Safehold Inc. [SAFE] Filings

10-Q 1 safe-20230930x10q.htm 10-Q

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, 2023
	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. 001-15371

Safehold Inc.

(Exact name of registrant as specified in its charter)


Maryland			95-6881527
(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: (212) 930-9400

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

Indicate by check mark whether the registrant: (1) 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 (2) 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
☒	☐	☐	☐	☐

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. ☐

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

As of October 30, 2023, there were 71,066,380 shares, $0.01 par value per share, of Safehold Inc. common stock outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
PART I	Consolidated Financial Information
Item 1.	Financial Statements:
	Consolidated Balance Sheets (unaudited) as of September 30, 2023 and December 31, 2022	1
	Consolidated Statements of Operations (unaudited)—For the three and nine months ended September 30, 2023 and 2022	2
	Consolidated Statements of Comprehensive Income (Loss) (unaudited)—For the three and nine months ended September 30, 2023 and 2022	3
	Consolidated Statements of Changes in Equity (unaudited)—For the three and nine months ended September 30, 2023 and 2022	4
	Consolidated Statements of Cash Flows (unaudited)—For the nine months ended September 30, 2023 and 2022	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	59
PART II	Other Information	61
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	61
Item 4.	Mine Safety Disclosures	61
Item 5.	Other Information	61
Item 6.	Exhibits	62
SIGNATURES		63

Table of Contents

PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. Financial Statements

Safehold Inc.

Consolidated Balance Sheets⁽¹⁾

(In thousands)

(unaudited)


	As of
	September 30,		December 31,
	2023		2022
ASSETS
Net investment in sales-type leases ($468 and $0 of allowances as of September 30, 2023 and December 31, 2022, respectively)	$	3,182,592	$	3,106,599
Ground Lease receivables, net ($318 and $0 of allowances as of September 30, 2023 and December 31, 2022, respectively)		1,563,670		1,374,716
Real estate
Real estate, at cost		744,571		740,971
Less: accumulated depreciation		(38,892)		(34,371)
Real estate, net		705,679		706,600
Real estate-related intangible assets, net		212,771		217,795
Real estate available and held for sale		7,216		—
Total real estate, net and real estate-related intangible assets, net and real estate available and held for sale		925,666		924,395
Loans receivable, net - related party ($2,421 of allowances as of September 30, 2023)		112,088		—
Equity investments		287,118		180,388
Cash and cash equivalents		11,483		20,066
Restricted cash		27,978		28,324
Deferred tax asset, net		7,173		—
Deferred operating lease income receivable		172,284		148,870
Deferred expenses and other assets, net⁽²⁾		153,139		67,564
Total assets	$	6,443,191	$	5,850,922
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Accounts payable, accrued expenses and other liabilities⁽³⁾	$	122,986	$	100,357
Real estate-related intangible liabilities, net		63,963		64,591
Debt obligations, net		3,937,827		3,521,359
Total liabilities		4,124,776		3,686,307
Commitments and contingencies (refer to Note 9)
Redeemable noncontrolling interests (refer to Note 3)		19,011		19,011
Equity:
Safehold Inc. shareholders' equity:
Common stock, $0.01 par value, 400,000 shares authorized, 71,066 and 62,397 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		710		624
Additional paid-in capital		2,183,034		1,986,417
Retained earnings		19,124		151,226
Accumulated other comprehensive income		61,459		3,281
Total Safehold Inc. shareholders' equity		2,264,327		2,141,548
Noncontrolling interests		35,077		4,056
Total equity		2,299,404		2,145,604
Total liabilities, redeemable noncontrolling interests and equity	$	6,443,191	$	5,850,922

(1)	Refer to Note 2 for details on the Company’s consolidated variable interest entities (“VIEs”).

(2)	As of September 30, 2023, includes $7.1 million due from related parties.

(3)	As of December 31, 2022, includes $8.5 million due to related parties.

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

Table of Contents

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,
	2023		2022		2023		2022
Revenues:
Interest income from sales-type leases⁽¹⁾	$	59,130	$	54,736	$	174,350	$	146,014
Operating lease income		16,715		16,507		54,366		49,925
Interest income - related party⁽²⁾		2,381		—		4,762		—
Other income⁽³⁾		7,335		453		16,073		1,004
Total revenues		85,561		71,696		249,551		196,943
Costs and expenses:
Interest expense		46,553		35,463		133,482		91,050
Real estate expense		1,001		866		3,219		2,272
Depreciation and amortization		2,519		2,407		7,444		7,215
General and administrative⁽⁴⁾		17,860		9,551		51,843		29,203
Impairment of goodwill		145,365		—		145,365		—
Provision for credit losses		336		—		2,625		—
Other expense		2,169		6,073		17,532		6,777
Total costs and expenses		215,803		54,360		361,510		136,517
Gain on sale of net investment in lease		—		55,811		—		55,811
Income (loss) from operations before other items		(130,242)		73,147		(111,959)		116,237
Earnings from equity method investments		7,451		2,244		16,520		6,772
Net income (loss) before income taxes		(122,791)		75,391		(95,439)		123,009
Income tax expense		(55)		—		(580)		—
Net income (loss)		(122,846)		75,391		(96,019)		123,009
Net (income) attributable to noncontrolling interests		(123)		(9,314)		(138)		(9,381)
Net income (loss) attributable to Safehold Inc. common shareholders	$	(122,969)	$	66,077	$	(96,157)	$	113,628

