Safehold Inc. New · NYSE:SAFE
Safehold Inc. New — Safehold — Debt Investor Presentation (October 2024)
42 slides from Safehold Inc. New's debt investor presentation, October 2024
Slide 1: Fixed Income Update Q3'24
Fixed Income Update Q3’24
Slide 2: 01 Credit Update
01 Credit Update Safehold | The Ground Lease Company | October 2024 2
Slide 3: Executive Summary
Executive Summary Safehold (NYSE: SAFE) is the creator and market leader of the modern ground lease industry. We provide a capital solution that makes commercial real estate ownership more cost efficient Q3’24 activity: Closed $104 million of new originations (all multifamily). Strong ground lease c
Slide 4: Unencumbered Asset Diversification
Unencumbered Asset Diversification Safehold primarily invests in the top 30 MSAs across the U.S., positioned for long-term sustainable growth $4.0b UA Core Ground Lease Portfolio (94-year w.a. extended lease term) Top 5 UA Gateway Markets (% of GBV, Count, Rent Coverage2, GLTV3) 1. Boston (13%) – 3
Slide 5: Unencumbered Asset Evolution
Unencumbered Asset Evolution Q4’20 Q3’24 Total UA GBV4 $0.8b +$3.2b $4.0b Over this period of time… Total UA Count 34 +72 106 Emphasis on multifamily (~76% of investments) Top 10 UA by GBV 56% -24% 32% Largest new market: Boston (~13% of UA) Est. UA UCA $1.4b +$4.6b $6.0b GLTV & rent coverage
Slide 6: Unencumbered Asset Overview
Unencumbered Asset Overview 106 Ground Leases $4.0b GBV4 $6.0b Est. UCA 3.7x Rent Coverage2 46% GLTV3 Multifamily 71 Multifamily $2.3b Multifamily $4.1b Multifamily 3.5x Multifamily 39% Office 21 Office $0.9b Office $0.6b Office 3.7x Office 66% Life Science 5 Life Science $0.4b Life Science $0.7b Li
Slide 7: Liability Risk Comparison
Liability Risk Comparison Safehold and its creditors sit at a significantly lower attachment point in a property’s capital structure than typical Lessors and Mortgage & Equity REITs, benefiting from higher levels of subordinate capital Highest-to-lowest creditor look-through LTV Mortgage Equity Illu
Slide 8: Capital Structure
Capital Structure A3 / BBB+ (Stable) (Positive) $4.6b 20.5 Years 3.6% / 4.0% 2.0x $955m Moody’s / Fitch Total Debt6 W.A. Maturity6 7 Current Cash / Corporate Liquiditya Effective Cost of Debt6 7 Leverage6 Debt Maturity Schedule8 Revolving Credit Non-recourse Secured Debt Unsecured Notes 1,061 633 40
Slide 9: Relative Value Comparison
Relative Value Comparison We believe Safehold’s secondary spreads do not accurately capture the credit quality and momentum of the business. We believe current levels present an attractive risk-adjusted opportunity for investors to outperform businesses that have fewer near-term credit catalysts and
Slide 10: Safehold's Credit Profile Has Transformed
Safehold’s Credit Profile Has Transformed Safehold’s credit profile has meaningfully evolved since our initial rating. We believe this improvement is due to the credit quality and performance of the portfolio, significant shift in our debt capital mix, diverse capital access, financial flexibility a
Slide 11: 02 Safehold Overview
02 Safehold Overview Safehold | The Ground Lease Company | October 2024 11
Slide 12: Company Snapshot as of Q3'24
Company Snapshot as of Q3’24 Portfolio Balance Sheet $6.6b Aggregate GBV A3 (Stable) Moody’s $4.2b Unencumbered Assets 92 Years W.A. Extended 146 Ground Leases Lease Term BBB+ (Positive) Fitch 1.5x Unencumbered Assets to Unsecured Debt No Unencumbered Assets $9.1b Est. Unrealized Capital Appreciatio
Slide 13: Financial Performance
Financial Performance Safehold benefits from steady, predictable revenue and collections against primarily fixed, long-term liabilities Safehold form lease includes no contractual operating expenses or capital expenditures born by Safehold G&A structure is stable at current levels and built to suppo
Slide 14: Investment Criteria and Market Opportunity
Investment Criteria and Market Opportunity ~90% of Safehold’s business is creating ground leases to support commercial property acquisitions, recapitalizations or development. The remaining ~10% is acquiring existing ground leases20 Target Investment Criteria Market Opportunity Top 30 MSAs with attr
Slide 15: Capital Highlights and Ratings
Capital Highlights Total Capital Activity: $2.6b Total Capital Activity: $2.9b Total Capital Activity: $2.1b Total equity raised: $961m Total equity raised: $476m Total equity raised: $152m Capital Total debt raised: $1,413m Total debt raised: $1,426m Total debt raised: $300m Incr. RCF (Capacity): $
