10-Q 1 safe-20210930x10q.htm 10-Q
0001688852--12-312021Q3false5320600056560000P30YP12M3.000001688852us-gaap:CommonStockMember2021-07-012021-09-300001688852us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001688852us-gaap:CommonStockMember2021-01-012021-09-300001688852us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300001688852us-gaap:CommonStockMember2020-07-012020-09-300001688852us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001688852us-gaap:CommonStockMember2020-01-012020-09-300001688852us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300001688852srt:DirectorMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:A2017EquityIncentivePlanMember2021-04-012021-06-300001688852srt:DirectorMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:A2017EquityIncentivePlanMember2020-04-012020-06-300001688852us-gaap:RestrictedStockUnitsRSUMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:A2017EquityIncentivePlanMember2019-01-012019-03-310001688852us-gaap:RetainedEarningsMember2021-09-300001688852us-gaap:NoncontrollingInterestMember2021-09-300001688852us-gaap:CommonStockMember2021-09-300001688852us-gaap:AdditionalPaidInCapitalMember2021-09-300001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300001688852us-gaap:RetainedEarningsMember2021-06-300001688852us-gaap:NoncontrollingInterestMember2021-06-300001688852us-gaap:CommonStockMember2021-06-300001688852us-gaap:AdditionalPaidInCapitalMember2021-06-300001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001688852us-gaap:RetainedEarningsMember2020-12-310001688852us-gaap:NoncontrollingInterestMember2020-12-310001688852us-gaap:CommonStockMember2020-12-310001688852us-gaap:AdditionalPaidInCapitalMember2020-12-310001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001688852us-gaap:RetainedEarningsMember2020-09-300001688852us-gaap:NoncontrollingInterestMember2020-09-300001688852us-gaap:CommonStockMember2020-09-300001688852us-gaap:AdditionalPaidInCapitalMember2020-09-300001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001688852us-gaap:RetainedEarningsMember2020-06-300001688852us-gaap:NoncontrollingInterestMember2020-06-300001688852us-gaap:CommonStockMember2020-06-300001688852us-gaap:AdditionalPaidInCapitalMember2020-06-300001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-3000016888522020-06-300001688852us-gaap:RetainedEarningsMember2019-12-310001688852us-gaap:NoncontrollingInterestMember2019-12-310001688852us-gaap:CommonStockMember2019-12-310001688852us-gaap:AdditionalPaidInCapitalMember2019-12-310001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001688852us-gaap:IPOMember2021-09-300001688852srt:DirectorMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:A2017EquityIncentivePlanMember2021-06-300001688852srt:DirectorMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:A2017EquityIncentivePlanMember2020-06-300001688852us-gaap:RestrictedStockUnitsRSUMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:A2017EquityIncentivePlanMember2019-03-310001688852safe:ManagerMemberus-gaap:PerformanceSharesMember2020-03-310001688852safe:ManagerMemberus-gaap:PerformanceSharesMember2020-02-280001688852us-gaap:PerformanceSharesMember2018-09-300001688852safe:ManagerMemberus-gaap:PerformanceSharesMember2020-03-012020-03-310001688852safe:NetInvestmentinSalestypeLeasesMemberus-gaap:CashMember2021-07-012021-09-300001688852safe:NetInvestmentinSalestypeLeasesMembersafe:NoncashMember2021-07-012021-09-300001688852safe:GroundLeaseReceivablesNetMemberus-gaap:CashMember2021-07-012021-09-300001688852safe:GroundLeaseReceivablesNetMembersafe:NoncashMember2021-07-012021-09-300001688852us-gaap:CashMember2021-07-012021-09-300001688852safe:NoncashMember2021-07-012021-09-300001688852safe:NetInvestmentinSalestypeLeasesMember2021-07-012021-09-300001688852safe:IStarInc.Member2021-07-012021-09-300001688852safe:GroundLeaseReceivablesNetMember2021-07-012021-09-300001688852safe:NetInvestmentinSalestypeLeasesMemberus-gaap:CashMember2021-01-012021-09-300001688852safe:NetInvestmentinSalestypeLeasesMembersafe:NoncashMember2021-01-012021-09-300001688852safe:GroundLeaseReceivablesNetMemberus-gaap:CashMember2021-01-012021-09-300001688852safe:GroundLeaseReceivablesNetMembersafe:NoncashMember2021-01-012021-09-300001688852us-gaap:CashMember2021-01-012021-09-300001688852safe:NoncashMember2021-01-012021-09-300001688852safe:NetInvestmentinSalestypeLeasesMember2021-01-012021-09-300001688852safe:IStarInc.Member2021-01-012021-09-300001688852safe:GroundLeaseReceivablesNetMember2021-01-012021-09-300001688852safe:NetInvestmentinSalestypeLeasesMemberus-gaap:CashMember2020-07-012020-09-300001688852safe:NetInvestmentinSalestypeLeasesMembersafe:NoncashMember2020-07-012020-09-300001688852safe:GroundLeaseReceivablesNetMemberus-gaap:CashMember2020-07-012020-09-300001688852safe:GroundLeaseReceivablesNetMembersafe:NoncashMember2020-07-012020-09-300001688852us-gaap:CashMember2020-07-012020-09-300001688852safe:NoncashMember2020-07-012020-09-300