Per common share data:
Net income (loss)
Basic	$	(1.81)	$	1.04	$	(1.47)	$	1.83
Diluted	$	(1.81)	$	1.04	$	(1.47)	$	1.83
Weighted average number of common shares:
Basic		67,979		63,393		65,214		61,991
Diluted		67,979		63,393		65,214		61,991

(1)	For the nine months ended September 30, 2022, the Company recorded $2.1 million of “Interest income from sales-type leases” in its consolidated statements of operations from Ground Leases with iStar Inc. (“iStar”).

(2)	Refer to Note 3.

(3)	For the three and nine months ended September 30, 2023, includes $6.0 million and $13.2 million, respectively, of management fees from related parties.

(4)

For the three months ended September 30, 2023 and 2022, includes $7.5 million and $8.5 million, respectively, of general and administrative expenses incurred to related parties that includes management fees and expense reimbursements to the Former Manager (refer to Note 1) and equity-based compensation (including equity-based compensation to employees). For the nine months ended September 30, 2023 and 2022, includes $28.5 million and $25.8 million, respectively, of general and administrative expenses incurred to related parties that includes management fees, expense reimbursements to the Former Manager (refer to Note 1) and equity-based compensation (including equity-based compensation to employees).

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

Table of Contents

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,
	2023		2022		2023		2022
Net income (loss)	$	(122,846)	$	75,391	$	(96,019)	$	123,009
Other comprehensive income:
Reclassification of (gains) losses on derivatives into earnings		(1,494)		943		(1,454)		2,945
Unrealized gain on derivatives		53,834		18,587		59,632		29,615
Other comprehensive income:		52,340		19,530		58,178		32,560
Comprehensive income (loss)		(70,506)		94,921		(37,841)		155,569
Comprehensive (income) attributable to noncontrolling interests		(123)		(9,314)		(138)		(9,381)
Comprehensive income (loss) attributable to Safehold Inc.	$	(70,629)	$	85,607	$	(37,979)	$	146,188

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

Table of Contents

Safehold Inc.

Consolidated Statements of Changes in Equity

(In thousands)

(unaudited)


							Retained		Accumulated
	Redeemable		Common		Additional		Earnings		Other
	Noncontrolling		Stock at		Paid-In		(Accumulated		Comprehensive		Noncontrolling		Total
	Interests⁽¹⁾		Par		Capital		Deficit)		Income (Loss)		Interests		Equity
Balance at June 30, 2023	$	19,011	$	639	$	2,034,678	$	154,826	$	9,119	$	34,480	$	2,233,742
Net income (loss)		—		—		—		(122,969)		—		123		(122,846)
Issuance of common stock, net / amortization		—		71		148,356		—		—		485		148,912
Dividends declared ($0.177 per share)		—		—		—		(12,733)		—		—		(12,733)
Change in accumulated other comprehensive income		—		—		—		—		52,340		—		52,340
Distributions to noncontrolling interests		—		—		—		—		—		(11)		(11)
Balance at September 30, 2023	$	19,011	$	710	$	2,183,034	$	19,124	$	61,459	$	35,077	$	2,299,404

Balance at June 30, 2022	$	19,000	$	621	$	1,975,933	$	85,405	$	(27,950)	$	3,320	$	2,037,329
Net income		658		—		—		66,077		—		8,656		74,733
Issuance of common stock, net / amortization		—		1		5,222		—		—		52		5,275
Dividends declared ($0.177 per share)		—		—		—		(11,007)		—		—		(11,007)
Change in accumulated other comprehensive income		—		—		—		—		19,530		—		19,530
Distributions to noncontrolling interests		—		—		—		—		—		(11)		(11)
Balance at September 30, 2022	$	19,658	$	622	$	1,981,155	$	140,475	$	(8,420)	$	12,017	$	2,125,849

Balance at December 31, 2022	$	19,011	$	624	$	1,986,417	$	151,226	$	3,281	$	4,056	$	2,145,604
Impact from adoption of new accounting standard (refer to Note 3)		—		—		—		(640)		—		—		(640)
Net income (loss)		—		—		—		(96,157)		—		138		(96,019)
Issuance of common stock, net / amortization		—		74		162,484		—		—		982		163,540
Dividends declared ($0.531 per share)		—		—		—		(35,305)		—		—		(35,305)
Change in accumulated other comprehensive income		—		—		—		—		58,178		—		58,178
Contributions from noncontrolling interests, net		—		—		(1,443)		—		—		30,439		28,996
Distributions to noncontrolling interests		—		—		—		—		—		(538)		(538)
Merger consideration (refer to Note 1 and Note 3)		—		12		35,576		—		—		—		35,588
Balance at September 30, 2023	$	19,011	$	710	$	2,183,034	$	19,124	$	61,459	$	35,077	$	2,299,404