Slide 16: Value Proposition
Value Proposition SAFE Customers SAFE Investors Ground leases are efficient sources of capital that can: Ground leases offer durable, compounding cash Drive returns via additional proceeds at lower cost flows and inflation capture15 Eliminate repeated material friction costs Future ownership rig
Slide 17: Portfolio Diversification
Portfolio Diversification Safehold primarily invests in the top 30 MSAs across the U.S., which we believe are positioned for long-term sustainable growth $6.6b Core Ground Lease Portfolio Top 10 Markets (% of GBV, Count, Rent Coverage2, GLTV3) (92-year w.a. extended lease term) 1. Manhattan (22%)26
Slide 18: Growing Customer Adoption
Growing Customer Adoption Diversifying Customer Base27 High Customer “Stickiness” & Improving Efficiency 5% 6% Other Public REIT 37% 70% 11% Of customers have closed Of existing customers have looked at or Global Fund Manager 50% multiple deals with Safehold are currently reviewing another deal 13%
Slide 19: Institutional Sponsors and Lenders
Institutional Sponsors and Lenders Safehold’s 146 ground leases include 97 unique sponsors and 57 unique leasehold lenders Sponsors include financial sponsors, owner/operators, public companies, sovereign wealth funds, and other institutions. Lenders include agencies, banks, insurance, CMBS, REITs a
Slide 20: Case Study of Highest and Best Use
Case Study of Highest and Best Use Ground Lease Payment Made for 13 Years… With No Building 6200 & 6201 Hollywood Boulevard are two newly-built multifamily properties totaling 1k+ units with parking and billboard space on the corner of Hollywood Boulevard & Argyle Avenue. Safehold acquired the groun
Slide 21: Case Study of Payments During Covid
Case Study of Payments During Covid 100% collections through Covid Alohilani Resort is an 839-key hotel on Waikiki Beach in Honolulu (1 of only 11 hotels with direct beach access). Concurrent with the closing of Safehold’s acquisition of the ground lease, we completed an agreement with the leasehold
Slide 22: 03 New Investors: Introduction to Safehold and the Modern Ground Lease
03 New Investors: Introduction to Safehold and the Modern Ground Lease Safehold | The Ground Lease Company | October 2024 22
Slide 23: What is a Ground Lease
What is a Ground Lease A Ground Lease (“GL”) represents ownership of the land underlying a commercial real estate property. The land is leased on a long-term basis by the landlord (Safehold) to a tenant that operates the property Ground Lessee / Leaseholder (Safehold’s Tenant) Building (Safehold’s T
Slide 24: Typical Safehold Ground Lease Terms
Typical Safehold Ground Lease Terms Lease Term 99 Years Contractual Escalators Annual fixed bumps (typically 2.0%) with periodic CPI-based lookbacks Property Expenses No landlord (Safehold) obligations Capital Expenditures No landlord (Safehold) obligations Tenant Repair Tenant obligated to maintain
Slide 25: The Modern Ground Lease
The Modern Ground Lease Safehold’s form structure standardizes how ground leases should function in the capital markets by removing value destroying features found in archaic ground leases and creating a bond-like instrument with growing, predictable cash flows which benefits all parties Old Ground
Slide 26: Illustrative Principal and Income Safety
Illustrative Principal and Income Safety Principal Safety Income Safety Risk Illustrative Asset Illustrative Safehold Backed Security Structure Equity Equity Leasehold Value $60m $167k monthly N/R (65-70% LTV) ground rent is B (60-65% LTV) BB (55-60% LTV) Leasehold 1/360th Mortgage (40-70% CPV) of l
Slide 27: UCA Growth Increases Security
UCA Growth Increases Security What is UCA? What does UCA growth mean for Safehold? Unrealized Capital Appreciation (UCA) represents an As tenants invest capital and execute business plans related to estimate of today’s value of the buildings on top of our buildings and other improvements on our grou
Slide 28: CPI Lookback Mechanics
CPI Lookback Mechanics CPI Lookbacks15 provide meaningful inflation capture that is better than comparable risk, long-term fixed- rate bonds we benchmark against, and continue periodically throughout the life of a lease Target Safehold Ground Lease 2.0% Rent Bumps per Annum | 10-Year CPI Lookbacks |
Slide 29: Illustrative Growth – Contractual Cash Flow and Inflation Capture
