What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 150 added, 83 removed, 215 unchanged (52% of the section changed)

15 unchanged sentences

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 March 31, 2025, 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.

As of June 30, 2025, 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.

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default and we may suffer losses.

We have entered into a forbearance agreement with a tenant under a significant New York office asset.

If the tenant defaults on such agreement, we may experience delays in enforcing our rights as a landlord, may suffer losses and may incur substantial costs in protecting our investment.

See the "Risk Factors" section of our 2024 Annual Report for additional discussion of certain potential risks to our business related to competition and industry concentrations.

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

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

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

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

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

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

Observing changes in our owned residual portfolio

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

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

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

The table below shows the current estimated UCA in our owned residual portfolio as of March 31, 2025 and December 31, 2024 ($ in millions):

March 31, 2025

The table below shows the current estimated UCA in our owned residual portfolio as of June 30, 2025 and December 31, 2024 ($ in millions):

June 30, 2025

December 31, 2024

2 unchanged sentences

Unrealized Capital Appreciation in Our Owned Residual Portfolio

(1) Please review our Current Report on Form 8-K filed on May 6, 2025 for a discussion of the valuation methodology used and important limitations and qualifications of the calculation of UCA.

(1) Please review our Current Report on Form 8-K filed on August 5, 2025 for a discussion of the valuation methodology used and important limitations and qualifications of the calculation of UCA.

See “Risk Factors- Certain tenant rights under our Ground Leases may limit the value and the UCA we are able to realize upon lease expiration, sale of our land and Ground Leases or other events ” included in “Risk Factors” of our 2024 Annual Report for a discussion of certain tenant rights and other terms of the leases that may limit our ability to realize value from the UCA.

(2) Combined Property Value includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $147.9 million and $319.8 million related to transactions with remaining unfunded commitments as of March 31, 2025 and December 31, 2024, respectively.

(2) Combined Property Value includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $291.1 million and $319.8 million related to transactions with remaining unfunded commitments as of June 30, 2025 and December 31, 2024, respectively.

Combined Property Value excludes the term loan to Star Holdings, the assets in the Leasehold Loan Fund (refer to Note 8 to the consolidated financial statements), the assets in the Ground Lease Plus Fund and amounts attributable to noncontrolling interests.

Ground Lease Cost includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $32.2 million and $46.2 million of unfunded commitments as of March 31, 2025 and December 31, 2024, respectively.

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

As of March 31, 2025, our gross book value as a percentage of combined property value was 52%.

Ground Lease Cost includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $90.5 million and $46.2 million of unfunded commitments as of June 30, 2025 and December 31, 2024, respectively.

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

As of June 30, 2025, our gross book value as a percentage of combined property value was 52%.

Our Caret Program (as defined below) is designed to recognize the two distinct components of value in our Ground Lease portfolio by separating them into:

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We have a Caret Performance Incentive Plan (the “Caret Performance Incentive Plan”) pursuant to which Caret units are reserved for grants of performance-based awards to participants including certain employees of the Company, directors and service providers.

As of March 31, 2025, all outstanding Caret units awarded under the Caret Performance Incentive Plan are fully vested except for grants awarded in connection with the merger between Safehold Inc.

As of June 30, 2025, all outstanding Caret units awarded under the Caret Performance Incentive Plan are fully vested except for grants awarded in connection with the merger between Safehold Inc.

and iStar Inc.

on March 31, 2023 to executive officers and other employees, which are subject to cliff vesting on March 31, 2027 if

our common stock has traded at an average price of $60.00 or more for at least 30 consecutive trading days since the grant date, and certain awards granted to a former employee that vest in December 2025, subject to certain conditions.

As of March 31, 2025, vested and unvested Caret units beneficially owned by our officers and other employees represent approximately 14.4% of the outstanding Caret units and 11.4% of the authorized Caret units, including 6.1% held directly and indirectly by Jay Sugarman, our Chairman and Chief Executive Officer, and approximately 128,746 Caret units remain available for issuance under the Caret Performance Incentive Plan.

