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Item 7. Management’s Discussion and Analysis

2025-02-06 compared with 2024-02-13 · 132 added, 120 removed, 172 unchanged (59% of the section changed)

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Please read the following discussion of our consolidated operating results, financial condition and liquidity together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Our discussion related to the results of operations and changes in financial condition for 2022 compared to 2021 is included in Part II, Item 7 of Old SAFE’s Annual Report on Form 10-K for the year ended December 31, 2022 .

Our discussion related to the results of operations and changes in financial condition for 2023 compared to 2022 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 .

These historical financial statements may not be indicative of our future performance.

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

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

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

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

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Capital appreciation is realized though appreciation in the value of the land over time and through our typical rights as landlord to acquire the commercial buildings on our land at the end of a Ground Lease, which may yield substantial value to us.

As of December 31, 2023, the percentage breakdown of the gross book value of our portfolio was 42% office, 38% multi-family, 11% hotels, 6% life science and 3% mixed use and other.

As of December 31, 2024, the percentage breakdown of the gross book value of our portfolio was 41% multi-family, 40% office, 11% hotels, 6% life science and 2% mixed use and other.

The diversification by geographic location, property type and sponsor in our portfolio further reduces risk and enhances potential upside.

Many of our Ground Leases have CPI lookbacks, generally starting between years 11 and 21 of the lease term, to mitigate the effects of inflation that are typically capped between 3.0% - 3.5%;

however, in the event cumulative inflation

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

In 2022, the Consumer Price Index (“CPI”) rose to its highest rate in over 40 years.

Since then the Federal Reserve has raised interest rates multiple times and it has stated that it could raise rates again.

Any increase in interest rates may result in a reduction in the availability or an increase in costs of leasehold financing, which is critical to the growth of a robust Ground Lease market.

An increase in interest rates could also increase the leasehold financing costs of our Ground Lease tenants and their ability to obtain leasehold financing.

The COVID-19 pandemic is not currently materially impacting our new investment activity, but we continue to monitor its potential impact, which could slow new investment activity because of reduced levels of real estate transactions and constrained conditions for equity and debt financing for real estate transactions, including leasehold loans.

In addition, following the onset of the COVID-19 pandemic, the U.S.

office sector has been adversely affected by office vacancies, the rise in interest rates and a decline in market liquidity, all of which could negatively impact our tenants, Ground Rent Coverages and estimated Combined Property Values.

Many of our Ground Leases have CPI lookbacks, generally starting between years 11 and 21 of the lease term, to mitigate the effects of inflation that

are typically capped between 3.0% - 3.5%;

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

To combat the increase in inflation, the Federal Reserve raised interest rates and has kept interest rates generally high.

This increase in interest rates has produced progress on inflation and in September 2024, the Federal Reserve reduced the federal funds rate by 50 basis points, which marked the first interest rate cut in four years.

The Federal Reserve further reduced the federal funds rate by 25 basis points in each of November 2024 and December 2024.

The Federal Reserve has indicated that the economic outlook is uncertain and it will continue to monitor incoming data on unemployment and inflation before adjusting monetary policy;

however, high interest rates have, and any future increase in interest rates may continue to result in a reduction in the availability or an increase in costs of leasehold financing for Ground Lease tenants, which is critical to the growth of a robust Ground Lease market.

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

The rise in interest rates has also adversely affected the U.S.

office sector, along with office vacancies and a decline in market liquidity following the onset of the COVID-19 pandemic, all of which could negatively impact our tenants, Ground Rent Coverages and estimated Combined Property Values.

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.

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.

See the "Risk Factors" section of this 10-K for additional discussion of certain potential risks to our business arising from the COVID-19 pandemic and certain potential risks to our business related to competition and industry concentrations .

See the "Risk Factors" section of this 10-K for additional discussion of certain potential risks to our business related to competition and industry concentrations .

Our Portfolio

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Our portfolio is comprised of Ground Leases and a master lease (relating to five hotel assets that we refer to as our “Park Hotels Portfolio”) that has many of the characteristics of a Ground Lease.

As of December 31, 2023, our estimated portfolio Ground Rent Coverage was 3.6x (see the "Risk Factors - Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect the full potential impact of the COVID-19 pandemic and may decline materially in future periods , - We rely on Property NOI as reported to us by our tenants, -Our estimates of Ground Rent Coverage for properties in development or transition, or for which we do not receive current tenant financial information, may prove to be incorrect " in this Form 10-K for a discussion of our estimated Ground Rent Coverage).

