SEC Filing | Safehold Inc.

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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
	June 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 July 28, 2023, there were 63,965,605 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 June 30, 2023 and December 31, 2022	1
	Consolidated Statements of Operations (unaudited)—For the three and six months ended June 30, 2023 and 2022	2
	Consolidated Statements of Comprehensive Income (Loss) (unaudited)—For the three and six months ended June 30, 2023 and 2022	3
	Consolidated Statements of Changes in Equity (unaudited)—For the three and six months ended June 30, 2023 and 2022	4
	Consolidated Statements of Cash Flows (unaudited)—For the six months ended June 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	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	55
PART II	Other Information	57
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	58
SIGNATURES		59

Table of Contents

PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. Financial Statements

Safehold Inc.

Consolidated Balance Sheets⁽¹⁾

(In thousands)

(unaudited)


	As of
	June 30,		December 31,
	2023		2022
ASSETS
Net investment in sales-type leases ($336 and $0 of allowances as of June 30, 2023 and December 31, 2022, respectively)	$	3,167,964	$	3,106,599
Ground Lease receivables, net ($221 and $0 of allowances as of June 30, 2023 and December 31, 2022, respectively)		1,484,948		1,374,716
Real estate
Real estate, at cost		740,971		740,971
Less: accumulated depreciation		(37,385)		(34,371)
Real estate, net		703,586		706,600
Real estate-related intangible assets, net		214,446		217,795
Total real estate, net and real estate-related intangible assets, net		918,032		924,395
Loans receivable, net - related party ($2,311 of allowances as of June 30, 2023)		112,168		—
Equity investments		267,206		180,388
Goodwill		149,505		—
Cash and cash equivalents		14,281		20,066
Restricted cash		28,144		28,324
Deferred tax asset, net		6,228		—
Deferred operating lease income receivable		164,499		148,870
Deferred expenses and other assets, net⁽²⁾		106,086		67,564
Total assets	$	6,419,061	$	5,850,922
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Accounts payable, accrued expenses and other liabilities⁽³⁾	$	119,797	$	100,357
Real estate-related intangible liabilities, net		64,172		64,591
Debt obligations, net		3,982,339		3,521,359
Total liabilities		4,166,308		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, 63,966 and 62,397 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		639		624
Additional paid-in capital		2,034,678		1,986,417
Retained earnings		154,826		151,226
Accumulated other comprehensive income (loss)		9,119		3,281
Total Safehold Inc. shareholders' equity		2,199,262		2,141,548
Noncontrolling interests		34,480		4,056
Total equity		2,233,742		2,145,604
Total liabilities, redeemable noncontrolling interests and equity	$	6,419,061	$	5,850,922

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

(2)	As of June 30, 2023, includes $8.1 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 Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Revenues:
Interest income from sales-type leases⁽¹⁾	$	58,158	$	48,247	$	115,220	$	91,278
Operating lease income		16,750		16,452		37,651		33,418
Interest income - related party⁽²⁾		2,381		—		2,381		—
Other income⁽³⁾		8,372		185		8,738		551
Total revenues		85,661		64,884		163,990		125,247
Costs and expenses:
Interest expense		46,055		30,266		86,929		55,586
Real estate expense		1,013		699		2,218		1,407
Depreciation and amortization		2,527		2,406		4,925		4,808
General and administrative⁽⁴⁾		18,916		10,458		33,983		19,651
Provision for credit losses		47		—		2,289		—
Other expense		1,274		596		15,363		705
Total costs and expenses		69,832		44,425		145,707		82,157
Income from operations before other items		15,829		20,459		18,283		43,090
Earnings from equity method investments		6,807		2,252		9,069		4,528
Net income before income taxes		22,636		22,711		27,352		47,618
Income tax expense		(525)		—		(525)		—
Net income		22,111		22,711		26,827		47,618
Net (income) loss attributable to noncontrolling interests		19		(33)		(15)		(67)
Net income attributable to Safehold Inc. common shareholders	$	22,130	$	22,678	$	26,812	$	47,551

Per common share data:
Net income
Basic	$	0.35	$	0.36	$	0.42	$	0.78
Diluted	$	0.35	$	0.36	$	0.42	$	0.78
Weighted average number of common shares:
Basic		63,944		63,252		63,809		61,279
Diluted		63,944		63,252		63,809		61,279

(1)	For the six months ended June 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 six months ended June 30, 2023, includes $7.2 million of management fees from related parties.

(4)

For the three months ended June 30, 2023 and 2022, includes $8.0 million and $9.5 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). For the six months ended June 30, 2023 and 2022, includes $21.0 million and $17.4 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.

