Safehold, Inc. Q1 FY2025 earnings call

• Market volatility in Q1 affected deal closures, but markets are adjusting and working with customers to provide needed capital. - Q1 investment activity was delayed with no new originations, but pipeline has non-binding LOIs totaling ~$386 million across 11 ground leases and 4 loans. - Credit metrics strong at current base rates, expecting contractual returns in low 7% range. - Portfolio GLTV increased to 52% due to Q1 office revaluations, but rent coverage unchanged at 3.5 times. - Capital structure includes ~$4.7 billion debt, weighted average maturity ~19 years, $1.3 billion cash and credit facility availability, and favorable credit ratings. - Hedging strategy has provided cash interest savings and long-term treasury locks with gains.

For the first quarter, GAAP revenue was $97.7 million, net income was $29.4 million, and earnings per share was $0.41. The portfolio at quarter end was $6.8 billion, with UCA estimated at $8.9 billion, GLTV at 52%, and rent coverage at 3.5 times. The ground lease portfolio has 147 assets, having grown 20 times by book value and estimated unrealized capital appreciation since IPO. There are 85 multifamily ground leases, up from 8% by count at IPO to 58% currently. The unrealized capital appreciation portfolio includes approximately 36 million square feet of institutional quality commercial real estate.

• Expecting increasing investment activity in near term as markets stabilize. - Capital recycling is a goal, evaluating opportunities to close public vs private valuation disconnect in existing portfolio. - Market choppiness or significant downturn could impact, but diversified ground lease portfolio is attractive.

• Market volatility and interest rate fluctuations can delay deal closures. - Geopolitical and political factors can freeze the market, affecting deal activity. - Uncertainty in deal timing due to multiple parties involved in the capital stack for some transactions.

Q: Could you give more color on the non-mining LOIs, sponsors, markets, and closure time frame?

A: Tim Doherty said the pipeline is robust with 11 deals, majority in multifamily (including market rate, construction, affordable), diverse locations (West Coast, Southeast, etc.), and shows deal diversity.

Q: Difference between ground lease and leasehold loan value and capacity?

A: Jay Sugarman said leasehold loans are a tool to kick start transactions when markets are volatile, a small percentage of balance sheet, and help customers lock down deals.

Q: Comment on public vs private market disconnect and potential asset sales?

A: Brett Asnas said capital recycling is a top goal, underway in processes to create best execution for asset sales or joint ventures to close valuation gap.

Q: Pipeline evolution and recovery sign?

A: Tim Doherty said volatility in rates has lessened, allowing sponsors to make decisions, pipeline under LOI is over $250 million, more than 2024 originations, indicating potential recovery but market still has variables.

Q: Joint venture partners and asset sale considerations?

A: Jay Sugarman said considering joint ventures to scale, but currently focusing on largest deals with existing partner; Brett Asnas said thoughtful about venture structures for existing assets to create value for stakeholders.