The tenant under our Park Hotels Portfolio elected to extend the leases underlying three of the five hotels past the initial lease maturity of December 2025 (see the "Risk Factors - We may be unable to renew expiring Ground Leases, re-lease the land or sell the properties on favorable terms or at all , - Percentage rent payable under our master lease relating to the Park Hotels Portfolio is calculated on an aggregate portfolio-wide basis , - We are the tenant of a Ground Lease underlying a majority of our Doubletree Seattle Airport property " in this Form 10-K for a discussion of our Park Hotels Portfolio).

As of December 31, 2024, our estimated portfolio Ground Rent Coverage was 3.5x (see the "Risk Factors - 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 , - We rely on Property NOI as reported to us by our tenants, -Our estimates of Ground Rent Coverage for properties in development or transition, or for which we do not receive current tenant financial information, may prove to be incorrect " in this Form 10-K for a discussion of our estimated Ground Rent Coverage).

Below is an overview of the top 10 assets in our portfolio as of December 31, 2024 (based on gross book value and excluding unfunded commitments):

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Impairment of goodwill

Provision for credit losses

Provision for (recovery of) credit losses

Other expense

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Gain on sale of Ground Leases

Earnings from equity method investments

Earnings (losses) from equity method investments

Net income (loss) before income taxes

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Net income (loss)

(1) For the year ended December 31, 2023, general and administrative was partially offset by $19.4 million of management fees earned from Star Holdings, which are included in “Other income” in our consolidated statements of operations.

(1) For the years ended December 31, 2024 and 2023, general and administrative was partially offset by $16.8 million and $19.4 million, respectively, of management fees earned from Star Holdings, which are included in “Other income” in our consolidated statements of operations.

Interest income from sales-type leases increased to $264.3 million for the year ended December 31, 2024 from $235.5 million for the year ended December 31, 2023.

The increase was due primarily to the origination of new Ground Leases and additional fundings on existing Ground Leases classified as sales-type leases and Ground Lease receivables.

Operating lease income increased to $71.3 million during the year ended December 31, 2023 from $66.8 million for the year ended December 31, 2022.

The increase was due primarily to a $3.1 million increase in percentage rent, which was primarily attributable to our Park Hotels Portfolio for which we recognized no percentage rent in 2022, and an increase in recovery income in 2023.

Interest income – related party was $7.1 million for the year ended December 31, 2023 and relates to the Star Holdings Term Loan Facility.

Other income for the year ended December 31, 2023 primarily includes $19.4 million of management fees from Star Holdings and $15.2 million of income due to a hedge forecasted for permanent debt that did not occur.

Other income for the years ended December 31, 2023 and 2022 includes $0.5 million and $0.4 million, respectively, of other income relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease.

Other income for the years ended December 31, 2023 and 2022 also includes $3.3 million and $0.8 million, respectively, of other ancillary income from our investments and interest income earned on our cash balances.

The increase was due primarily to acquisitions of Ground Leases and additional fundings on existing Ground Leases classified as sales-type leases and Ground Lease receivables.

Operating lease income decreased to $71.1 million during the year ended December 31, 2024 from $71.3 million for the year ended December 31, 2023.

Operating lease income consists of rent from our operating leases and percentage rent from certain properties, including our Park Hotels Portfolio.

Interest income – related party was $9.5 million and $7.1 million for the years ended December 31, 2024 and 2023, respectively, and relates to the Star Holdings Term Loan Facility that was originated on March 31, 2023.

The increase is due to a full year of interest for the year ended December 31, 2024.

Other income for the years ended December 31, 2024 and 2023 primarily includes $16.8 million and $19.4 million, respectively, of management fees from Star Holdings and for the year ended December 31, 2023 includes $15.2 million of income due to a hedge forecasted for permanent debt that did not occur.

Other income for the years ended December 31, 2024 and 2023 also includes $0.5 million and $0.5 million, respectively, of other income relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease and $3.6 million and $3.3 million, respectively, of other ancillary income from our investments and interest income earned on our cash balances.

During the year ended December 31, 2024, we incurred interest expense from our debt obligations of $198.0 million compared to $181.0 million during the year ended December 31, 2023.