Balance at December 31, 2021	$	—	$	566	$	1,663,324	$	59,368	$	(40,980)	$	2,924	$	1,685,202
Net income		658		—		—		113,628		—		8,723		122,351
Issuance of common stock, net / amortization		—		56		318,002		—		—		385		318,443
Dividends declared ($0.524 per share)		—		—		—		(32,521)		—		—		(32,521)
Change in accumulated other comprehensive income		—		—		—		—		32,560		—		32,560
Contributions from noncontrolling interests, net		18,829		—		—		—		—		18		18
Distributions to noncontrolling interests		—		—		—		—		—		(33)		(33)
Additional paid in capital attributable to redeemable noncontrolling interests		171		—		(171)		—		—		—		(171)
Balance at September 30, 2022	$	19,658	$	622	$	1,981,155	$	140,475	$	(8,420)	$	12,017	$	2,125,849

(1)	Refer to Note 3.

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

Table of Contents

Safehold Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	For the Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(96,019)	$	123,009
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		7,444		7,215
Stock-based compensation expense		20,127		1,518
Deferred operating lease income		(23,415)		(23,694)
Non-cash interest income from sales-type leases		(62,139)		(53,555)
Non-cash interest expense		10,216		8,806
Amortization of real estate-related intangibles, net		1,729		1,729
Impairment of goodwill		145,365		—
Provision for credit losses		2,625		—
Earnings from equity method investments		(16,520)		(6,772)
Distributions from operations of equity method investments		4,591		1,510
Gain on sale of net investment in lease		—		(55,811)
Amortization of premium, discount and deferred financing costs on debt obligations, net		5,454		4,039
Non-cash management fees		5,199		14,950
Other operating activities		408		3,486
Changes in assets and liabilities:
Changes in deferred expenses and other assets, net		(168)		10,646
Changes in accounts payable, accrued expenses and other liabilities		(12,568)		15,071
Cash flows (used in) provided by operating activities		(7,671)		52,147
Cash flows from investing activities:
Acquisitions of real estate		(10,817)		—
Origination/acquisition of net investment in sales-type leases and Ground Lease receivables		(203,364)		(1,210,274)
Origination of loans receivable, net		(114,450)		—
Payment for merger consideration		(88,685)		—
Cash and cash equivalents acquired upon merger		3,213		—
Contributions to equity method investments		(33,560)		(7)
Funding reserves received from Ground Lease tenant net of disbursements		(218)		30,071
Net proceeds from sale of net investment in lease		—		135,529
Net proceeds received from sale of real estate available and held for sale		1,631		—
Deposits on Ground Lease investments		(112)		(2,250)
Other investing activities		(3,588)		(679)
Cash flows used in investing activities		(449,950)		(1,047,610)
Cash flows from financing activities:
Proceeds from issuance of common stock		151,940		309,160
Proceeds from debt obligations		458,000		1,770,000
Repayments of debt obligations		(145,000)		(1,005,000)
Payments for deferred financing costs		(4,618)		(

Safehold Inc. [SAFE] Filings
10-Q	[2023-11-01]
10-Q	[2023-08-01]
10-Q	[2023-04-28]
10-K	[2023-02-22]
10-Q	[2022-11-04]
10-Q	[2022-08-04]
10-Q	[2022-05-04]
10-K	[2022-02-25]
10-Q	[2021-11-02]
10-Q	[2021-08-03]
10-Q	[2021-04-29]
10-K	[2021-02-23]
10-Q	[2020-11-03]
10-Q	[2020-08-06]
10-Q	[2020-04-30]
10-K	[2020-02-24]
10-Q	[2019-10-31]
10-Q	[2019-08-01]
10-Q	[2019-05-02]
10-K	[2019-02-26]
10-Q	[2018-11-01]
10-Q	[2018-08-03]
10-Q	[2018-05-03]
10-K	[2018-02-26]
10-Q	[2017-11-02]
10-Q	[2017-08-04]
10-Q	[2017-05-04]
10-K	[2017-02-27]
10-Q	[2016-11-03]
10-Q	[2016-08-04]
10-Q	[2016-05-03]
10-K	[2016-02-26]
10-Q	[2015-11-03]
10-Q	[2015-08-04]
10-Q	[2015-05-04]
10-K	[2015-03-02]
10-Q	[2014-11-04]
10-Q	[2014-08-05]
10-Q	[2014-05-06]
10-K	[2014-03-03]
10-Q	[2013-11-06]
10-Q	[2013-08-06]
10-Q	[2013-05-06]
10-K	[2013-03-01]
10-Q	[2012-11-09]
10-Q	[2012-08-07]
10-Q	[2012-05-10]
10-K	[2012-02-29]