We cannot assure you that any expansion or acquisition opportunities or other strategic transactions, will be successful, or that we will realize our expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.

Risks Related to Our Relationship with Star Holdings

We are party to several agreements with Star Holdings and may be unable to collect amounts to which we are contractually entitled, which could negatively affect our performance, financial condition, results of operations and cash flow.

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Pursuant to the Management Agreement, we have agreed to provide Star Holdings with a management team and manage Star Holdings’ assets and its subsidiaries’ day-to-day operations, subject to the supervision of Star Holdings’ board of trustees.

In consideration for our management services, Star Holdings has agreed to pay us an annual management fee fixed at $25.0 million, $15.0 million, $10.0 million

and $5.0 million in each of the first four annual terms of the agreement, and 2.0% of the gross book value of Star Holdings’ assets thereafter, excluding the shares of us held by Star Holdings, as of the end of each fiscal quarter.

In consideration for our management services, Star Holdings paid us an annual management fee of $25.0 million for the term ended March 31, 2024 and will pay an annual management 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 held by Star Holdings, thereafter.

The management fee is payable in cash quarterly, in arrears.

Additionally, on March 31, 2023, we, as a lender and an administrative agent, and Star Holdings, as a 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 (the “Incremental Term Loan Facility, and together with the Secured Term Loan Facility, as amended, the “Term Loan Facility”) at Star Holdings’ election.

Borrowings under the Term Loan Facility bear an interest at a fixed rate of 8.00% per annum, subject to increase in certain circumstances.

Borrowings under the 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 Term Loan Facility has certain prepayment obligations, and a maturity of March 31, 2027.

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Any significant and negative impact on our cash flow could in turn negatively impact our compliance with covenants under our debt instruments or result in our default thereof, which could materially and adversely affect our performance, financial condition and results of operations.

Star Holdings owns a significant amount of our common stock, all of which serves as collateral for a margin loan.

Star Holdings owns a significant amount of our common stock, some of which serves as collateral for a margin loan.

As of December 31, 2024, Star Holdings owned approximately 18.9% of the outstanding shares of our common stock.

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LC, as sole custodian, calculation agent and collateral agent (the “Margin Loan Facility”).

As of November 8, 2023, the outstanding principal balance was $80.2 million.

The Margin Loan Facility is secured by all of the shares of our common stock held by Star Holdings.

As of September 30, 2024, the outstanding principal balance was $87.4 million.

As of December 31, 2024, the Margin Loan Facility is secured by 12.9 million shares of our common stock held by Star Holdings.

If the market value of our common stock held by Star Holdings drops below certain specified levels, Star Holdings will be required to post additional collateral or, at certain levels, repay the outstanding margin loan amount as well as all accrued and unpaid interest, and a make whole amount.

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The concentration of voting power in Star Holdings might also have the effect of delaying, deferring or preventing a change of control that our other shareholders may view as beneficial.

We entered into a Governance Agreement with Star Holdings, pursuant to which, among other things, Star Holdings and its subsidiaries agreed to certain lockup and standstill provisions, and to vote all shares of our common stock owned by them (i) in favor of all persons nominated to serve as our directors by our board of directors or our nominating and corporate governance committee, (ii) against any stockholder proposal that is not recommended by our board of directors and (iii) in accordance with the recommendations of our board on all other proposals brought before our stockholders, in each case until the earliest to occur of (a) the termination of our management agreement with Star Holdings, (b) the date on which both (1) Star Holdings ceases to beneficially own at least 7.5% of our outstanding common

stock and (2) Star Holdings is no longer managed by us or our affiliates, or (c) a “change of control” of us, as defined in the Governance Agreement.

As a result, the ability of other stockholders to influence the election of directors and other matters submitted to stockholders for approval will be limited.

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

conflicts in the amount of time that our officers and employees will spend on Star Holdings’ affairs vs.

conflicts in the amount of time that our officers and employees spend on Star Holdings’ affairs vs.

our other affairs;

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We also have duties as the manager of Star Holdings which may come in conflict with our duties to our shareholders from time to time.

Our management agreement with Star Holdings and other effects from the Spin-Off could distract management time and attention and give rise to disputes or other unfavorable effects, which could materially and adversely affect our business, financial position or results of operations.