In addition to the Caret units awarded or reserved for issuance under our Caret Performance Incentive Plan, we have sold 122,500 Caret units to third-party investors, including affiliates of MSD Partners, that remain outstanding as of March 31, 2025.

As of March 31, 2025, the Company owned 84.3% of the outstanding Caret units.

on March 31, 2023 to executive officers and other employees, which are subject to cliff vesting on March 31, 2027 if our common stock has traded at an average price of $60.00 or more for at least 30 consecutive trading days since the grant date, and certain awards granted to a former employee that vest in December 2025, subject to certain conditions.

As of June 30, 2025, vested and unvested Caret units beneficially owned by our officers and other employees represent approximately 14.4% of the outstanding Caret units and 11.4% of the authorized Caret units, including 6.1% held directly and indirectly by Jay Sugarman, our Chairman and Chief Executive Officer, and approximately 128,871 Caret units remain available for issuance under the Caret Performance Incentive Plan.

As of June 30, 2025, the Company owned 84.3% of the outstanding Caret units.

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

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

Additionally, we have created additional channels and products that allows us to build a larger, captive pipeline, like our interests in two Ground Lease ecosystem funds, Ground Lease Plus Fund and Leasehold Loan Fund (refer to Note 7 to the consolidated financial statements).

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

We have interests in two Ground Lease ecosystem funds, the Ground Lease Plus Fund and the Leasehold Loan Fund (refer to Note 8 to the consolidated financial statements).

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

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

We have also recently begun to originate leasehold loans individually.

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

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Our portfolio of properties is diversified by property type and region.

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

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 our 2024 Annual Report for a discussion of our Park Hotels Portfolio).

As of March 31, 2025, 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 our 2024 Annual Report for a discussion of our estimated Ground Rent Coverage).

Below is an overview of the top 10 assets in our portfolio as of March 31, 2025 (based on gross book value and excluding unfunded commitments):

Our portfolio is comprised of Ground Leases, leasehold loans and one 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.

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 our 2024 Annual Report for a discussion of our Park Hotels Portfolio).

As of June 30, 2025, 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 our 2024 Annual Report for a discussion of our estimated Ground Rent Coverage).

Below is an overview of the top 10 Ground Leases in our portfolio as of June 30, 2025 (based on gross book value and excluding unfunded commitments):

Rent Escalation

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Washington, DC

Fixed with Inflation Adjustments

100 Cambridgeside

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however, our tenant at the property pays this cost directly to the third party.

The following tables show our portfolio by top 10 markets and property type as of March 31, 2025, excluding unfunded commitments:

The following tables show our portfolio by top 10 markets and property type as of June 30, 2025, excluding unfunded commitments:

Manhattan (1)

1 unchanged sentence

San Francisco

(1) Total New York MSA including areas outside of Manhattan makes up 28% of gross book value.

(1) Total New York metropolitan statistical area including areas outside of Manhattan makes up 28% of gross book value.

Property Type

2 unchanged sentences

We have unfunded commitments to certain of our Ground Lease tenants related to leasehold improvement allowances that we expect to fund upon the completion of certain conditions.

As of March 31, 2025, we had $32.2 million of such commitments, excluding commitments to be funded by noncontrolling interests.

We also have unfunded forward commitments related to agreements that we entered into for the acquisition of new Ground Leases or additions to existing Ground Leases if certain conditions are met (refer to Note 14 to the

consolidated financial statements).

These commitments may also include leasehold improvement allowances that will be funded to the Ground Lease tenants upon the completion of certain conditions.

As of March 31, 2025, we had an aggregate $150.3 million of such commitments.

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

Through the Leasehold Loan Fund, we also fund construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria.

As of June 30, 2025, we had $90.5 million of such commitments, excluding commitments to be funded by noncontrolling interests.

We also have an unfunded forward commitment of $35.0 million related to an agreement that we entered into for the addition to an existing Ground Lease if certain conditions are met (refer to Note 15 to the consolidated financial statements).

There can be no assurance that the conditions for closing this transaction will be satisfied and that we will fund the addition to the Ground Lease.

We also fund construction and development loans and build-outs of space in real estate assets over a period of time, both individually and through the Leasehold Loan Fund, if and when the borrowers and tenants meet established milestones and other performance criteria.

We refer to these arrangements as performance-based commitments.

As of March 31, 2025, we had $116.0 million of such commitments.

As of June 30, 2025, we had $195.9 million of such commitments.

We also entered into a discretionary commitment to fund up to $9.0 million of preferred equity in an entity that owned the leasehold interest under one of our office Ground Leases located in Washington, DC and through March 31, 2025, we funded $1.5 million of the commitment amount.

At inception in April 2024, we incurred $0.4 million of costs creating the entity formed to own the leasehold interest, which resulted in a total investment balance of $1.9 million and was included in “Deferred expenses and other assets” on our consolidated balance sheet as of December 31, 2024.

In May 2025, the leasehold interest was acquired by a new sponsor and we determined our investment was likely not recoverable, which resulted in a $1.9 million write-off of our preferred equity investment as of March 31, 2025.

In May 2025, the leasehold interest was acquired by a new sponsor and we determined our investment was not recoverable, which resulted in a $1.9 million write-off of our preferred equity investment as of March 31, 2025.

The write-off is included in “Other expense” in our consolidated statement of operations.

We recognized $1.7 million of interest income from sales-type leases from the Ground Lease in our consolidated statements of operations for the three months ended March 31, 2025.

Results of Operations for the Three Months Ended March 31, 2025 compared to the Three Months Ended March 31, 2025

For the Three Months Ended March 31,

We recognized $3.4 million of interest income from sales-type leases from the Ground Lease in our consolidated statements of operations for the six months ended June 30, 2025.

Results of Operations for the Three Months Ended June 30, 2025 compared to the Three Months Ended June 30, 2024

For the Three Months Ended

(in thousands)

1 unchanged sentence

Operating lease income

Interest income - related party

Interest income

Total revenues

11 unchanged sentences

Net income (loss)

Interest income from sales-type leases increased to $69.7 million for the three months ended March 31, 2025 from $63.2 million for the same period in 2024.

The increase was due primarily to acquisitions of Ground Leases and additional fundings on existing Ground Leases during 2024 classified as sales-type leases and Ground Lease receivables.

Operating lease income increased to $21.4 million for the three months ended March 31, 2025 from $21.0 million for the same period in 2024.

Interest income from sales-type leases increased to $70.6 million for the three months ended June 30, 2025 from $65.2 million for the same period in 2024.

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

Operating lease income was $16.7 million for both the three months ended June 30, 2025 and 2024.

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

The increase was primarily the result of a $0.3 million increase in percentage rent at our Park Hotels Portfolio.

Interest income – related party was $2.3 million and $2.4 million for the three months ended March 31, 2025 and 2024, respectively, and relates to the Star Holdings Term Loan Facility.

Other income for the three months ended March 31, 2025 and 2024 includes $3.6 million and $5.5 million, respectively, of management fees from Star Holdings.

Other income for both the three months ended March 31, 2025 and 2024 also includes $0.1 million 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 three months ended March 31, 2025 and 2024 also includes $0.6 million and 1.0 million, respectively, of other ancillary income from our investments.

Interest income relates to the Star Holdings Term Loan Facility (refer to Note 7 to the consolidated financial statements) and three leasehold loans we originated during the three months ended June 30, 2025 in connection with Ground Leases.

The increase in 2025 was due primarily to the origination of leasehold loans.

Other income for the three months ended June 30, 2025 and 2024 includes $2.7 million and $4.4 million, respectively, of management fees from Star Holdings.

Other income for both the three months ended June 30, 2025 and 2024 also includes $0.1 million 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 three months ended June 30, 2025 and 2024 also includes $1.0 million and 1.1 million, respectively, of other ancillary income from our investments.

Other ancillary income primarily includes sublease income, recoverable expenses and interest income earned on our cash balances.

During the three months ended March 31, 2025 and 2024, we incurred interest expense from our debt obligations of $50.4 million and $48.6 million, respectively.

The increase in 2025 was primarily the result of increased indebtedness to fund acquisition activity and higher interest rates.