The increase in 2023 was primarily the result of issuances of unsecured notes to fund our growing portfolio of Ground Leases and additional borrowings on our 2021 Unsecured Revolver, which also accrued interest at higher rates in 2023 due to an increase in base interest rates.

Real estate expense during the years ended December 31, 2023 and 2022 was $4.7 million and $3.1 million, respectively, and consisted primarily of the amortization of an operating lease right-of-use asset, property taxes, legal fees, property appraisal fees and insurance expense.

In addition, during the years ended December 31, 2023 and 2022, we also recorded $0.5 million and $0.4 million, respectively, of real estate expense relating to a Ground Lease in which we are the

lessee but our tenant at the property pays this expense directly under the terms of a master lease.

The increase in 2023 was primarily the result of an increase in recoverable property expenses.

The increase in 2024 was due primarily to additional borrowings on our revolvers and commercial paper program, which also accrued interest at higher rates in 2024 due to an increase in base interest rates, and interest expense on our trust preferred securities, 5.65% Notes and 6.10% Notes.

Real estate expense during the years ended December 31, 2024 and 2023 was $4.2 million and $4.7 million, respectively, and consisted primarily of the amortization of an operating lease right-of-use asset, property taxes, legal fees,

property appraisal fees and insurance expense.

In addition, during the years ended December 31, 2024 and 2023, we also recorded $0.5 million and $0.5 million, respectively, of real estate expense relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease.

Depreciation and amortization was $9.9 million and $9.9 million during the years ended December 31, 2024 and 2023, respectively, and primarily relates to our ownership of the Park Hotels Portfolio and a multi-family property , the amortization of in-place lease assets, and beginning in the second quarter of 2023, depreciation on corporate fixed assets acquired in the Merger.

The increase in 2023 was due primarily to the depreciation on corporate fixed assets acquired in the Merger.

Subsequent to the Merger closing on March 31, 2023, general and administrative expenses primarily includes public company costs such as compensation (including equity-based compensation), occupancy and other costs.

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Total general and administrative expenses (4)

(1) For the year ended December 31, 2023, public company and other costs primarily includes compensation, occupancy, audit, legal, insurance and other office related costs.

(1) For the years ended December 31, 2024 and 2023, public company and other costs primarily includes compensation, occupancy, audit, legal, insurance and other office related costs.

(2) For the year ended December 31, 2023, $4.7 million relates to the accelerated vesting of iStar’s equity-based compensation plans in connection with the Merger.

(3) Refer to Note 14 to the consolidated financial statements.

(4) For the year ended December 31, 2023, general and administrative expenses were partially offset by $19.4 million of management fees earned from Star Holdings, which are included in “Other income” in our consolidated statements of operations.

(4) For the years ended December 31, 2024 and 2023, general and administrative expenses were partially offset by $16.8 million and $19.4 million, respectively, of management fees earned from Star Holdings, which are included in “Other income” in our consolidated statements of operations.

During the year ended December 31, 2023, we recorded a full impairment of the goodwill that was recognized as a result of the Merger (refer to Note 3 to the consolidated financial statements).

During the year ended December 31, 2024, we recorded a provision for credit losses of $9.5 million.

The provision for credit losses was due primarily to enhancements to our general provision for credit loss methodology (refer to Note 3 to the consolidated financial statements), current market conditions and growth in the portfolio during the period.

During the year ended December 31, 2023, we recorded a provision for credit losses of $2.7 million.

The provision was primarily the result of the adoption of a new accounting standard (refer to Note 3 to the consolidated financial statements) in 2023, which resulted in a $2.4 million provision on our loan receivable, net – related party.

During the year ended December 31, 2024, other expense consists primarily of costs related to our debt obligations.

During the year ended December 31, 2023 , other expense consists primarily of legal and consulting costs, transfer taxes associated with the Merger (refer to Note 1 to the consolidated financial statements) and $1.9 million from the derecognition of previously-capitalized deal structuring costs.

During the year ended December 31, 2022, other expense consists primarily of legal costs associated with our Merger with iStar (refer to Note 1 to the consolidated financial statements) as well as fees related to our Caret units program, unsuccessful pursuit costs and fees related to our derivative transactions.

During the year ended December 31, 2023, we sold a Ground Lease to a third-party for $4.2 million and recognized a gain on sale of Ground Leases of $0.4 million.