Our management agreement with Star Holdings could distract management time and attention and give rise to disputes or other unfavorable effects, which could materially and adversely affect our business, financial position or results of operations.

We are Star Holdings’ external manager and our duties under the management agreement could distract the time and attention of our management away from Safehold.

In addition, the Spin-Off may lead to increased recurring operating and other expenses and to changes to certain operations.

Disputes with third parties could also arise out of these transactions.

These potential management distractions increased expenses, changes to operations, disputes with third parties, or other effects could materially and adversely affect our financial condition, results of operations, cash flow and per share market price of our common stock.

These potential management distractions, as well as increased expenses, changes to operations, potential disputes with third parties, or other effects related to our arrangements with Star Holdings could materially and adversely affect our financial condition, results of operations, cash flow and per share market price of our common stock.

The Spin-Off may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws.

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Financing and Investment Risks

Our debt obligations, which include the substantial amount of indebtedness we assumed in connection with the Merger, will reduce cash available for distribution and expose us to the risk of default.

Prior to the Merger, Old SAFE had substantial indebtedness and, in connection with the Merger, we assumed all of Old SAFE’s indebtedness in addition to retaining $100.0 million of our trust preferred securities.

Our debt obligations will reduce cash available for distribution and expose us to the risk of default.

As of December 31, 2024, we had approximately $4.4 billion principal amount of outstanding indebtedness (which includes $100 million of trust preferred securities of a consolidated subsidiary that bear interest at a per annum rate equal to three-month adjusted term SOFR plus 1.50%, but excludes $272 million of mortgage debt, representing our pro rata share of debt associated with our non-consolidated joint ventures (equity method investments)), and $1.3 billion of borrowing capacity available (subject to customary conditions) under our unsecured credit facility.

Payments of principal and interest on borrowings may leave us with insufficient cash resources to fund investment activities or to make distributions currently contemplated or necessary for us to maintain our qualification as a REIT.

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Our organizational documents do not contain any limitation on the amount of indebtedness we may incur.

Our level of debt following the Merger, the costs of our debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including, without limitation, the following:

Our level of debt, the costs of our debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including, without limitation, the following:

● our cash flow may be insufficient to meet our required principal and interest payments;

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We hold certain of our Ground Leases through ventures owned by us and a third party, and we may co-invest in the future with third parties through partnerships, joint ventures or other entities.

Under our stockholder’s agreement with an institutional investor that invested in Old SAFE prior to Old SAFE’s initial public offering, we have agreed that it will have the right to participate as a co-investor in real estate investments for which we are seeking joint venture partners.

Under our stockholder’s agreement with an institutional investor, we have agreed that it will have the right to participate as a co-investor in real estate investments for which we are seeking joint venture partners.

In a joint venture, we may not be in a position to exercise sole decision-making authority regarding material decisions.

Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to

fund their share of required capital contributions.

Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and they may have competing interests that could create conflict of interest issues.

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If we fail to meet the market’s expectations with regard to future operating results and cash distributions, the market price of our common stock could be adversely affected.

Stockholders of the Company have no contractual or other legal right to dividends that have not been declared by our board of directors.

The availability of shares for future sale could adversely affect the market price of our common stock.

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Under the terms of registration rights agreements, MSD Partners, L.P.

(“MSD”), Star Holdings and SFTY Venture LLC each received rights to have shares of common stock issued from time to time registered for resale under the Securities Act.

(“MSD Partners”), Star Holdings and SFTY Venture LLC each received rights to have shares of common stock issued from time to time registered for resale under the Securities Act.

We may also issue shares of common stock in connection with future acquisitions.

Issuances or resales of substantial amounts of shares of our common stock, or the perception that such issuances or resales might occur could adversely affect the market price of our common stock.

This potential adverse effect may be increased by the large number of shares of our common stock that are or will be owned by

Star Holdings to the extent that it resells, or there is a perception that it may resell, a significant portion of its holdings.

This potential adverse effect may be increased by the large number of shares of our common stock that are or will be owned by Star Holdings to the extent that it resells, or there is a perception that it may resell, a significant portion of its holdings.

In addition, future issuances of shares of our common stock may be dilutive to holders of shares of our common stock and may reduce the market price of our common stock.