001688852safe:NetInvestmentinSalestypeLeasesMember2020-07-012020-09-300001688852safe:IStarInc.Member2020-07-012020-09-300001688852safe:GroundLeaseReceivablesNetMember2020-07-012020-09-300001688852safe:NetInvestmentinSalestypeLeasesMemberus-gaap:CashMember2020-01-012020-09-300001688852safe:NetInvestmentinSalestypeLeasesMembersafe:NoncashMember2020-01-012020-09-300001688852safe:GroundLeaseReceivablesNetMemberus-gaap:CashMember2020-01-012020-09-300001688852safe:GroundLeaseReceivablesNetMembersafe:NoncashMember2020-01-012020-09-300001688852us-gaap:CashMember2020-01-012020-09-300001688852safe:NoncashMember2020-01-012020-09-300001688852safe:NetInvestmentinSalestypeLeasesMember2020-01-012020-09-300001688852safe:IStarInc.Member2020-01-012020-09-300001688852safe:GroundLeaseReceivablesNetMember2020-01-012020-09-300001688852safe:ReclassificationOfLeaseToSalesTypeLeaseMember2021-07-012021-09-300001688852safe:ReclassificationOfLeaseToSalesTypeLeaseMember2021-01-012021-09-300001688852us-gaap:PerformanceSharesMember2021-01-012021-09-300001688852safe:IStarInc.Memberus-gaap:PrivatePlacementMember2021-09-012021-09-300001688852safe:IStarInc.Memberus-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-300001688852safe:ManagerMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:IncentiveFeeMember2021-01-012021-09-300001688852safe:IStarInc.Memberus-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300001688852safe:IStarInc.Memberus-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001688852safe:IStarInc.Memberus-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001688852safe:PublicOfferingMember2021-09-012021-09-300001688852srt:MultifamilyMembersafe:MultiFamilyProjectUnderConstructionMembersafe:IStarInc.Member2021-09-012021-09-300001688852safe:PublicOfferingAndPrivatePlacementMember2021-09-012021-09-300001688852safe:AtMarketEquityOfferingMember2021-01-012021-09-300001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-09-300001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001688852us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001688852us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestExpenseMember2021-07-012021-09-300001688852us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestExpenseMember2021-01-012021-09-300001688852us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestExpenseMember2020-07-012020-09-300001688852us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestExpenseMember2020-01-012020-09-300001688852safe:PercentageRentMember2021-07-012021-09-300001688852safe:PercentageRentMember2021-01-012021-09-300001688852safe:PercentageRentMember2020-07-012020-09-300001688852safe:PercentageRentMember2020-01-012020-09-300001688852us-gaap:OtherIncomeMember2021-07-012021-09-300001688852safe:RealEstateExpenseMember2021-07-012021-09-300001688852us-gaap:OtherIncomeMember2021-01-012021-09-300001688852safe:RealEstateExpenseMember2021-01-012021-09-300001688852us-gaap:OtherIncomeMember2020-07-012020-09-300001688852safe:RealEstateExpenseMember2020-07-012020-09-300001688852us-gaap:OtherIncomeMember2020-01-012020-09-300001688852safe:RealEstateExpenseMember2020-01-012020-09-300001688852us-gaap:NoncontrollingInterestMember2021-07-012021-09-300001688852us-gaap:NoncontrollingInterestMember2021-01-012021-09-300001688852us-gaap:NoncontrollingInterestMember2020-07-012020-09-300001688852us-gaap:NoncontrollingInterestMember2020-01-012020-09-300001688852us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-300001688852us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300001688852us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001688852us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001688852safe:MultiFamilyProjectUnderConstructionMemberus-gaap:LandMembersafe:IStarInc.Member2021-09-012021-09-300001688852safe:StudentHousingPropertyMemberus-gaap:LeaseholdImprovementsMember2021-09-012021-09-300001688852safe:StudentHousingPropertyMemberus-gaap:LandMember2021-09-012021-09-300001688852safe:StudentHousingPropertyMember2021-09-012021-09-300001688852safe:MultiFamilyPropertyMemberus-gaap:LeaseholdImprovementsMember2021-06-012021-06-300001688852safe:MultiFamilyPropertyMemberus-gaap:LandMember2021-06-012021-06-300001688852safe:MultiFamilyPropertyMember2021-06-012021-06-300001688852safe:IStarInc.Membersafe:MultiFamilyProjectUnderConstructionMemberus-gaap:LandMember2021-03-012021-03-310001688852safe:OfficePropertyMemberus-gaap:LeaseholdImprovementsMember2021-01-012021-01-310001688852safe:OfficePropertyMemberus-gaap:LandMember2021-01-012021-01-310001688852safe:OfficePropertyMember2021-01-012021-01-310001688852safe:SanJoseCAMembersafe:MultiFamilyProjectUnderConstructionMembersafe:IStarInc.Member2017-10-012017-10-310001688852us-gaap:EstimateOfFairValueFairValueDisclosureMember2021-09-300001688852us-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001688852us-gaap:RevolvingCreditFacilityMemberus-gaap:UnsecuredDebtMember2021-09-300001688852safe:SafeholdOperatingPartnershipLPMember2021-01-012021-09-300001688852us-gaap:VariableInterestEntityPrimaryBeneficiaryMembersafe:DebtObligationsNetAccountsPayableAccruedExpensesandOtherLiabilitiesMember2021-09-300001688852safe:PercentageRentMember2021-09-300001688852safe:InflationLinkedEscalationsMember2021-09-300001688852safe:FixedBumpswithPercentageRentMember2021-09-300001688852safe:FixedBumpswithInflationAdjustmentsMember2021-09-300001688852safe:FixedBumpsMember2021-09-300001688852us-gaap:CorporateJointVentureMember2021-07-012021-09-300001688852safe:OfficePropertyNewYorkCityMember2021-07-012021-09-300001688852us-gaap:CorporateJointVentureMember2021-01-012021-09-300001688852safe:OfficePropertyNewYorkCityMember2021-01-012021-09-300001688852us-gaap:CorporateJointVentureMember2020-07-012020-09-300001688852us-gaap:CorporateJointVentureMember2020-01-012020-09-300001688852safe:ExpensesWithRelatedPartyEquityBasedCompensationMember2021-07-012021-09-300001688852safe:ExpensesWithRelatedPartyEquityBasedCompensationMember2021-01-012021-09-300001688852safe:ExpensesWithRelatedPartyEquityBasedCompensationMember2020-07-012020-09-300001688852safe:ExpensesWithRelatedPartyEquityBasedCompensationMember2020-01-012020-09-300001688852us-gaap:OtherIntangibleAssetsMember2021-09-300001688852us-gaap:LeasesAcquiredInPlaceMember2021-09-300001688852us-gaap:AboveMarketLeasesMember2021-09-300001688852us-gaap:OtherIntangibleAssetsMember2020-12-310001688852us-gaap:LeasesAcquiredInPlaceMember2020-12-310001688852us-gaap:AboveMarketLeasesMember2020-12-310001688852safe:OfficePropertyNewYorkCityMember2021-09-300001688852us-gaap:CorporateJointVentureMember2020-12-310001688852us-gaap:CorporateJointVentureMember2021-09-300001688852safe:IStarInc.Membersafe:OfficeCondominiumTenantVentureMembersafe:HonoluluHiMember2020-06-300001688852us-gaap:RetainedEarningsMember2021-07-012021-09-300001688852us-gaap:RetainedEarningsMember2021-01-012021-09-300001688852us-gaap:RetainedEarningsMember2020-07-012020-09-300001688852us-gaap:RetainedEarningsMember2020-01-012020-09-300001688852safe:RestrictedCashMember2020-12-310001688852safe:AccountsPayableAccruedExpensesandOtherLiabilitiesMemberus-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-09-300001688852us-gaap:DesignatedAsHedgingInstrumentMember2021-09-300001688852safe:AccountsPayableAccruedExpensesandOtherLiabilitiesMemberus-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-12-310001688852us-gaap:DesignatedAsHedgingInstrumentMember2020-12-310001688852safe:ReclassificationOfLeaseToSalesTypeLeaseMember2021-09-300001688852us-gaap:SeniorNotesMemberus-gaap:UnsecuredDebtMember2021-05-310001688852us-gaap:SeniorNotesMemberus-gaap:UnsecuredDebtMember2021-09-300001688852us-gaap:RevolvingCreditFacilityMemberus-gaap:UnsecuredDebtMember2021-09-300001688852us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredDebtMember2020-12-310001688852us-gaap:MortgagesMemberus-gaap:SecuredDebtMember2020-12-310001688852us-gaap:SecuredDebtMember2020-12-310001688852us-gaap:RevolvingCreditFacilityMemberus-gaap:UnsecuredDebtMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-03-012021-03-310001688852us-gaap:RevolvingCreditFacilityMemberus-gaap:UnsecuredDebtMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-01-012021-09-3000016888522021-07-012021-09-3000016888522020-07-012020-09-300001688852us-gaap:RestrictedStockUnitsRSUMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:A2017EquityIncentivePlanMember2021-09-300001688852us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-09-300001688852us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001688852us-gaap:VariableInterestEntityPrimaryBeneficiaryMembersafe:RealEstateNetRealEstateRelatedIntangibleAssetsNetandDeferredOperatingLeaseIncomeReceivableNetMember2021-09-300001688852us-gaap:OtherIntangibleAssetsMembersafe:OperatingLeaseIncomeMember2021-07-012021-09-300001688852us-gaap:LeasesAcquiredInPlaceMembersafe:DepreciationandAmortizationMember2021-07-012021-09-300001688852us-gaap:AboveMarketLeasesMembersafe:OperatingLeaseIncomeMember2021-07-012021-09-300001688852safe:BelowMarketLeasesMembersafe:OperatingLeaseIncomeMember2021-07-012021-09-300001688852us-gaap:OtherIntangibleAssetsMembersafe:OperatingLeaseIncomeMember2021-01-012021-09-300001688852us-gaap:LeasesAcquiredInPlaceMembersafe:DepreciationandAmortizationMember2021-01-012021-09-300001688852us-gaap:AboveMarketLeasesMembersafe:OperatingLeaseIncomeMember2021-01-012021-09-300001688852safe:BelowMarketLeasesMembersafe:OperatingLeaseIncomeMember2021-01-012021-09-300001688852us-gaap:OtherIntangibleAssetsMembersafe:OperatingLeaseIncomeMember2020-07-012020-09-300001688852us-gaap:LeasesAcquiredInPlaceMembersafe:DepreciationandAmortizationMember2020-07-012020-09-300001688852us-gaap:AboveMarketLeasesMembersafe:OperatingLeaseIncomeMember2020-07-012020-09-300001688852safe:BelowMarketLeasesMembersafe:OperatingLeaseIncomeMember2020-07-012020-09-300001688852us-gaap:OtherIntangibleAssetsMembersafe:OperatingLeaseIncomeMember2020-01-012020-09-300001688852us-gaap:LeasesAcquiredInPlaceMembersafe:DepreciationandAmortizationMember2020-01-012020-09-300001688852us-gaap:AboveMarketLeasesMembersafe:OperatingLeaseIncomeMember2020-01-012020-09-300001688852safe:BelowMarketLeasesMembersafe:OperatingLeaseIncomeMember2020-01-012020-09-300001688852safe:ManagerMemberus-gaap:PerformanceSharesMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:EquityPlanMember2021-01-012021-09-300001688852safe:ManagerMemberus-gaap:PerformanceSharesMemberus-gaap:GeneralAndAdministrativeExpenseMembersafe:EquityPlanMember2020-01-012020-09-300001688852safe:OtherLiabilityDueToRelatedPartyMember2021-09-300001688852safe:OtherLiabilityDueToRelatedPartyMember2020-12-310001688852safe:IStarInc.Membersrt:MaximumMember2021-09-300001688852safe:MultiFamilyProjectUnderConstructionMemberus-gaap:LandMembersafe:IStarInc.Member2021-03-012021-03-310001688852safe:MultiFamilyProjectUnderConstructionMembersafe:IStarInc.Memberus-gaap:LandMember2021-03-012021-03-310001688852us-gaap:PerformanceSharesMember2021-09-300001688852srt:MaximumMemberus-gaap:PerformanceSharesMembersafe:EquityPlanMember2021-09-300001688852safe:FixedBumpswithPercentageRentMember2021-09-300001688852safe:FixedBumpswithInflationAdjustmentsMember2021-09-300001688852safe:FixedBumpsMember2021-09-300001688852safe:AtMarketEquityOfferingMember2021-09-300001688852safe:AtMarketEquityOfferingMember2021-02-012021-02-280001688852srt:MinimumMember2021-09-300001688852srt:MaximumMember2021-09-300001688852safe:StudentHousingPropertyMember2021-09-300001688852safe:OfficePropertyMember2021-09-300001688852safe:IStarInc.Membersrt:MinimumMember2021-09-3000016888522021-06-300001688852us-gaap:PerformanceSharesMember2021-08-012021-08-310001688852safe:IStarInc.Member2021-06-012021-06-300001688852safe:IStarInc.Membersafe:MultiFamilyProjectUnderConstructionMemberus-gaap:LandMember2021-03-012021-09-300001688852safe:IStarInc.Membersafe:SAFEMember2021-09-3000016888522021-06-012021-06-300001688852safe:IStarInc.Member2021-01-012021-09-300001688852safe:IStarInc.Member2021-09-300001688852safe:IStarInc.Member2020-09-300001688852safe:EmployeeOfManagerMember2020-03-012020-03-310001688852srt:MaximumMembersafe:MultiFamilyProjectUnderConstructionMemberus-gaap:LandMembersafe:IStarInc.Member2021-09-300001688852safe:IStarInc.Membersafe:MultiFamilyProjectUnderConstructionMemberus-gaap:LandMember2021-03-310001688852us-gaap:MortgagesMemberus-gaap:SecuredDebtMember2021-01-012021-09-300001688852us-gaap:UnsecuredDebtMember2021-09-300001688852us-gaap:SecuredDebtMember2021-09-300001688852srt:MaximumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:UnsecuredDebtMember2021-03-310001688852safe:HonoluluHiMember2020-06-012020-06-300001688852safe:ReclassificationOfLeaseToSalesTypeLeaseMember2021-09-012021-09-300001688852safe:IStarInc.Membersrt:WeightedAverageMember2021-01-012021-09-300001688852srt:WeightedAverageMember2021-01-012021-09-300001688852us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-09-300001688852us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-09-300001688852us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001688852us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-3100016888522020-12-3100016888522020-09-3000016888522019-12-310001688852srt:MinimumMember2021-01-012021-09-300001688852srt:MaximumMember2021-01-012021-09-300001688852safe:IStarInc.Membersafe:MultiFamilyProjectUnderConstructionMember2021-03-012021-03-310001688852srt:HotelMembersafe:GroundLeaseTenantForRecapitalizationOfExistingHotelPropertyMembersafe:IStarInc.Member2021-02-012021-02-2800016888522020-01-012020-09-300001688852safe:AccountsPayableAccruedExpensesandOtherLiabilitiesMemberus-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-01-012021-09-300001688852us-gaap:RevolvingCreditFacilityMemberus-gaap:UnsecuredDebtMember2021-03-310001688852us-gaap:SeniorNotesMemberus-gaap:UnsecuredDebtMember2021-05-012021-05-310001688852us-gaap:RevolvingCreditFacilityMemberus-gaap:UnsecuredDebtMember2021-03-012021-03-310001688852srt:MinimumMemberus-gaap:SeniorNotesMemberus-gaap:UnsecuredDebtMember2021-09-300001688852srt:MinimumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:UnsecuredDebtMember2021-09-300001688852us-gaap:MortgagesMemberus-gaap:SecuredDebtMember2021-09-300001688852safe:ConsolidatedMortgageDebtUnconsolidatedMortgageDebtAnd2.8SeniorNotesMember2021-09-300001688852safe:IStarInc.Member2017-07-012021-09-3000016888522019-05-012019-05-3100016888522021-08-012021-08-310001688852safe:BelowMarketLeasesMember2021-09-300001688852safe:LandAndRelatedGroundLeaseMembersafe:IStarInc.Member2021-06-012021-06-300001688852safe:LandAndRelatedGroundLeaseMembersafe:IStarInc.Member2021-06-3000016888522021-09-300001688852safe:IStarInc.Member2021-06-3000016888522021-10-1900016888522021-01-012021-09-30utr:sqftsafe:segmentxbrli:sharessafe:employeexbrli:pureiso4217:USDiso4217:USDxbrli:sharessafe:itemsafe:agreementsafe:directorsafe:lease