During the year ended December 31, 2022, we sold a Ground Lease to a third-party for $136.0 million and recognized a gain on sale of Ground Leases of $55.8 million, or $46.3 million net of amounts attributable to noncontrolling interests and redeemable noncontrolling interests.

During the year ended December 31, 2024, earnings from equity method investments (refer to Note 7 to the consolidated financial statements) resulted from our $3.2 million share of income from our 425 Park Avenue venture, our $5.7 million share of income from our 32 Old Slip venture, our $2.3 million share of income from the Ground Lease Plus Fund and our $11.8 million share of income from the Leasehold Loan Fund.

During the year ended December 31, 2022,

earnings from equity method investments resulted from our $3.4 million pro rata share of income from the 425 Park Avenue venture and our $5.7 million pro rata share of income from our 32 Old Slip venture.

During the year ended December 31, 2023, earnings from equity method investments (refer to Note 7 to the consolidated financial statements) resulted from our $3.5

million share of income from our 425 Park Avenue venture, our $5.7 million share of income from our 32 Old Slip venture, our $5.4 million share of income from the Ground Lease Plus Fund and our $9.6 million share of income from the Leasehold Loan Fund.

The decrease in 2024 was due primarily to us buying an asset from the Ground Lease Plus Fund, which was partially offset by an increase in income from the Leasehold Loan Fund due to additional loan fundings and an increase in outside basis amortization (refer to Note 7 to the consolidated financial statements).

During the year ended December 31, 2024, we recorded income tax expense of $3.4 million.

The provision for income taxes consists of current federal and state income taxes in the amount of $1.1 million and deferred federal and state taxes in the amount of $2.3 million with respect to our TRS.

During the year ended December 31, 2023, we recorded income tax expense of $1.7 million.

The income tax expense was primarily the result of current federal and state income tax expense in the amount of $3.1 million, which was partially offset by a deferred tax benefit in the amount of $1.3 million with respect to our TRS.

In addition, we recorded other state and local income taxes in the amount of $0.7 million during the year ended December 31, 2023.

Liquidity and Capital Resources

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We expect to make quarterly cash distributions to our shareholders sufficient to meet REIT qualification requirements.

In the first quarter 2021, we received investment-grade credit ratings from Moody's Investors Services of Baa1 and Fitch Ratings of BBB+.

In October 2023, Moody’s Investors Services upgraded our credit ratings to A3 which reduced the interest rate on our unsecured revolvers (see below).

We believe the strong credit profile we have established utilizing our modern Ground Leases and our current investment-grade credit ratings from Moody's Investors Services of A3 and Fitch Ratings of BBB+ will accelerate our ability to bring commercial real estate owners, developers and sponsors more efficiently priced capital and allows us significant operational and financial flexibility and supports our ability to scale our Ground Lease platform.

In the first quarter 2021, we entered into an unsecured revolver (refer to Note 9 to the consolidated financial statements) with a total capacity of $1.35 billion (the “2021 Unsecured Revolver”).

In the second quarter 2021, the fourth quarter 2021, the first quarter 2022 and the second quarter 2022, we issued four tranches of unsecured notes with varying fixed-rates and maturities ranging from June 2031 to May 2052 (collectively the “Notes”).

Our most recent issuance in May 2022 features a stairstep coupon structure (refer to Note 9 to the consolidated financial statements) that is unique in the unsecured and investment-grade market and will benefit key cash flow metrics.

In January 2023, we 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%, with a maturity of July 31, 2025.

We also amended our 2021 Unsecured Revolver (refer to Note 9 to the consolidated financial statements) primarily to transition from LIBOR to Adjusted SOFR, as defined in the applicable agreement.

We believe the strong credit profile we have established utilizing our modern Ground Leases and our current investment-grade credit ratings from Moody's Investors Services of A3, Fitch Ratings of A- and S&P Global Ratings of BBB+ facilitates our ability to bring commercial real estate owners, developers and sponsors more efficiently priced capital and allows us significant operational and financial flexibility and supports our ability to scale our Ground Lease platform.

On February 4, 2025, our Board authorized the repurchase of up to $50.0 million of our common stock.

W e have no obligation to repurchase additional shares, and the timing, actual number and value of the shares that are repurchased, if any, will be at the discretion of management and will depend on a number of factors, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate.

Repurchases may be suspended, terminated or modified at any time for any reason.

The share repurchase program does not have an expiration date.

Any repurchased shares will be returned to the status of authorized but unissued shares of common stock.