During the three months ended March 31, 2025 and 2024, we incurred real estate expense of $1.2 million and $1.1 million, respectively, which consisted primarily of the amortization of an operating lease right-of-use asset, legal fees, property taxes and insurance expense.

In addition, during both the three months ended March 31, 2025 and 2024, we also recorded $0.1 million 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 during the three months ended March 31, 2025 and 2024 was $2.2 million and $2.5 million, respectively.

Depreciation and amortization primarily relates to our ownership of the Park Hotels Portfolio and a multi-family property, the amortization of in-place lease assets and depreciation on corporate fixed assets.

During the three months ended June 30, 2025 and 2024, we incurred interest expense from our debt obligations of $51.3 million and $49.1 million, respectively.

The increase in 2025 was primarily the result of increased indebtedness to fund acquisition activity.

During the three months ended June 30, 2025 and 2024, we incurred real estate expense of $0.9 million and $1.0 million, respectively, which consisted primarily of the amortization of an operating lease right-of-use asset, legal fees, property taxes and insurance expense.

In addition, during both the three months ended June 30, 2025 and 2024, we also recorded $0.1 million 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 during the three months ended June 30, 2025 and 2024 was $2.1 million and $2.5 million, respectively.

The decrease in 2025 was primarily the result of the tenant under our Park Hotels Portfolio electing to extend the leases underlying three of the five hotels under the lease past the initial lease maturity of December 2025.

General and administrative expenses primarily includes public company costs such as compensation (including equity-based compensation), occupancy and other costs.

The following table presents our general and administrative expenses for the three months ended March 31, 2025 and 2024 ($ in thousands):

The following table presents our general and administrative expenses for the three months ended June 30, 2025 and 2024 ($ in thousands):

For the Three Months Ended

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Total general and administrative expenses (2)

(1) For the three months ended March 31, 2025 and 2024, public company and other costs primarily includes compensation, legal, insurance and occupancy costs.

(2) For the three months ended March 31, 2025 and 2024, general and administrative expenses were partially offset by $3.6 million and $5.5 million, respectively, of management fees earned from Star Holdings, which are included in “Other income” in our consolidated statements of operations.

During the three months ended March 31, 2025, we recorded a provision for credit losses of $2.3 million.

The provision for credit losses was due primarily to current market conditions, including an increase in our Ground Lease cost to value ratios on certain of our assets, and growth in the carrying value of the portfolio during the period.

During the three months ended March 31, 2024, we recorded a provision for credit losses of $0.7 million.

The provision was primarily the result of current market conditions, including an increase in our Ground Lease to cost value ratios on our Ground Lease portfolio.

D uring the three months ended March 31, 2025, other expense consists primarily of a full write-off of a $1.9 million preferred equity investment in an entity that owned the leasehold interest under one of our Ground Leases (refer to Note 14 to the consolidated financial statements).

During the three months ended March 31, 2024, other expense consists primarily of costs related to our derivative transactions.

During the three months ended March 31, 2025, earnings from equity method investments (refer to Note 7 to the consolidated financial statements) resulted from our $0.9 million share of income from our 425 Park Avenue venture, our $1.4 million share of income from our 32 Old Slip venture, our $0.5 million share of income from the Ground Lease Plus Fund and our $2.2 million share of income from the Leasehold Loan Fund.

During the three months ended March 31, 2024, earnings from equity method investments resulted from our $0.9 million share of income from our 425 Park Avenue venture, our $1.4 million share of income from our 32 Old Slip venture, our $0.9 million share of income from the Ground Lease Plus Fund and our $3.7 million share of income from the Leasehold Loan Fund.

The decrease in 2025 was due primarily to a loan repayment at the Leasehold Loan Fund in April 2024 and us buying one asset from the Ground Lease Plus Fund in January 2024 (refer to Note 14 to the consolidated financial statements).

During the three months ended March 31, 2025, we recorded consolidated income tax expense of $0.9 million, which was primarily attributable to a deferred tax expense at our taxable REIT subsidiary (“TRS”) and relates to equity-based compensation expense and utilization of net operating loss carryovers to which our TRS is a successor.