Pursuant to agreements with us, each of MSD and SFTY Venture LLC have certain rights to maintain their percentage interest in us, but other existing shareholders have no preemptive rights.

Pursuant to agreements with us, each of MSD Partners and SFTY Venture LLC have certain rights to maintain their percentage interest in us, but other existing shareholders have no preemptive rights.

Distributions to holders of Caret units will reduce distributions to us upon certain transactions, and sales of additional Caret units may dilute the economic interests of our common stockholders.

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We have established an equity incentive plan (the “Plan”) providing for grants of Caret units to our directors, officers and employees and other eligible participants representing up to 1,500,000 Caret units, 1,371,254 of which are currently outstanding.

In addition to the Caret units reserved for issuance under the Plan, we have sold or contracted to sell an aggregate of 259,642 Caret units to third-party investors, including affiliates of MSD and an entity affiliated with one of our independent directors.

In addition to the Caret units reserved for issuance under the Plan, we have sold 122,500 Caret units to third-party investors, including affiliates of MSD Partners, that remain outstanding as of December 31, 2024.

As a result, we currently own the remaining 84.3% of the outstanding Caret units.

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Moreover, the price at which additional Caret units are sold may not be commensurate to the cash distributions we or our common stockholders would have received if we had retained such Caret units.

In connection with the sale of 137,142 Caret units in February 2022 (28,571 of which were committed to be purchased at the time), we agreed to use commercially reasonable efforts to provide public market liquidity for such Caret units, or securities into which they may be exchanged, prior to the second anniversary of such sales.

There can be no assurances that we will be able to provide public market liquidity within such timeframe, or at all, and if we are unable to do so, such investors have a right to require us to redeem their 137,142 Caret units purchased in February 2022.

Even if we are able to provide public market liquidity an active trading market may not develop, or be sustained, and the market price of such securities may be volatile.

Additionally, in connection with the pursuit of public market liquidity, we may restructure the Caret units, or securities into which they may be exchanged.

Certain other changes to the Caret program in connection with the Merger could further impact the economic interests of our common stockholders, including the following:

● A lease extension (other than in accordance with the original terms of a Ground Lease) or other “GL Material Change,” as defined in the Portfolio Holdings LLCA, will result in accelerating, not increasing, the amounts SAFE is entitled to on account of the GL units it owns;

● Portfolio Holdings will have less discretion with respect to sales of Ground Lease Assets, as (i) it may be obligated to sell Ground Lease Assets (thereby triggering a distribution to holders of Caret units and GL units) upon any Ground Lease expiration or termination, not just those related to tenant defaults, as well as upon SAFE’s receipt of all amounts it is entitled to after a lease extension or other GL Material Change, and (ii) it will be required to sell either to an affiliate via an arm’s length marketed process (and, following specified liquidity transactions, as agreed by a majority of a committee of independent directors) or to an unaffiliated third party;

● Under the recently amended Caret program, SAFE, as owner of the GL units, will no longer have a redemption right with respect to GL units;

In connection with the sale of 137,142 Caret units in February 2022 (28,571 of which were committed to be purchased at the time, but did not close), we agreed to use commercially reasonable efforts to provide public market liquidity for such Caret units, or securities into which they may be exchanged, prior to the second anniversary of such

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 at the original purchase price less the amount of distributions previously made on such units.

Certain other aspects of the Caret program could further impact the economic interests of our common stockholders, including the following:

● A lease extension (other than in accordance with the original terms of a Ground Lease) or other “GL Material Change,” as defined in the Portfolio Holdings LLCA, will result in accelerating the amounts SAFE is entitled to on account of the GL units it owns;

● Portfolio Holdings may be obligated to sell Ground Lease Assets (thereby triggering a distribution to holders of Caret units and GL units) upon any Ground Lease expiration or termination, as well as upon SAFE’s receipt of all amounts it is entitled to after a lease extension or other GL Material Change, and will be required to sell either to an affiliate via an arm’s length marketed process (and, following specified liquidity transactions, as agreed by a majority of a committee of independent directors) or to an unaffiliated third party;

● SAFE, as owner of the GL units, does not have a redemption right with respect to GL units;

● Caret distributions are not reduced for interest and principal repayment obligations of indebtedness (other than certain debt defined in the Portfolio Holdings LLCA as a “Caret Financing”).