In November 2024 and February 2024, Portfolio Holdings (as issuer) and we (as guarantor), issued an aggregate $700.0 million principal amount of senior notes.

In November 2024, we issued $400.0 million aggregate principal amount of 5.65% senior notes due January 2035 (the “5.65% Notes”).

The 5.65% Notes were issued at 98.812% of the principal amount.

In February 2024, we issued $300.0 million aggregate principal amount of 6.10% senior notes due April 2034 (the “6.10% Notes”).

The 6.10% Notes were issued at 98.957% of the principal amount.

In June 2024, we entered into a U.S.

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

Under the Commercial Paper Program, we may issue the commercial paper notes from time to time and intend to use the proceeds for general corporate purposes.

The Commercial Paper Program is backed by our 2024 Unsecured Revolver (see below).

As of December 31, 2024, we had no outstanding balance under the Commercial Paper Program.

Borrowings under the Commercial Paper Program reduce amounts otherwise available under the 2024 Unsecured Revolver.

In April 2024, we closed on a new $2.0 billion unsecured revolving credit facility (the “2024 Unsecured Revolver”), which replaced our 2021 Unsecured Revolver and 2023 Unsecured Revolver (refer to Note 9 to the consolidated financial statements), 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 our credit ratings,

with an extended maturity date of May 1, 2029, which includes two six-month extension options.

The 2024 Unsecured Revolver replaced our nearest term maturities, reduced the overall facility cost and increased our liquidity by $150 million.

Additionally, we gained greater financial flexibility through changes to certain financial covenants.

As of December 31, 2024, there was $1.3 billion of undrawn capacity on the 2024 Unsecured Revolver.

In April 2023, we entered into an at-the-market equity offering (the “ATM”) pursuant to which we may sell shares of our common stock up to an aggregate purchase price of $300.0 million.

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As of December 31, 2024, we had not sold any shares under the ATM.

In August 2023, we sold 6,500,000 shares of our common stock in a public offering for gross proceeds of $139.1 million.

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

As of December 31, 2023, we had $19 million of unrestricted cash and an aggregate $733 million of undrawn capacity on our 2021 Unsecured Revolver and 2023 Unsecured Revolver.

We refer to this unrestricted cash and additional borrowing capacity on our 2021 Unsecured Revolver and 2023 Unsecured Revolver as our “equity” liquidity which can be used for general corporate purposes or leveraged to acquire or originate new Ground Lease assets.

Our primary sources of cash to date have been proceeds from equity offerings and private placements, proceeds from our initial capitalization by iStar and two institutional investors and borrowings from our debt facilities, unsecured notes and mortgages.

primary uses of cash to date have been the acquisition/origination of Ground Leases, repayments on our debt facilities and distributions to our shareholders.

As of December 31, 2024, we had $8 million of unrestricted cash.

We also have an aggregate $1.3 billion of undrawn capacity on our 2024 Unsecured Revolver (refer to Note 9 to the consolidated financial statements).

We refer to this unrestricted cash and additional borrowing capacity on our 2024 Unsecured Revolver as our “equity” liquidity which can be used for general corporate purposes or leveraged to acquire or originate new Ground Lease assets.

Our primary uses of cash to date have been the acquisition/origination of Ground Leases, repayments on our debt facilities and distributions to our shareholders.

We expect our short-term liquidity requirements to include debt service on our debt obligations (refer to Note 9 to the consolidated financial statements), distributions to our shareholders, working capital, new acquisitions and originations of Ground Lease investments.

We expect our long-term liquidity requirements to include debt service on our debt obligations (refer to Note 9 to the consolidated financial statements), distributions to our shareholders, working capital, new acquisitions and originations of Ground Lease investments (including in respect of unfunded commitments – refer to Note 10 to the consolidated financial statements) and debt maturities.

Our primary sources of liquidity going forward will generally consist of cash on hand and cash flows from operations, new financings, funds from our joint venture partners, unused borrowing capacity under our 2021 Unsecured Revolver (subject to the conditions set forth in the applicable loan agreement), our 2023 Unsecured Revolver (subject to the conditions set forth in the applicable loan agreement) and common and/or preferred equity issuances.

Our primary sources of liquidity going forward will generally consist of cash on hand and cash flows from operations, new financings, funds from our joint venture partners, unused borrowing capacity under our 2024 Unsecured Revolver (subject to the conditions set forth in the applicable loan agreement) and Commercial Paper Program, and common and/or preferred equity issuances.