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to            

Commission File No. 001-38122

Safehold Inc.

(Exact name of registrant as specified in its charter)

Maryland

30-0971238

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

1114 Avenue of the Americas

 

39th Floor

New York

,

NY

10036

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: (212930-9400

Indicate by check mark whether the registrant: (i) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports); and (ii) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer

  

Accelerated filer

  

Non-accelerated filer

  

Smaller reporting company

  

Emerging growth company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes     No 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

SAFE

 

NYSE

As of October 19, 2021, there were 56,559,871 shares, $0.01 par value per share, of Safehold Inc. common stock outstanding.

TABLE OF CONTENTS

 

 

Page

PART I

Consolidated Financial Information

Item 1.

Financial Statements:

Consolidated Balance Sheets (unaudited) as of September 30, 2021 and December 31, 2020

1

Consolidated Statements of Operations (unaudited)—For the three and nine months ended

September 30, 2021 and 2020

2

Consolidated Statements of Comprehensive Income (Loss) (unaudited)—For the three and nine months ended September 30, 2021 and 2020

3

Consolidated Statements of Changes in Equity (unaudited)—For the three and nine months ended September 30, 2021 and 2020

4

Consolidated Statements of Cash Flows (unaudited)—For the nine months ended September 30, 2021 and 2020

6

Notes to Consolidated Financial Statements (unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

PART II

Other Information

37

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

39

SIGNATURES

40

PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1.   Financial Statements

Safehold Inc.

Consolidated Balance Sheets(1)

(In thousands)

(unaudited)

As of

September 30, 

December 31,

    

2021

    

2020

ASSETS

 

  

 

  

Real estate

 

  

 

  

Real estate, at cost

$

740,971

$

752,420

Less: accumulated depreciation

 

(26,835)

 

(22,314)

Real estate, net

 

714,136

 

730,106

Real estate-related intangible assets, net (refer to Note 4)

 

222,606

 

242,166

Total real estate, net and real estate-related intangible assets, net

 

936,742

 

972,272

Net investment in sales-type leases

 

1,801,986

 

1,305,519

Ground Lease receivables

 

691,378

 

577,457

Equity investments in Ground Leases

 

171,532

 

129,614

Cash and cash equivalents

 

43,870

 

56,948

Restricted cash

 

3,831

 

39,519

Deferred operating lease income receivable

 

109,373

 

93,307

Deferred expenses and other assets, net

 

66,270

 

34,334

Total assets

$

3,824,982

$

3,208,970

LIABILITIES AND EQUITY

 

  

 

  

Liabilities:

 

  

 

  

Accounts payable, accrued expenses and other liabilities(2)

$

62,492

$

76,673

Real estate-related intangible liabilities, net (refer to Note 4)

 

65,638

 

66,268

Debt obligations, net

 

2,028,195

 

1,684,726

Total liabilities

 

2,156,325

 

1,827,667

Commitments and contingencies (refer to Note 9)

 

  

 

  

Equity:

 

  

 

  

Safehold Inc. shareholders' equity:

 

  

 

  

Common stock, $0.01 par value, 400,000 shares authorized, 56,560 and 53,206 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

566

 

532

Additional paid-in capital

 

1,658,972

 

1,412,107

Retained earnings

 

48,455

 

23,945

Accumulated other comprehensive loss

 

(42,015)

 

(57,461)

Total Safehold Inc. shareholders' equity

 

1,665,978

 

1,379,123

Noncontrolling interests

 

2,679

 

2,180

Total equity

 

1,668,657

 

1,381,303

Total liabilities and equity

$

3,824,982

$

3,208,970

(1)Refer to Note 2 for details on the Company’s consolidated variable interest entities (“VIEs”).
(2)As of September 30, 2021 and December 31, 2020, includes $5.5 million and $4.7 million, respectively, due to related parties.

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

1

Safehold Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

    

Revenues:

 

  

 

  

 

  

 

  

 

Operating lease income

$

16,992

$

17,195

$

51,367

$

55,088

Interest income from sales-type leases

 

30,145

 

20,583

 

83,244

 

59,315

Other income

 

144

 

222

 

390

 

1,115

Total revenues

 

47,281

 

38,000

 

135,001

 

115,518

Costs and expenses:

 

  

 

  

 

  

 

  

Interest expense

 

20,932

 

16,430

 

57,259

 

47,811

Real estate expense

 

719

 

493

 

2,038

 

1,828

Depreciation and amortization

 

2,390

 

2,361

 

7,160

 

7,064

General and administrative(1)

 

6,658

 

5,302

 

21,388

 

16,924

Other expense

 

350

 

34

 

740

 

194

Total costs and expenses

 

31,049

 

24,620

 

88,585

 

73,821

Income from operations before other items

 

16,232

 

13,380

 

46,416

 

41,697

Loss on early extinguishment of debt

 

 

 

(216)

 

Earnings from equity method investments

 

2,244

 

832

 

4,012

 

2,472

Selling profit from sales-type leases

1,833

1,833

Net income

 

20,309

 

14,212

 

52,045

 

44,169

Net income attributable to noncontrolling interests

 

(105)

 

(49)

 

(201)

 

(145)

Net income attributable to Safehold Inc. common shareholders

$

20,204

$

14,163

$

51,844

$

44,024

Per common share data:

 

  

 

  

 

  

 

  

Net income

 

  

 

  

 

  

 

  

Basic

$

0.38

$

0.28

$

0.97

$

0.88

Diluted

$

0.38

$

0.28

$

0.97

$

0.88

Weighted average number of common shares:

 

  

 

  

  

Basic

 

53,498

 

51,153

 

53,347

 

50,158

Diluted

 

53,511

 

51,162

 

53,359

 

50,167

(1)For the three months ended September 30, 2021 and 2020, includes $5.6 million and $4.7 million, respectively, of general and administrative expenses incurred to related parties that includes management fees, expense reimbursements to the Company’s Manager and equity-based compensation. For the nine months ended September 30, 2021 and 2020, includes $17.8 million and $14.6 million, respectively, of general and administrative expenses incurred to related parties that includes management fees, expense reimbursements to the Company’s Manager and equity-based compensation.

