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Item 7. Management’s Discussion and Analysis

2026-02-12 compared with 2025-02-06 · 100 added, 90 removed, 214 unchanged (47% of the section changed)

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

Merger Transaction

On August 10, 2022, Safehold Inc.

(“Old SAFE”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with iStar Inc.

(“iStar”), and on March 31, 2023, the Merger was completed in accordance with the terms of the Merger Agreement.

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

The Company considered the following relevant facts for this determination:

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

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

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

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

As a result, the historical financial statements of Old SAFE became the historical financial statements of Safehold Inc.

Unless the context otherwise requires, references to “iStar” refer to iStar prior to the Merger, and references to “we,” “our” and “the Company” refer to the business and operations of Old SAFE and its consolidated subsidiaries prior to the Merger and to Safehold Inc.

(formerly known as iStar 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 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”).

Business Overview

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

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%;

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;

To combat the increase in inflation over the past few years, the Federal Reserve raised interest rates and has kept interest rates generally high, although recently they began to reduce rates.

The Federal Reserve has indicated that the economic outlook, which could include any potential impact on the economy from changes to U.S.

trade policy, 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.

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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.

office sector, along with office vacancies and a decline in market liquidity that began with 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.

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 this 10-K for additional discussion of certain potential risks to our business related to competition and industry concentrations.

On January 1, 2026, we became responsible for operating two hotel properties that reverted to us.

We have not previously operated any hotel properties.

We expect that going forward we will have revenues and expenses associated with room occupancy, food and beverage services and other ancillary income and expenses from hotel operations.

Our Portfolio

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

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.

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).

Our portfolio is comprised of Ground Leases, leasehold loans and a master lease (relating to an initial 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 master lease 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).

On October 22, 2025, we sent the tenant under the Park Hotels master lease a termination notice for all five hotels and commenced litigation against our tenant and Park Intermediate Holdings LLC, guarantor under the master lease, for certain breaches, among other things, related to the maintenance and operations of the hotels.

There are no assurances that we will be able to terminate the master lease or prevail in our litigation.

As of December 31, 2025, our estimated portfolio Ground Rent Coverage was 3.4x (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):

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

Rent Escalation

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