We expect that we will be able to meet our liquidity requirements over the next 12 months and beyond.

The following table outlines our cash flows provided by operating activities, cash flows used in investing activities and cash flows provided by financing activities for the years ended December 31, 2024 and 2023 ($ in thousands):

For the Years Ended

Cash flows provided by operating activities

Cash flows used in investing activities

Cash flows provided by financing activities

The decrease in cash flows provided by operating activities during 2023 was primarily due to costs incurred in connection with the Merger and increased costs on our debt obligations in 2023 due to an increase in borrowings and interest rates, which were partially offset by an increase in percentage rent and rents collected in 2023 from new originations and acquisitions of Ground Leases throughout 2022 and 2023.

The decrease in cash flows used in investing activities during 2023 was due primarily to a decrease in new originations and acquisitions of Ground Leases, which was partially offset by the origination of the Star Holdings Term Loan Facility, consideration paid in connection with the Merger and an increase in contributions to equity method investments.

The decrease in cash flows provided by financing activities during 2023 was due primarily to the issuance of common stock in 2022 and the issuance of unsecured debt to fund our growing Ground Lease portfolio in 2022, which was partially offset by the issuance of common stock in 2023 and contributions from noncontrolling interests in 2023.

For the Year Ended

Cash flows provided by (used in) operating activities

Cash flows provided by (used in) investing activities

Cash flows provided by (used in) financing activities

The increase in cash flows provided by operating activities during 2024 was due primarily to an increase in distributions received from equity method investments in 2024 and the payment of Merger expenses in 2023, which was partially offset by the payment of annual performance awards in 2024.

The decrease in cash flows used in investing activities during 2024 was due primarily to the origination of the Star Holdings Term Loan Facility in 2023, consideration paid in connection with the Merger in 2023, a decrease in the funding of Ground Leases and an increase in net distributions received from equity method investments in 2024 and proceeds received from a derivative transaction in 2024.

The decrease in cash flows provided by financing activities during 2024 was due primarily to a decrease in net borrowings on debt obligations in 2024, the acquisition of a noncontrolling interest in 2024 and proceeds from the issuance of common stock in 2023.

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

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The 2.85% Notes were issued at 99.123% of par.

We may redeem the 2.85% Notes in whole at any time or in part from time to time prior to October 15, 2031, at our option and sole discretion, at a redemption price equal to the greater

We may redeem the 2.85% Notes in whole at any time or in part from time to time prior to October 15, 2031, at our option and sole discretion, at a redemption price equal to the greater of:

(i) 100% of the principal amount of the 2.85% Notes being redeemed;

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provided, that, so long as no default or event of default shall then exist, at any time on or after February 13, 2052, we may, at our option, prepay all or any part of the 5.15% Notes at 100% of the principal amount so prepaid, together with, in each case, accrued interest to the prepayment date, without any make-whole amount.

2021 Unsecured Revolver —In March 2021, Portfolio Holdings, then known as Safehold Operating Partnership LP, (as borrower) and us (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, we obtained additional lender commitments increasing the maximum availability to $1.35 billion.

The 2021 Unsecured Revolver has an initial maturity of March 2024 with two 12-month extension options exercisable by us, subject to certain conditions, and accrued interest at an annual rate of applicable LIBOR plus 0.90%, subject to our credit ratings.

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

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

As of December 31, 2023, there was $233.0 million of undrawn capacity on the 2021 Unsecured Revolver.

2023 Unsecured Revolver —In January 2023, Portfolio Holdings, then known as Safehold Operating Partnership LP (as borrower) and us (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 our credit ratings, with a maturity of July 31, 2025.

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

In February 2024, Portfolio Holdings (as issuer) and us (as guarantor) issued $300.0 million aggregate principal amount of 6.10% Notes.

The 6.10% Notes were issued at 98.957% of the principal amount.

We may redeem the 6.10% Notes in whole at any time or in part from time to time prior to January 1, 2034, at our option and sole discretion, at a redemption price equal to the greater of:

(i) 100% of the principal amount of the 6.10% Notes being redeemed;

and (ii) a make-whole premium calculated in accordance with the indenture, plus, in each case, accrued and unpaid interest thereon to, but not including, the applicable redemption date.