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Thus, holders of our common stock bear the risk that Caret units will dilute their economic interests and other attributes of ownership in us and may materially and adversely affect the market price of shares of our common stock.

The changes to the Caret program in connection with the Merger may fail to improve the recognition of SAFE’s two distinct components of value by market participants.

The Caret program was designed to recognize the two distinct components of value in SAFE’s Ground Lease portfolio:

the “bond component,” which consists of the bond-like income stream SAFE receives from contractual rent payments under its Ground Leases and the return of invested capital, and the “Caret component,” which consists of the unrealized capital appreciation above SAFE’s investment basis in its Ground Leases due to SAFE’s ownership of the land and improvements at the end of the term of the applicable Ground Lease.

While the changes to the Caret program in connection with the Merger were intended to improve the recognition of these two components, particularly the Caret component, by market participants, there can be no assurances that this will happen or that such recognition will be accretive to the market price of shares of our common stock.

The design of the Caret program may not result in the recognition of the two distinct components of value by market participants.

The Caret program was designed to recognize the two distinct components of value in our Ground Lease portfolio:

the “bond component,” which consists of the bond-like income stream we receive from contractual rent payments under our Ground Leases and the return of invested capital, and the “Caret component,” which consists of the unrealized capital appreciation above our investment basis in our Ground Leases due to our ownership of the land and improvements at the end of the term of the applicable Ground Lease.

While the Caret program is designed to allow for the recognition of these two components, particularly the Caret component, by market participants, there can be no assurances that this will happen or that such recognition will be accretive to the market price of shares of our common stock.

The terms of Caret units could result in conflicts of interest between holders of our common stock and holders of Caret units.

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While our management and its board of directors may consider our interest as a Caret unit holder, neither is obligated to separately consider the interests of Caret unit holders when making such decisions.

Our board of directors intends to exercise its judgment from time to time, depending on the circumstances, as it believes the advantage of retaining flexibility in determining how to fulfill its responsibilities in any such circumstances as they may arise outweigh any perceived advantages of adopting additional specific procedures.

Our board of directors

intends to exercise its judgment from time to time, depending on the circumstances, as it believes the advantage of retaining flexibility in determining how to fulfill its responsibilities in any such circumstances as they may arise outweigh any perceived advantages of adopting additional specific procedures.

Additionally, our management’s ownership of Caret units creates potential conflicts of interest.

Pursuant to the Plan, 1,500,000 Caret units were reserved for grants of performance-based awards under the Plan to Plan participants, including certain of our executives.

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

In connection with the Merger, certain officers entered into re-vesting agreements pursuant to which they have agreed to subject a portion of their otherwise vested Caret units to additional vesting conditions which will be satisfied on the second anniversary of the closing date of the Merger.

Initial grants under the Plan were subject to vesting based on time-based service conditions and hurdles relating to our common stock price, all of which have been satisfied.

In connection with the Merger, certain officers entered into re-vesting agreements pursuant to which they have agreed to subject a portion of their otherwise vested Caret units to additional vesting conditions which will be satisfied on March 31, 2025, the second anniversary of the closing date of the Merger.

Additionally, immediately following the Merger, 76,801 Caret units were awarded to executive officers and other employees that are subject to cliff vesting on the fourth anniversary of their grant date if our 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.

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Subject to certain agreed exceptions, any material amendment adverse to the interest of Caret unit holders with respect to:

(i) capital contributions, (ii) the designation and number of membership interests in Portfolio Holdings, (iii) economics, (iv) restrictions on the authority of Portfolio Holdings’ managing member, us, (v) certain decisions with respect to Ground Leases and the fee or other interest in real property subject to a Ground Lease, (vi) our commitment that, subject to certain exceptions, all commercial Ground Leases, including any improvements built thereon, that are directly or indirectly owned by us must be owned through Portfolio Holdings, (vii) the use of proceeds from the issuance of Caret units by Portfolio Holdings or Caret Financings, (viii) drag-along rights, or (ix) amendments to the Portfolio Holdings LLCA, as well as any definitions related to such matters, will require the consent of (1) prior to a Liquidity Transaction (as defined in the Portfolio Holdings LLCA), a majority of Caret unit holders other than us and persons employed by us or any of our subsidiaries (“Outside Unitholders”) and (2) following a Liquidity Transaction, the majority of the members of a committee of independent directors and, for certain amendments, Outside Unitholders holding a majority of Caret units held by Outside Unitholders.

(i) capital contributions, (ii) the designation and number of membership interests in Portfolio Holdings, (iii) economics, (iv) restrictions on the authority of Portfolio Holdings’ managing member, us, (v) certain decisions with respect to Ground Leases and the fee or other interest in real property subject to a Ground Lease, (vi) our commitment that, subject to certain exceptions, all commercial Ground Leases, including any improvements built thereon, that are directly or indirectly owned by us must be owned through Portfolio Holdings, (vii) the use of proceeds from the issuance of Caret units by Portfolio Holdings or Caret Financings, (viii) drag-along rights, or (ix) amendments to the Portfolio Holdings LLCA, as well as any definitions related to such matters, require the consent of (1) prior to a Liquidity Transaction (as defined in the Portfolio Holdings LLCA), a majority of Caret unit holders other than us and persons employed by us or any of our subsidiaries (“Outside Unitholders”) and (2) following a Liquidity Transaction, the majority of the members of a committee of independent directors and, for certain amendments, Outside Unitholders holding a majority of Caret units held by Outside Unitholders.

This provision in the Portfolio Holdings LLCA could delay or impede any proposed amendment to the Portfolio Holdings LLCA that might be beneficial to us or our common stockholders, unless such amendment is approved by the Outside Unitholders.

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The Portfolio Holdings LLCA contains provisions, including limitations on our authority to amend the agreement by granting certain approval rights to holders of Caret units, that may delay, defer or prevent a change in control.

Under the terms of the Portfolio Holdings LLCA, we will have the sole discretion, prior to a specified liquidity transactions, to acquire all Caret units to consummate a change of control in us or the sale of our ground lease business.

However, we will not have such drag-along right after a liquidity transaction.

The Portfolio Holdings LLCA further provides that prior to specified liquidity transactions, any amendment or modification of the terms of our drag-along right will require the consent of Caret unit holders (other than us or any person that is employed by us or our subsidiaries) holding a majority of Caret units held by such persons.

Under the terms of the Portfolio Holdings LLCA, we have the sole discretion, prior to specified liquidity transactions, to acquire all Caret units to consummate a change of control in us or the sale of our ground lease business.

However, we do not have such drag-along right after a liquidity transaction.

The Portfolio Holdings LLCA further provides that prior to specified liquidity transactions, any amendment or modification of the terms of our drag-along right requires the consent of Caret unit holders (other than us or any person that is employed by us or our subsidiaries) holding a majority of Caret units held by such persons.

The absence of the drag-along right after a liquidity transaction could make us a less attractive target for acquisition and therefore delay, deter or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interests of our common stockholders.

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Thus, holders of shares of our common stock bear the risk that our future issuances or sales of debt or equity securities or our incurrence of other borrowings may materially and adversely affect the market price of shares of our common stock and may result in conflicts of interest.

Risks Related to Our Recent Me rger

We have and may continue to incur substantial expenses related to the Merger and related transactions.

While we have incurred certain transaction and internalization expenses, there are a number of factors beyond our control that could affect the total amount or the timing of expenses related to the Merger.

Following the Merger, we may be unable to realize the anticipated synergies and related benefits of the Merger or do so within the anticipated time frame.

We must devote significant management attention and resources to managing the combined company as a single, internalized enterprise and ensuring that we are fulfilling its obligations under the Star Holdings management agreement.

Potential difficulties we may encounter include the following:

● The inability to successfully combine iStar Inc.

and Safehold businesses in a manner that permits us to achieve the future cost savings that were anticipated to result from the Merger, which would result in some anticipated benefits of the Merger not being realized in the time frame currently anticipated, or at all;

● potential unknown liabilities and unforeseen increased expenses resulting from the Merger and Spin-Off;

● performance shortfalls as a result of the diversion of management’s attention caused by managing Star Holdings.

For all these reasons, you should be aware that it is possible that we may be adversely affected by the business and financial results of distractions of our management, the disruption of our ongoing business and/or unanticipated costs and expenses or the failure to realize anticipated future cost savings.

Our future operating results will suffer if we do not effectively manage our operations following the Merger.