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Safehold Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(unaudited)


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income	$	22,111	$	22,711	$	26,827	$	47,618
Other comprehensive income:
Reclassification of (gains) losses on derivatives into earnings		(902)		969		41		2,002
Unrealized gain on derivatives		34,221		6,772		5,797		11,028
Other comprehensive income (loss):		33,319		7,741		5,838		13,030
Comprehensive income (loss)		55,430		30,452		32,665		60,648
Comprehensive (income) loss attributable to noncontrolling interests		19		(33)		(15)		(67)
Comprehensive income (loss) attributable to Safehold Inc.	$	55,449	$	30,419	$	32,650	$	60,581

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

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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 March 31, 2023	$	19,011	$	639	$	2,031,026	$	144,164	$	(24,200)	$	27,498	$	2,179,127
Net income		—		—		—		22,130		—		(19)		22,111
Issuance of common stock, net / amortization		—		—		3,652		—		—		488		4,140
Dividends declared ($0.177 per share)		—		—		—		(11,468)		—		—		(11,468)
Change in accumulated other comprehensive income		—		—		—		—		33,319		—		33,319
Contributions from noncontrolling interests		—		—		—		—		—		6,525		6,525
Distributions to noncontrolling interests		—		—		—		—		—		(12)		(12)
Balance at June 30, 2023	$	19,011	$	639	$	2,034,678	$	154,826	$	9,119	$	34,480	$	2,233,742

Balance at March 31, 2022	$	19,000	$	619	$	1,970,443	$	73,711	$	(35,691)	$	3,245	$	2,012,327
Net income		—		—		—		22,678		—		33		22,711
Issuance of common stock, net / amortization		—		2		5,490		—		—		53		5,545
Dividends declared ($0.177 per share)		—		—		—		(10,984)		—		—		(10,984)
Change in accumulated other comprehensive income		—		—		—		—		7,741		—		7,741
Distributions to noncontrolling interests		—		—		—		—		—		(11)		(11)
Balance at June 30, 2022	$	19,000	$	621	$	1,975,933	$	85,405	$	(27,950)	$	3,320	$	2,037,329

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		—		—		—		26,812		—		15		26,827
Issuance of common stock, net / amortization		—		3		14,128		—		—		497		14,628
Dividends declared ($0.354 per share)		—		—		—		(22,572)		—		—		(22,572)
Change in accumulated other comprehensive income		—		—		—		—		5,838		—		5,838
Contributions from noncontrolling interests, net		—		—		(1,443)		—		—		30,439		28,996
Distributions to noncontrolling interests		—		—		—		—		—		(527)		(527)
Merger consideration (refer to Note 1)		—		12		35,576		—		—		—		35,588
Balance at June 30, 2023	$	19,011	$	639	$	2,034,678	$	154,826	$	9,119	$	34,480	$	2,233,742

Balance at December 31, 2021	$	—	$	566	$	1,663,324	$	59,368	$	(40,980)	$	2,924	$	1,685,202
Net income		—		—		—		47,551		—		67		47,618
Issuance of common stock, net / amortization		—		55		312,780		—		—		333		313,168
Dividends declared ($0.347 per share)		—		—		—		(21,514)		—		—		(21,514)
Change in accumulated other comprehensive income		—		—		—		—		13,030		—		13,030
Contributions from noncontrolling interests, net		18,829		—		—		—		—		18		18
Distributions to noncontrolling interests		—		—		—		—		—		(22)		(22)
Additional paid in capital attributable to redeemable noncontrolling interests		171		—		(171)		—		—		—		(171)
Balance at June 30, 2022	$	19,000	$	621	$	1,975,933	$	85,405	$	(27,950)	$	3,320	$	2,037,329

(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 Six Months Ended
	June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	26,827	$	47,618
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		4,925		4,808
Stock-based compensation expense		12,670		1,465
Deferred operating lease income		(15,630)		(15,812)
Non-cash interest income from sales-type leases		(41,084)		(33,659)
Non-cash interest expense		7,421		5,977
Amortization of real estate-related intangibles, net		1,152		1,152
Provision for credit losses		2,289		—
Earnings from equity method investments		(9,069)		(4,528)
Distributions from operations of equity method investments		1,860		1,051
Amortization of premium, discount and deferred financing costs on debt obligations, net		3,623		2,676
Non-cash management fees		5,199		9,666
Other operating activities		242		2,496
Changes in assets and liabilities:
Changes in deferred expenses and other assets, net		(10,234)		263
Changes in accounts payable, accrued expenses and other liabilities		339		23,492
Cash flows (used in) provided by operating activities		(9,470)		46,665
Cash flows from investing activities:
Origination/acquisition of net investment in sales-type leases and Ground Lease receivables		(130,744)		(907,281)
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		(18,362)		(2)
Funding reserves received from Ground Lease tenant net of disbursements		(218)		58,768
Net proceeds received from sale of real estate available and held for sale		1,631		—
Deposits on Ground Lease investments		—		(2,250)
Other investing activities		(8,211)		72
Cash flows used in investing activities		(355,826)		(850,693)
Cash flows from financing activities:
Proceeds from issuance of common stock		—		309,160
Proceeds from debt obligations		358,000		1,460,000
Repayments of debt obligations		—		(880,000)
Payments for deferred financing costs		(4,615)		(5,034)
Dividends paid to common shareholders		(22,144)		(20,200)
Payment of offering costs		(1,822)		(4,815)
Payments for withholding taxes upon vesting for stock-based compensation		—		(970)
Distributions to noncontrolling interests		(527)		(22)
Contributions from noncontrolling interests		30,439		18
Contributions from redeemable noncontrolling interests		—		19,000
Cash flows provided by financing activities		359,331		877,137
Changes in cash, cash equivalents and restricted cash		(5,965)		73,109
Cash, cash equivalents and restricted cash at beginning of period		48,390		38,516
Cash, cash equivalents and restricted cash at end of period	$	42,425	$	111,625


Reconciliation of cash and cash equivalents and restricted cash presented on the consolidated statements of cash flows