If the 6.10% Notes are redeemed on or after January 1, 2034, the redemption price will be equal to 100% of the principal amount of the 6.10% Notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date.

In November 2024, Portfolio Holdings (as issuer) and us (as guarantor) issued $400.0 million aggregate principal amount of the 5.65% Notes (together with the 2.80% Notes, the 2.85% Notes, the 3.98% Notes, the 5.15% Notes and the 6.10% Notes, the “Senior Notes”).

The 5.65% Notes were issued at 98.812% of the principal amount.

We may redeem the 5.65% Notes in whole at any time or in part from time to time prior to October 15, 2034, at our option and sole discretion, at a redemption price equal to the greater of:

(i) 100% of the principal amount of the 5.65% Notes being redeemed;

and (ii) a make-whole premium calculated in accordance with the indenture, plus, in each case, accrued and unpaid interest thereon to, but not including, the applicable redemption date.

If the 5.65% Notes are redeemed on or after October 15, 2034, the redemption price will be equal to 100% of the principal amount of the 5.65% Notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date.

2024 Unsecured Revolver —In April 2024, we entered into a $2.0 billion unsecured revolving credit facility (the “2024 Unsecured Revolver”), which replaced our 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 our credit ratings, with an extended maturity date of May 1, 2029, which includes two six-month extension options.

We also pay a facility fee of 0.10%, subject to our credit ratings.

As of December 31, 2024, there was $1.3 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 us (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 us, subject to certain conditions, and accrued interest at an annual rate of applicable SOFR plus 0.90%, subject to our credit ratings.

In March 2024, we exercised one of our options to extend the maturity to March 2025.

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 us (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 our credit ratings.

The 2024 Unsecured Revolver replaced the 2023 Unsecured Revolver.

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

The trust preferred securities bear interest at three-month Adjusted Term SOFR plus 1.50% and mature in October 2035.

Debt Covenants —We are subject to financial covenants under the 2021 Unsecured Revolver and the 2023 Unsecured Revolver, including maintaining:

Debt Covenants —We are 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 1.33x;

and (ii) a consolidated fixed charge coverage ratio of at least 1.15x, 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 our or certain of our subsidiaries’ ability to incur additional debt or liens, engage in certain mergers, consolidations and other fundamental changes, make other investments or pay dividends.

Our 2.80% Notes, 2.85% Notes, 3.98% Notes and 5.15% Notes are subject to a financial covenant requiring a ratio of unencumbered assets to unsecured debt of at least 1.25x and contain customary affirmative and negative covenants.

Our 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 our 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.

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

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

Among other things, these covenants may restrict us or certain of our subsidiaries’ ability to incur additional debt or liens, engage in certain mergers, consolidations and other fundamental changes, make other investments or pay dividends.

Our 2.80% Notes, 2.85% Notes, 3.98% Notes, 5.15% Notes, 6.10% Notes and 5.65% Notes are subject to a financial covenant requiring a ratio of unencumbered assets to unsecured debt of at least 1.25x and contain customary affirmative and negative covenants.

Our 6.10% Notes and 5.65% Notes are also subject to a financial covenant limiting the incurrence of any secured debt that would cause our secured debt to total assets ratio to exceed 50%.

Our 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 our 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.

Our mortgages contain no significant maintenance or ongoing financial covenants.

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The amendments became effective on January 4, 2021.

We and Portfolio Holdings have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of Portfolio Holdings, which will be fully and unconditionally guaranteed by us.

As of December 31, 2023, Portfolio Holdings had issued and outstanding the Notes, which were registered on a Form S-3 filed by Old SAFE and Portfolio Holdings (then known as Safehold Operating Partnership LP).

The obligations of Portfolio Holdings to pay principal, premiums, if any, and interest on the Notes are guaranteed on a senior basis by us.

In April 2023, we and Portfolio Holdings filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of Portfolio Holdings, which will be fully and unconditionally guaranteed by us.

As of December 31, 2024, Portfolio Holdings had issued and outstanding the Senior Notes, which were registered on the Form S-3 filed in April 2023 or on a Form S-3 filed by Old SAFE and Portfolio Holdings (then known as Safehold Operating Partnership LP).

The obligations of Portfolio Holdings to pay principal, premiums, if any, and interest on the Senior Notes are guaranteed on a senior basis by us.

The guarantee is full and unconditional, and Portfolio Holdings is a consolidated subsidiary of ours.