Following the Merger, we may continue to expand its operations through additional acquisitions, development opportunities and other strategic transactions, some of which involve complex challenges.

Our future success will depend, in part, upon our ability to manage our expansion opportunities, which may pose substantial challenges for us to integrate new operations into its existing business in an efficient and timely manner, and to successfully monitor our operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls.

We cannot assure you that its expansion or acquisition opportunities will be successful, or that we will realize our expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.

Following the Merger and the Spin-Off, the Company may not continue to pay dividends at or above the rate previously paid by us or Old SAFE.

Following the Merger and the Spin-Off, the stockholders of the Company may not receive dividends at the same rate that they did as stockholders of Old SAFE of the Company prior to the Merger and the Spin-Off for various reasons, including the following:

the Company may not have enough cash to pay such dividends due to changes in the Company’s cash requirements, capital spending plans, cash flow or financial position;

decisions on whether, when and in what amounts to pay any future dividends will remain at all times entirely at the discretion of our board of directors, which reserves the right to change the Company’s dividend practices at any time and for any reason, subject to applicable REIT requirements;

the amount of dividends that our subsidiaries may distribute to us may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur.

Stockholders of the Company have no contractual or other legal right to dividends that have not been declared by our board of directors.

There can be no assurance that we will repurchase shares pursuant to our share repurchase program consistent with historical amounts or at all.

Our share repurchase program may change from time to time, and we may not repurchase shares in any particular amounts, in amounts consistent with historical practice, or at all.

Our repurchase program does not obligate the Company to repurchase any specific dollar amount or to acquire any specific number of shares and the timing and amount of repurchases, if any, will depend on several factors, including market and business conditions, applicable debt covenants, the timing and amount of cash proceeds from asset dispositions, the timing and amount of any like-kind exchange transactions and other tax-planning matters, the trading price of our common stock, the nature of other investment opportunities, and other factors as our Board may deem relevant from time to time.

Repurchase activity could have a negative effect on our stock price, increase volatility, or fail to enhance stockholder value.

Tax Risks Related to Ownership of Our Shares

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Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis.

In connection with such requirements, for so long as any stockholders, either individually or together in the aggregate, hold 10% or more of the shares of our common stock, we will be deemed to own any tenant in which such stockholder or such stockholders together own, at any time during a taxable year, a 10% or greater interest, applying certain constructive

ownership rules, which could cause us to receive rental income from a related party tenant.

We have put in place procedures to diligence whether we will directly or indirectly receive rental income of a related party tenant.

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To the extent we fail to satisfy a REIT gross income test as a result of receiving related party tenant income we could fail to qualify as a REIT or be subject to a penalty tax which could be significant in amount.

Furthermore, we own a direct or indirect interest in certain subsidiaries that have elected to be taxed as REITs for U.S.

federal income tax purposes under the Code.

Provided that each subsidiary REIT qualifies as a REIT, our interest in such subsidiary REIT will be treated as a qualifying real estate asset for purposes of the REIT asset tests.

To qualify as a REIT, the subsidiary REIT must independently satisfy all of the REIT qualification requirements.

The failure of a subsidiary REIT to qualify as a REIT could have an adverse effect on our ability to comply with the REIT income and asset tests, and thus our ability to qualify as a REIT.

Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for us to qualify as a REIT.

Thus, while we believe we have been organized and operated and intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we have qualified or will continue to so qualify for any particular year.

Thus, while we believe we have been organized and operated and intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the

rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we have qualified or will continue to so qualify for any particular year.

These considerations also might restrict the types of assets that we can acquire or services that we can directly provide to our tenants in the future.

If we fail to qualify as a REIT in any taxable year, and we do not qualify for certain statutory relief provisions, we would be required to pay U.S.

federal income tax on our taxable income at the regular corporate rate, and distributions to our shareholders would not be deductible by us in determining our taxable income.

federal income tax on our taxable income at the regular corporate rate, distributions to our shareholders would not be deductible by us in determining our taxable income, we could be subject to the one percent excise tax on stock repurchases imposed by the 2022 Inflation Reduction Act, and we may not elect to be taxed as a REIT for four taxable years following the year in which we were disqualified.

In such a case, we might need to borrow money, sell assets, or reduce or even cease making distributions in order to pay our taxes.

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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 1A. Risk Factors