During the three months ended March 31, 2024, we recorded consolidated income tax expense of $0.5 million, of which a $0.4 million benefit was attributable to our TRS.

Included in our consolidated income tax expense, our TRS recorded a deferred tax expense in the amount of $0.9 million.

(1) For the three months ended June 30, 2025 and 2024, public company and other costs primarily includes compensation, legal, insurance and occupancy costs.

(2) For the three months ended June 30, 2025 and 2024, general and administrative expenses were partially offset by $2.7 million and $4.4 million, respectively, of management fees earned from Star Holdings, which are included in “Other income” in our consolidated statements of operations.

During the three months ended June 30, 2025, we recorded a provision for credit losses of $2.4 million.

The provision for credit losses was due primarily to the origination of three leasehold loans (refer to Note 6 to the consolidated financial statements) during the three months ended June 30, 2025 and current market conditions, including an increase in our Ground Lease cost to value ratios on certain of our assets, and growth in the carrying value of the Ground Lease portfolio during the period.

During the three months ended June 30, 2024, we recorded a provision for credit losses of $0.6 million.

The provision was primarily the result of current market conditions, including an increase in our Ground Lease cost to value ratios on our Ground Lease portfolio.

D uring the three months ended June 30, 2025, other expense consists primarily of legal fees.

During the three months ended June 30, 2024, other expense consists primarily of costs related to our debt obligations.

During the three months ended June 30, 2025, earnings from equity method investments (refer to Note 8 to the consolidated financial statements) decreased to $4.9 million from $6.5 million for the same period in 2024.

The decrease in 2025 was due primarily to a loan repayment at the Leasehold Loan Fund in March 2025.

During the three months ended June 30, 2025, we recorded consolidated income tax expense of $0.9 million, which was primarily attributable to a deferred tax expense at our taxable REIT subsidiary (“TRS”) and relates to equity-based compensation expense and utilization of net operating loss carryovers to which our TRS is a successor.

Included in our consolidated income tax expense for the three months ended June 30, 2025, our TRS recorded current and deferred income tax expense in the amounts of $0.2 million and $0.7 million, respectively.

During the three months ended June 30, 2024, we recorded consolidated income tax expense of $0.9 million, which was attributable to our TRS.

Included in our consolidated income tax expense for the three months ended June 30, 2024, our TRS recorded current and deferred tax expense in the amounts of $0.7 million and $0.2 million, respectively.

The deferred tax expense relates primarily to equity-based compensation expense and utilization of net operating loss carryovers to which our TRS is a successor.

Results of Operations for the Six Months Ended June 30, 2025 compared to the Six Months Ended June 30, 2024

For the Six Months Ended

(in thousands)

Interest income from sales-type leases

Operating lease income

Interest income

Total revenues

Costs and expenses:

Interest expense

Real estate expense

Depreciation and amortization

General and administrative

Provision for (recovery of) credit losses

Other expense

Total costs and expenses

Earnings (losses) from equity method investments

Net income (loss) before income taxes

Income tax expense

Net income (loss)

Interest income from sales-type leases increased to $140.3 million for the six months ended June 30, 2025 from $128.5 million for the same period in 2024.

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

Operating lease income increased to $38.1 million for the six months ended June 30, 2025 from $37.7 million for the same period in 2024.

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

The increase was primarily the result of a $0.3 million increase in percentage rent at our Park Hotels Portfolio.

Interest income relates to the Star Holdings Term Loan Facility (refer to Note 7 to the consolidated financial statements) and three leasehold loans we originated during the six months ended June 30, 2025 in connection with Ground Leases.

The increase in 2025 was due primarily to the origination of leasehold loans.

Other income for the six months ended June 30, 2025 and 2024 includes $6.3 million and $9.9 million, respectively, of management fees from Star Holdings.

Other income for both the six months ended June 30, 2025 and 2024 also includes $0.3 million 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 six months ended June 30, 2025 and 2024 also includes $1.5 million and 2.0 million, respectively, of other ancillary income from our investments.

Other ancillary income primarily includes sublease income, recoverable expenses and interest income earned on our cash balances.