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

2

Safehold Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

    

Net income

$

20,309

$

14,212

$

52,045

$

44,169

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Reclassification of losses on derivatives into earnings

 

1,034

 

508

 

2,156

 

1,321

Unrealized gain (loss) on derivatives

 

 

984

 

13,290

 

(23,450)

Other comprehensive gain (loss)

 

1,034

 

1,492

 

15,446

 

(22,129)

Comprehensive income

 

21,343

 

15,704

 

67,491

 

22,040

Comprehensive income attributable to noncontrolling interests

 

(105)

 

(49)

 

(201)

 

(145)

Comprehensive income attributable to Safehold Inc.

$

21,238

$

15,655

$

67,290

$

21,895

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

3

Table of Contents

Safehold Inc.

Consolidated Statements of Changes in Equity

(In thousands)

(unaudited)

 

Retained

Accumulated

Common

Additional

Earnings

Other

Stock at

Paid-In

(Accumulated

Comprehensive

Noncontrolling

Total

    

Par

    

Capital

    

Deficit)

    

Income (Loss)

    

Interests

    

Equity

Balance at June 30, 2021

$

533

$

1,421,185

$

37,870

$

(43,049)

$

2,454

$

1,418,993

Net income

 

 

 

20,204

 

 

105

 

20,309

Issuance of common stock, net / amortization

 

33

 

237,787

 

 

 

132

 

237,952

Dividends declared ($0.17 per share)

 

 

 

(9,619)

 

 

 

(9,619)

Change in accumulated other comprehensive income

 

 

 

 

1,034

 

 

1,034

Distributions to noncontrolling interests

 

 

 

 

 

(12)

 

(12)

Balance at September 30, 2021

$

566

$

1,658,972

$

48,455

$

(42,015)

$

2,679

$

1,668,657

Balance at June 30, 2020

$

511

$

1,287,385

$

11,454

$

(62,744)

$

1,811

$

1,238,417

Net income

 

 

 

14,163

 

 

49

 

14,212

Issuance of common stock, net / amortization

 

1

 

3,231

 

 

 

147

 

3,379

Dividends declared ($0.16224 per share)

 

 

 

(8,306)

 

 

 

(8,306)

Change in accumulated other comprehensive income

 

 

 

 

1,492

 

 

1,492

Distributions to noncontrolling interests

 

 

 

 

 

(11)

 

(11)

Balance at September 30, 2020

$

512

$

1,290,616

$

17,311

$

(61,252)

$

1,996

$

1,249,183

4

Table of Contents

Safehold Inc.

Consolidated Statements of Changes in Equity

(In thousands)

(unaudited)

Retained

Accumulated

Common

Additional

Earnings

Other

Stock at

Paid-In

(Accumulated

Comprehensive

Noncontrolling

Total

    

Par

    

Capital

    

Deficit)

    

Income (Loss)

    

Interests

    

Equity

Balance at December 31, 2020

$

532

$

1,412,107

$

23,945

$

(57,461)

$

2,180

$

1,381,303

Net income

 

 

 

51,844

 

 

201

 

52,045

Issuance of common stock, net / amortization

 

34

 

246,865

 

 

 

331

 

247,230

Dividends declared ($0.50224 per share)

 

 

 

(27,334)

 

 

 

(27,334)

Change in accumulated other comprehensive income

 

 

 

 

15,446

 

 

15,446

Distributions to noncontrolling interests

 

 

 

 

 

(33)

 

(33)

Balance at September 30, 2021

$

566

$

1,658,972

$

48,455

$

(42,015)

$

2,679

$

1,668,657

Balance at December 31, 2019

$

478

$

1,132,603

$

(2,146)

$

(39,123)

$

1,486

$

1,093,298

Net income

 

 

 

44,024

 

 

145

 

44,169

Issuance of common stock, net / amortization

 

34

 

158,013

 

 

 

397

 

158,444

Dividends declared ($0.4805 per share)

 

 

 

(24,567)

 

 

 

(24,567)

Change in accumulated other comprehensive loss

 

 

 

 

(22,129)

 

 

(22,129)

Distributions to noncontrolling interests

 

 

 

 

 

(32)

 

(32)

Balance at September 30, 2020

$

512

$

1,290,616

$

17,311

$

(61,252)

$

1,996

$

1,249,183

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

5

Safehold Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

For the Nine Months Ended

September 30, 

    

2021

    

2020

    

Cash flows from operating activities:

 

  

 

  

 

Net income

$

52,045

$

44,169

Adjustments to reconcile net income to cash flows from operating activities:

 

  

 

Depreciation and amortization

 

7,160

 

7,064

Stock-based compensation expense

 

1,574

 

1,555

Deferred operating lease income

 

(25,789)

 

(26,282)

Non-cash interest income from sales-type leases

 

(30,662)

 

(21,758)

Non-cash interest expense

 

8,895

 

8,088

Amortization of real estate-related intangibles, net

 

1,849

 

2,003

Loss on early extinguishment of debt

 

216

 

Earnings from equity method investments

 

(4,012)

 

(2,472)

Distributions from operations of equity method investments

 

1,397

 

734

Selling profit from sales-type leases

(1,833)

Amortization of premium, discount and deferred financing costs on debt obligations, net

 

2,617

 

1,677

Non-cash management fees

 

10,594

 

9,282

Other operating activities

 

3,187

 

1,596

Changes in assets and liabilities:

 

  

 

Changes in deferred expenses and other assets, net

 

99

 

(5)

Changes in accounts payable, accrued expenses and other liabilities

 

(14,390)

 

125

Cash flows provided by operating activities

 

12,947

 

25,776

Cash flows from investing activities:

 

  

 

  

Acquisitions of real estate

 

 

(20,612)

Origination/acquisition of net investment in sales-type leases and Ground Lease receivables

 

(542,269)

 

(165,071)

Contributions to equity method investments

(39,304)

Deposits on Ground Lease investments

 

(27,617)

 

1,050

Other investing activities

 

1,892

 

(104)

Cash flows used in investing activities

 

(607,298)

 

(184,737)

Cash flows from financing activities:

 

  

 

  

Proceeds from issuance of common stock

 

243,345

 

150,086

Proceeds from debt obligations

 

896,508

 

418,970

Repayments of debt obligations

 

(550,000)

 

(317,000)

Payments for deferred financing costs

 

(9,511)

 

(6,528)

Dividends paid to common shareholders

 

(26,334)

 

(23,702)

Payment of offering costs

 

(8,390)

 

(1,919)

Distributions to noncontrolling interests

 

(33)

 

(32)

Other financing activities

 

 

24

Cash flows provided by financing activities

 

545,585

 

219,899

Changes in cash, cash equivalents and restricted cash

 

(48,766)

 

60,938

Cash, cash equivalents and restricted cash at beginning of period

 

96,467

 

46,782

Cash, cash equivalents and restricted cash at end of period

$

47,701

$

107,720

Supplemental disclosure of non-cash investing and financing activity:

 

  

 

  

Acquisition of real estate

$

$

383

Assumption of other liabilities/debt obligations

 

 

383

Dividends declared to common shareholders

9,631

8,306

Accrued finance costs

 

248

 

2

Accrued offering costs

 

409

 

15

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

6

Table of Contents

Safehold Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 1—Business and Organization

Business—Safehold Inc. (the “Company”) operates its business through one reportable segment by acquiring, managing and capitalizing ground leases. Ground leases are long-term contracts between the landlord (the Company) and a tenant or leaseholder. The Company believes that it is the first publicly-traded company formed primarily to acquire, own, manage, finance and capitalize ground leases. Ground leases generally represent ownership of the land underlying commercial real estate projects that is net leased by the fee owner of the land to the owners/operators of the real estate projects built thereon (“Ground Leases”). Under a Ground Lease, the tenant is generally responsible for all property operating expenses, such as maintenance, real estate taxes and insurance and is also responsible for development costs and capital expenditures. Ground Leases are typically long-term (base terms ranging from 30 to 99 years, often with tenant renewal options) and have contractual base rent increases (either at a specified percentage or consumer price index (“CPI”) based, or both) and sometimes include percentage rent participations.

The Company intends to target investments in long-term Ground Leases in which: (i) the cost of its Ground Lease represents 30% to 45% of the combined value of the land and buildings and improvements thereon as if there was no Ground Lease on the land (“Combined Property Value”); (ii) the ratio of property net operating income to the Ground Lease payment due the Company (“Ground Rent Coverage”) is between 2.0x to 4.5x, and for this purpose the Company uses estimates of the stabilized property net operating income if it does not receive current tenant information and for properties under construction or in transition, in each case based on leasing activity at the property and available market information, including leasing activity at comparable properties in the relevant market; and (iii) the Ground Lease contains contractual rent escalation clauses or percentage rent that participates in gross revenues generated by the commercial real estate on the land. A Ground Lease lessor (the Company) typically has the right to regain possession of its land and take ownership of the buildings and improvements thereon upon tenant default and the termination of the Ground Lease on account of such default. The Company believes that the Ground Lease structure provides an opportunity for potential value accretion through the reversion to the Company, as the Ground Lease owner, of the buildings and improvements on the land at the expiration or earlier termination of the lease, for no additional consideration from the Company.

The Company is managed by SFTY Manager, LLC (the “Manager”), a wholly-owned subsidiary of iStar Inc. (“iStar”), the Company’s largest shareholder, pursuant to a management agreement. The Company has no employees, as the Manager provides all services to it. The Company draws on the extensive investment origination and sourcing platform of its Manager to actively promote the benefits of the Ground Lease structure to prospective Ground Lease tenants.

Organization—The Company is a Maryland corporation and completed its initial public offering in June 2017. The Company’s common stock is listed on the New York Stock Exchange under the symbol “SAFE.” The Company elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, commencing with the tax year ended December 31, 2017. The Company is structured as an Umbrella Partnership REIT (“UPREIT”). As such, all of the Company’s properties are owned through a subsidiary partnership, Safehold Operating Partnership LP (the “Operating Partnership”). As of September 30, 2021, the Company owned 100% of the limited partner interests in the Operating Partnership and a wholly-owned subsidiary of the Company owned 100% of the general partner interests in the Operating Partnership. The UPREIT structure may afford the Company certain benefits as it seeks to acquire properties from third parties who may want to defer taxes by contributing their Ground Leases to the Company.

Note 2—Basis of Presentation and Principles of Consolidation

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10-01 of Regulation S-X for interim financial statements. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. These unaudited consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”).

7

Table of Contents

Safehold Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

The preparation of these consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

In the opinion of management, the accompanying consolidated financial statements contain all adjustments consisting of normal recurring adjustments necessary for a fair statement of the results for the interim periods presented. Such operating results may not be indicative of the expected results for any other interim periods or the entire year.

Principles of Consolidation—The consolidated financial statements include the accounts and operations of the Company, its wholly-owned subsidiaries and VIEs for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

Consolidated VIEs—The Company consolidates VIEs for which it is considered the primary beneficiary. As of September 30, 2021, the total assets of these consolidated VIEs were $68.0 million and total liabilities were $29.7 million. The classifications of these assets are primarily within “Net investment in sales-type leases,” “Real estate, net,” “Real estate-related intangible assets, net” and “Deferred operating lease income receivable” on the Company’s consolidated balance sheets. The classifications of liabilities are primarily within “Debt obligations, net” and “Accounts payable, accrued expenses and other liabilities” on the Company’s consolidated balance sheets. The liabilities of these VIEs are non-recourse to the Company and can only be satisfied from each VIE’s respective assets. The Company has provided no financial support to VIEs that it was not previously contractually required to provide and did not have any unfunded commitments related to consolidated VIEs as of September 30, 2021.