Illustrative Growth – Contractual Cash Flow and Inflation Capture15 Minimum contractual ground lease cash flows target ~100+ bps of spread vs. similar long-term, high grade fixed income securities. In addition, CPI lookbacks15 in our portfolio are designed to provide meaningful inflation capture, ty
Slide 30: A Better Capital Solution
A Better Capital Solution Making ground leases modern, efficient, and value-enhancing for building owners Improved Capital Efficiency Improved Cost Efficiency Significant Risk Reduction $60m Transfer Tax $100m $70m Mortgage Recording Tax Near-term maturity risk Title Insurance Broker Fees $30m Reduc
Slide 31: Efficient Capital Creates Better Returns for New Transactions
Efficient Capital Creates Better Returns for New Transactions $100m $100m $40m Equity Illustrative Example: $30m Equity Safehold’s Modern Ground $30m Lease creates value and liquidity for customers Leasehold Loanb $60m Loana $40m GLc $100m Fee Simple Purchase Price $100m (-0%) $40m Equity Required $
Slide 32: Appendix
Appendix Safehold | The Ground Lease Company | October 2024 32
Slide 33: Organization Structure
Organization Structure Safehold benefits from its full-service platform (76 employees) and leadership team with decades of experience in all key functions Jay Sugarman 27 Chairman & CEO Brett Asnas Tim Doherty Elisha Blechner Theresa Ulyatt EVP, Head of Chief People Officer 15 Chief Financial Office
Slide 34: ESG Update
ESG Update Environmental GHG Emissions “Low Risk” Rating Achieved 20% reduction target 427 Moody’s Partnership Against 2019 baseline, 2025 target, achieved in 2022 To evaluate and track climate risks in Continuing to purchase carbon offsets pipeline and portfolio Social CEO Action Over 70% of People
Slide 35: Income Statement
Income Statement For the three months ended September 30, For the nine months ended September 30, 2024 2023 2024 2023 Revenues: Interest income from sales-type leases $67,120 $59,130 $195,573 $174,350 Operating lease income 16,650 16,715 54,344 54,366 Interest income - related party 2,384 2,381 7,09
Slide 36: Balance Sheet
Balance Sheet As of September 30, 2024 As of December 31, 2023 Assets: Net investment in sales-type leases $3,440,042 $3,255,195 Ground Lease receivables, net 1,779,147 1,622,298 Real estate: Real estate, at cost 740,971 744,337 Less: accumulated depreciation (44,921) (40,400) Real estate, net 696,0
Slide 37: Portfolio Reconciliation
Portfolio Reconciliation IPO (6/22/17) 9/30/20 9/30/21 9/30/22 9/30/23 9/30/24 Net investment in Sales-Type Leases - $1,089 $1,802 $3,066 $3,183 $3,440 Ground Lease receivables - 480 $691 $1,327 $1,564 $1,779 Pro-rata interest in Ground Leases held as - 344 $439 $444 $480 $454 equity method investme
Slide 38: Earnings Reconciliation
Earnings Reconciliation For the 12 months For the year ended ended September 30, December 31, 2024 2020 Net income attributable to Safehold Inc. common shareholders $120,905 $59,294 Less: Gain on sale of ground leases (447) - Less: Non-amortizable hedge gains or losses (15,191) - a Add: General prov
Slide 39: Unrealized Capital Appreciation Details
Unrealized Capital Appreciation Details Refer to the Glossary in the Appendix for a definition of Owned Residual Portfolio, Unrealized Capital Appreciation (“UCA”), and “Combined Property Value” (“CPV”). SAFE relies in part on CBRE’s valuations of the CPV of our portfolio in calculating UCA. SAFE ma
Slide 40: Glossary
Glossary Aggregate Cost Basis Represents Cost Basis plus unfunded commitments of the Core Ground Lease Portfolio. For unfunded commitments, it represents the aggregate future amount to be paid under the commitments. Aggregate Gross Book Value Represents the Gross Book Value plus unfunded commitments
Slide 41: Endnotes
Endnotes (1) Manhattan market comprises 24% of total New York MSA GBV (4 assets). (2) The Company uses estimates of the stabilized Property NOI for Rent Coverage calculations if it does not receive current tenant information or if the properties are under construction / in transition. These estimate
Slide 42: Forward-Looking Statements and Other Matters
Forward-Looking Statements and Other Matters This presentation may contain forward-looking statements. All statements other than statements of historical fact are forward-looking statements. These forward-looking statements can be identified by the use of words such as “illustrative”, “representativ