During the six months ended June 30, 2025 and 2024, we incurred interest expense from our debt obligations of $101.7 million and $97.7 million, respectively.

The increase in 2025 was primarily the result of increased indebtedness to fund acquisition activity.

During the six months ended June 30, 2025 and 2024, we incurred real estate expense of $2.0 million and $2.1 million, respectively, which consisted primarily of the amortization of an operating lease right-of-use asset, legal fees, property taxes and insurance expense.

In addition, during both the six months ended June 30, 2025 and 2024, we also recorded $0.3 million 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 during the six months ended June 30, 2025 and 2024 was $4.3 million and $5.0 million, respectively.

General and administrative expenses primarily includes public company costs such as compensation (including equity-based compensation), occupancy and other costs.

The following table presents our general and administrative expenses for the six months ended June 30, 2025 and 2024 ($ in thousands):

For the Six Months Ended

Public company and other costs (1)

Stock-based compensation

Total general and administrative expenses (2)

(1) For the six months ended June 30, 2025 and 2024, public company and other costs primarily includes compensation, legal, insurance and occupancy costs.

(2) For the six months ended June 30, 2025 and 2024, general and administrative expenses were partially offset by $6.3 million and $9.9 million, respectively, of management fees earned from Star Holdings, which are included in “Other income” in our consolidated statements of operations.

During the six months ended June 30, 2025, we recorded a provision for credit losses of $4.6 million.

The provision for credit losses was due primarily to the origination of three leasehold loans (refer to Note 6 to the consolidated financial statements) during the six months ended June 30, 2025 and current market conditions, including an increase in our Ground Lease cost to value ratios on certain of our assets, and growth in the carrying value of the Ground Lease portfolio during the period.

During the six months ended June 30, 2024, we recorded a provision for credit losses of $1.3 million.

The provision in 2024 was primarily the result of current market conditions, including an increase in our Ground Lease to cost value ratios on our Ground Lease portfolio.

D uring the six months ended June 30, 2025, other expense consists primarily of a full write-off of a $1.9 million preferred equity investment in an entity that owned the leasehold interest under one of our Ground Leases (refer to Note 15 to the consolidated financial statements).

During the six months ended June 30, 2024, other expense consists primarily of costs related to our debt obligations.

During the six months ended June 30, 2025, earnings from equity method investments (refer to Note 8 to the consolidated financial statements) decreased to $9.9 million from $13.4 million for the same period in 2024.

in 2025 was due primarily to loan repayments at the Leasehold Loan Fund and us buying one asset from the Ground Lease Plus Fund in January 2024.

During the six months ended June 30, 2025, we recorded consolidated income tax expense of $1.7 million, which was primarily attributable to a deferred tax expense at our TRS and relates to equity-based compensation expense and utilization of net operating loss carryovers to which our TRS is a successor.

Included in our consolidated income tax expense for the six months ended June 30, 2025, our TRS recorded current and deferred tax expense in the amounts of $0.2 million and $1.5 million, respectively.

During the six months ended June 30, 2024, we recorded consolidated income tax expense of $1.4 million, of which $1.3 million was attributable to our TRS.

Included in our consolidated income tax expense for the six months ended June 30, 2024, our TRS recorded a deferred tax expense in the amount of $1.0 million.

The net deferred tax expense relates primarily to equity-based compensation expense and utilization of net operating loss carryovers to which our TRS is a successor.

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

As of March 31, 2025, we had no outstanding balance under the Commercial Paper Program.

As of June 30, 2025, 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 replaces our 2021 Unsecured Revolver and 2023 Unsecured Revolver (refer to Note 9 to the consolidated financial statements), each of which were terminated.

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 10 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 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, reduces 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 March 31, 2025, there was $1.3 billion of undrawn capacity on the 2024 Unsecured Revolver.

As of June 30, 2025, there was $1.2 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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Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our common stock, capital needs, and our determinations of the appropriate sources of funding.

As of March 31, 2025, we had not sold any shares under the ATM.

As of March 31, 2025, we had $17 million of unrestricted cash.