Note 3—Summary of Significant Accounting Policies

Fair Values—The Company is required to disclose fair value information with regard to its financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practical to estimate fair value. The Financial Accounting Standards Board (“FASB”) guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy prioritizes the inputs to be used in valuation techniques to measure fair value: Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The Company determines the estimated fair values of financial assets and liabilities based on a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the Company and the Company’s own assumptions about market participant assumptions.

8

Table of Contents

Safehold Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

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

As of September 30, 2021

As of December 31, 2020

Carrying 

Fair

Carrying 

Fair

    

Value

    

Value

    

Value

    

Value

Net investment in sales-type leases(1)

$

1,802

$

1,802

$

1,306

$

1,306

Ground Lease receivables(1)

 

691

 

691

 

577

 

577

Cash and cash equivalents(1)

 

44

 

44

 

57

 

57

Restricted cash(1)

 

4

 

4

 

40

 

40

Debt obligations, net(2)

 

2,028

 

2,194

 

1,685

 

1,835

(1)The Company determined the carrying values of its net investment in sales-type leases; Ground Lease receivables; cash and cash equivalents and restricted cash approximated their fair values. The fair value of the Company’s net investment in sales-type leases and Ground Lease receivables are classified as Level 3 within the fair value hierarchy and the fair value of the Company’s cash and cash equivalents and restricted cash are classified as Level 1 within the fair value hierarchy.
(2)The fair value of the Company’s debt obligations traded in secondary markets are classified as Level 1 within the fair value hierarchy and the fair value of the Company’s debt obligations not traded in secondary markets are classified as Level 3 within the fair value hierarchy.

For the remainder of the Company’s significant accounting policies, refer to the Company’s 2020 Annual Report.

New Accounting PronouncementsIn June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) which was issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments held by a reporting entity. This amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public entities such as the Company that qualified as smaller reporting companies prior to December 31, 2019, ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2022. Early adoption is permitted. Management is currently evaluating the impact of ASU 2016-13 on the Company’s consolidated financial statements.

In May 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”) to clarify certain accounting topics from previously issued ASUs, including ASU 2016-13. ASU 2019-04 addresses certain aspects of ASU 2016-13, including but not limited to, accrued interest receivable, loan recoveries, interest rate projections for variable-rate financial instruments and expected prepayments. ASU 2019-04 provides alternatives that allow entities to measure credit losses on accrued interest separate from credit losses on the principal portion of a loan, clarifies that entities should include expected recoveries in the measurement of credit losses, allows entities to consider future interest rates when measuring credit losses and can elect to adjust effective interest rates used to discount expected cash flows for expected loan prepayments. ASU 2019-04 is effective upon the adoption of ASU 2016-13. Management is currently evaluating the impact of ASU 2019-04 on the Company’s consolidated financial statements.

9

Table of Contents

Safehold Inc.

Notes to Consolidated Financial Statements (Continued)

(unaudited)

Note 4—Real Estate and Real Estate-Related Intangibles

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

As of

    

September 30, 2021

    

December 31, 2020

Land and land improvements, at cost

$

547,739

$

559,188

Buildings and improvements, at cost

 

193,232

 

193,232

Less: accumulated depreciation

 

(26,835)

 

(22,314)

Total real estate, net

$

714,136

$

730,106

Real estate-related intangible assets, net

 

222,606

 

242,166

Total real estate, net and real estate-related intangible assets, net

$

936,742

$

972,272

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

    

As of September 30, 2021

Gross 

Accumulated 

Carrying 

Intangible

Amortization

Value

Above-market lease assets, net(1)

$

186,002

$

(11,336)

$

174,666

In-place lease assets, net(2)

 

61,848

 

(14,630)

 

47,218

Other intangible assets, net

 

750

 

(28)

 

722

Total

$

248,600

$

(25,994)

$

222,606

As of December 31, 2020

Gross 

Accumulated 

Carrying 

    

Intangible

    

Amortization

    

Value

Above-market lease assets, net(1)

$

203,778

$

(9,494)

$

194,284

In-place lease assets, net(2)

 

59,179

 

(12,025)

 

47,154

Other intangible assets, net

 

750

 

(22)

 

728

Total

$

263,707

$

(21,541)

$

242,166

(1)Above-market lease assets are recognized during business combinations and asset acquisitions when the present value of market rate rental cash flows over the term of a lease is less than the present value of the contractual in-place rental cash flows. Above-market lease assets are amortized over the non-cancelable term of the leases.
(2)In-place lease assets are recognized during business combinations and asset acquisitions and are estimated based on the value associated with the costs avoided in originating leases comparable to the acquired in-place leases as well as the value associated with lost rental revenue during the assumed lease-up period. In-place lease assets are amortized over the non-cancelable term of the leases.

The amortization of real estate-related intangible assets had the following impact on the Company’s consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 ($ in thousands):

Income Statement

For the Three Months Ended September 30, 

Intangible asset

    

Location

    

2021

    

2020

Above-market lease assets (decrease to income)

 

Operating lease income

$

814

$

830

In-place lease assets (decrease to income)

 

Depreciation and amortization

 

881

 

852

Other intangible assets (decrease to income)

 

Operating lease income

 

2

 

2

Income Statement

For the Nine Months Ended September 30, 

Intangible asset

    

Location

    

2021

    

2020

Above-market lease assets (decrease to income)

 

Operating lease income

$

2,471

$

2,481

In-place lease assets (decrease to income)

 

Depreciation and amortization

 

2,633