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

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

We update our analysis for c urrent market conditions and reasonable and supportable forecasts of unemployment rates to develop an estimate of credit losses.

We analyze our portfolio of Ground Leases in two categories, based on whether the underlying property is a stabilized property or a development project.

Our development properties are assigned a higher loss rate due to the higher inherent risk of deals under construction.

We perform a quarterly analysis of our loan receivable – related party that incorporates management’s current judgments about credit quality based on all known and relevant internal and external factors that may affect collectability.

We consider, among other things, payment status, lien position, borrower financial resources and investment collateral, collateral type, project economics and geographical location as well as national and regional economic factors.

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

The estimate of our Expected Loss requires significant judgment.

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

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

We updated our analysis for current market conditions and reasonable and supportable forecasts of unemployment rates to develop an estimate of credit losses.

Beginning in the third quarter of 2024, we enhanced our policy to inform credit loss estimates by analyzing historical loss data for high-credit rated long-duration bonds, which we believe have similar risk profiles to our Ground Leases, provided by external third parties along with the historical data provided by Trepp.

We continue to consider comparable loan to value ratios, loss rates, timing of losses, vintage, property type and other statistics in its estimate of credit losses.

We also continue to analyze our portfolio of Ground Leases in two categories, based on whether the underlying property is a stabilized property or a development project (projects with unfunded commitments that are under development or in transition).

Our development properties are assigned a higher loss rate due to the higher potential risk for deals under construction.

We may adopt alternative approaches to estimate our credit losses in the future based on factors such as, but not limited to, the loan to value ratios, property type and the availability of relevant historical market loss data for similar type financial instruments.

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

Acquisitions—We evaluate each acquisition transaction to determine whether the acquired asset meets the definition of a business.

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

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

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

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

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

Our acquisition of iStar was accounted for as a business combination.

For business combinations, we recognize and measure identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree at their fair values on our consolidated balance sheets.

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

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

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

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

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

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

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

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

Right of use assets are included in “Deferred expenses and other assets, net” and lease liabilities are recorded in “Accounts payable, accrued expenses and other liabilities” on our consolidated balance sheets.

Above-market leases and in-place leases are each recorded at their fair values and included in “Deferred expenses and other assets, net” on our consolidated balance sheets.

Intangible liabilities may also include below-market leases, which are recorded at their fair values and included in “Accounts payable, accrued expenses and other liabilities” on our consolidated balance sheets.

Purchase price allocation—Our acquisitions of properties are generally accounted for as an acquisition of assets.

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

We account for our acquisition of properties by recording the purchase price of tangible and intangible assets and liabilities acquired based on their relative fair values.

The value of the tangible assets, consisting of land, buildings, building improvements and tenant improvements is determined as if these assets are vacant, using estimated cash flow projections of the properties acquired which incorporate market rent, growth, discount and terminal capitalization rates.

Intangible assets may include the value of lease incentive assets, above-market leases, below-market Ground Lease assets and in-place leases, which are each recorded at their relative fair values determined using current market rents and leasing costs as inputs and included in "Real estate-related intangible assets, net" on our consolidated balance sheets.

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

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

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

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

We may also engage in sale/leaseback transactions whereby we execute a net lease with the occupant simultaneously with the purchase of the asset.

These transactions are accounted for as asset acquisitions.

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

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Impairments of real estate assets, if any, are recorded in "Impairment of assets" in our consolidated statements of operations.

Goodwill — Goodwill is calculated as the excess of purchase consideration over the fair value of the net identifiable assets acquired and primarily relates to the acquisition of iStar’s workforce and future synergies expected

to be realized from the Merger.

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

During the third quarter of 2023, we experienced a precipitous and sustained decline in the price per share of our common stock, which we identified as an indicator of goodwill impairment.

As a result, we performed an interim goodwill evaluation.

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

Our estimated fair value was determined to be our market capitalization adjusted for a control premium estimated by us representing an amount a market participant would pay to obtain a controlling interest in us.

We determined that our carrying value exceeded our estimated fair value and therefore recorded an impairment of goodwill.

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

We do not expect goodwill to have any tax impact on our financial statements.

For a discussion of other critical accounting policies, refer to Note 3 to the consolidated financial statements.

For a discussion of other significant accounting policies, refer to Note 3 to the consolidated financial statements.

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 7. Management’s Discussion and Analysis