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

As of June 30, 2025, we had not sold any shares under the ATM.

As of June 30, 2025, we had $13.9 million of unrestricted cash.

We also have an aggregate $1.2 billion of undrawn capacity on our 2024 Unsecured Revolver (refer to Note 10 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.

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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.

We expect our short-term liquidity requirements to include debt service on our debt obligations (refer to Note 10 to the consolidated financial statements), distributions to our shareholders, working capital, new acquisitions and originations of Ground Lease and leasehold loan investments and additional fundings on existing Ground Leases and leasehold loan investments.

We expect our long-term liquidity requirements to include debt service on our debt obligations (refer to Note 10 to the consolidated financial statements), distributions to our shareholders, working capital, new acquisitions and originations of Ground Lease and leasehold loan investments (including in respect of unfunded commitments – refer to Note 11 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 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 (used in) operating activities, cash flows used in investing activities and cash flows provided by financing activities for the three months ended March 31, 2025 and 2024 ($ in thousands):

For the Three Months Ended

The following table outlines our cash flows provided by (used in) operating activities, cash flows used in investing activities and cash flows provided by financing activities for the six months ended June 30, 2025 and 2024 ($ in thousands):

For the Six Months Ended

Cash flows provided by (used in) operating activities

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Cash flows provided by (used in) financing activities

The increase in cash flows provided by operating activities during 2025 was due primarily to an increase in accrued expenses, primarily interest expense, that were not yet paid as of March 31, 2025.

The decrease in cash flows used in investing activities during 2025 was due primarily to a decrease in Ground Lease fundings in 2025 and the payment of temporary cash collateral for debt obligations in 2024.

The decrease in cash flows provided by financing activities during 2025 was due primarily to a decrease in net borrowings on debt obligations.

The increase in cash flows provided by operating activities during 2025 was due primarily to proceeds received from the settlement of derivatives and from an increase in accrued expenses, primarily interest expense, that were not yet paid as of June 30, 2025.

The decrease in cash flows used in investing activities during 2025 was due primarily to a decrease in the origination of Ground Leases in 2025 and the payment of temporary cash collateral for debt obligations in 2024, which was partially offset by the origination of leasehold loans in 2025 and a decrease in distributions from equity method investments in 2025.

The increase in cash flows provided by financing activities during 2025 was due primarily to activity in 2024, including the redemption of noncontrolling interests and the payment of finance costs, which was partially offset by a decrease in contributions from noncontrolling interests.

Supplemental Guarantor Disclosure

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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 March 31, 2025, Portfolio Holdings had issued and outstanding four tranches of unsecured senior notes with varying fixed-rates and maturities ranging from June 2031 to January 2035, which were registered on the Form S-3 filed in April 2023 or on a Form S-3 filed by Safehold Inc.

As of June 30, 2025, Portfolio Holdings had issued and outstanding four tranches of unsecured senior notes with varying fixed-rates and maturities ranging from June 2031 to January 2035, which were registered on the Form S-3 filed in April 2023 or on a Form S-3 filed by Safehold Inc.

and Portfolio Holdings (then known as Safehold Operating Partnership LP) prior to its merger with the Company (then known as iStar Inc.).

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For all of these estimates, we caution that future events rarely develop exactly as forecasted, and, therefore, routinely require adjustment.

For a discussion of our critical accounting policies, refer to Note 3 to the consolidated financial statements of our 2024 Annual Report.

Loans receivable, net —Loans receivable, net includes senior mortgages that we originated to certain of our Ground Lease tenants in connection with Ground Leases (refer to Note 6 to the consolidated financial statements).

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

We perform a quarterly analysis of our loans receivable 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 other economic factors.

We estimate the 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 our investments.

The estimate of our expected loss requires significant judgment.

We calculate our expected loss through the use of third-party historical market data for loans with similar characteristics to our loan portfolio.

We also utilize a third-party to provide forecasts to incorporate current and future economic conditions that may impact the performance of the commercial real estate assets securing our investments.

For a discussion of our remaining critical accounting policies, refer to Note 3 to the consolidated financial statements of our 2024 Annual Report.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis