Safehold Inc. New · NYSE:SAFE
Safehold Inc. New — Safehold — Debt Investor Presentation (February 2024)
40 slides from Safehold Inc. New's debt investor presentation, February 2024
Slide 1: Fixed Income Update Q4'23
Fixed Income Update Q4’23
Slide 2: 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
Slide 3: 01 Credit Update
01 Credit Update Safehold | The Ground Lease Company | February 2024 3
Slide 4: 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 In Q4’23, we originated 3 new multifamily ground leases totaling $56 million1 In October 2023, M
Slide 5: Unencumbered Asset Diversification
Unencumbered Asset Diversification Safehold primarily invests in the top 30 MSAs across the U.S., positioned for long-term sustainable growth $3.7b UA Core Ground Lease Portfolio (96-year w.a. extended lease term) Top 5 UA Gateway Markets (% of GBV, Count, Rent Coverage2, GLTV3) 1. Boston (13%) – 3
Slide 6: Unencumbered Asset Evolution
Unencumbered Asset Evolution Q4’20 Q4’23 Total UA GBV1 $0.8b +$2.9b $3.7b Since our initial BBB+ rating… Total UA Count 34 +62 96 Emphasis on multifamily (~72% of investments) Top 10 UA by GBV 56% -23% 33% Largest new market: Boston (now 13% of UA) Est. UA UCA $1.4b +$4.7b $6.1b GLTV & rent co
Slide 7: Unencumbered Asset Overview
Unencumbered Asset Overview 96 Ground Leases $3.7b GBV1 $6.1b Est. UCA 3.8x Rent Coverage2 42% GLTV3 Multifamily 61 Multifamily $2.0b Multifamily $3.8b Multifamily 3.4x Multifamily 38% Office 21 Office $0.9b Office $1.0b Office 4.1x Office 53% Life Science 5 Life Science $0.3b Life Science $0.7b Lif
Slide 8: Underlying Risk Comparison
Underlying Risk Comparison Safehold and its creditors sit at a significantly lower attachment point in a property’s capital structure than typical Lessors, Mortgage and Equity REITs Our creditors are financing long-term, compounding, inflation-protected cash flow streams that benefit from a lower at
Slide 9: Capital Structure
Capital Structure 100% unsecured debt use since initial credit rating; $0 of non-recourse secured debt raised in last ~4 years; commitment to further rating upgrades $4.4b 22.2 Years 3.3% / 3.9% 1.9x 59% Total Debt1 W.A. Maturity1 2 Current Cash / Corporate Unsecured Debt as Effective Cost of Debt1
Slide 10: 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 11: 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 12: 02 Safehold Update
02 Safehold Update Safehold | The Ground Lease Company | February 2024 12
Slide 13: Company Snapshot as of Q4'23
Company Snapshot as of Q4’23 Portfolio Balance Sheet $6.4b Aggregate GBV A3 (Stable) Moody’s $3.9b Unencumbered Assets 92 Years W.A. Extended 137 Ground Leases Lease Term BBB+ (Positive) Fitch 1.5x Unencumbered Assets to Unsecured Debt No Unencumbered Assets $9.8b Est. Unrealized Capital Appreciatio
Slide 14: 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 15: Large Addressable Market
Large Addressable Market Any liquidity event at the property level (buy/sell, recapitalization, development) in a major market presents an opportunity for Safehold to create a ground lease Additional product offerings create opportunity for us to further build a bigger pipeline, and we also will com
Slide 16: Capital Highlights
Capital Highlights Total Capital Activity: $2.1b Total Capital Activity: $0.5b Total Capital Activity: $2.0b Total Capital Activity: $0.9b Total Capital Activity: $0.9b Total equity raised: $762m Total equity raised: $199m Total equity raised: $167m Total equity raised: $309m Total equity raised: $1
Slide 17: Value Proposition
Value Proposition Customers: SAFE ground leases are highly efficient sources of capital that can drive returns, require less equity upfront, eliminate repeated material friction costs and significantly reduce refinancing risk Investors: Ground leases offer durable, compounding cash flows, inflation
Slide 18: 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 $6.3b Core Ground Lease Portfolio Top 10 Markets (% of GBV, Count, Rent Coverage2, GLTV3) (92-year w.a. extended lease term) 1. Manhattan (23%)1 –
Slide 19: Growing Customer Adoption
Growing Customer Adoption Diversifying Customer Base1 High Customer “Stickiness” & Improving Efficiency 5% 6% Other Public REIT 38% 71% 12% Of customers have closed Of existing customers have looked at or Global Fund Manager 49% multiple deals with Safehold are currently reviewing another deal 14% F
Slide 20: Institutional Sponsors and Lenders
Institutional Sponsors and Lenders Safehold’s 137 ground leases include 92 unique sponsors and 56 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 21: 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 22: 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 23: 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 | February 2024 23
Slide 24: 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 25: 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 26: 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 27: 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 ground rent is B (60-65% LTV) BB (55-60% LTV) Leasehold 1/360th Mortgage of leasehold value BBB (50-55%
Slide 28: 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 29: CPI Lookback Mechanics
CPI Lookback Mechanics CPI Lookbacks1 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 30: Illustrative Growth – Contractual Cash Flow and Inflation Capture
Illustrative Growth – Contractual Cash Flow and Inflation Capture Minimum contractual ground lease cash flows target ~100+ bps of spread vs. similar long-term, high grade fixed income securities. In addition, CPI lookbacks in our portfolio are designed to provide significant inflation capture, typic
Slide 31: 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 Other Transaction Cost
Slide 32: Efficient Capital Creates Better Returns for New Transactions
Efficient Capital Creates Better Returns for New Transactions $100m $100m $40m Equity Illustrative Example: $24m Equity Safehold’s Modern Ground $36m Lease creates value and liquidity for customers Leasehold Loan2 $60m Loan1 $40m GL3 $100m Fee Simple Purchase Price $100m (-0%) $40m Equity Required $
Slide 33: Appendix
Appendix Safehold | The Ground Lease Company | February 2024 33
Slide 34: Organization Structure
Organization Structure Safehold benefits from its full-service platform (78 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 35: Income Statement
Income Statement For the three months ended December 31, For the twelve months ended December 31, 2023 2022 2023 2022 Revenues: Interest income from sales-type leases $61,153 $56,244 $235,503 $202,258 Operating lease income 16,921 16,892 71,287 66,817 Interest income - related party 2,381 - 7,143 -
Slide 36: Balance Sheet
Balance Sheet As of December 31, 2023 As of December 31, 2022 Assets: Net investment in sales-type leases $3,255,195 $3,106,599 Ground Lease receivables, net 1,622,298 1,374,716 Real estate: Real estate, at cost 744,337 740,971 Less: accumulated depreciation (40,400) (34,371) Real estate, net 703,93
Slide 37: Portfolio Reconciliation
Portfolio Reconciliation IPO (6/22/17) 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Net investment in Sales-Type Leases - $985 $1,306 $2,413 $3,107 $3,255 Ground Lease receivables - 397 $577 $796 $1,375 $1,622 Pro-rata interest in Ground Leases held as - 340 $345 $441 $445 $493 equity method investm
Slide 38: Earnings Reconciliation
Earnings Reconciliation For the year ended For the year ended December 31, December 31, 2023 2020 Net income attributable to Safehold Inc. common shareholders ($54,973) $59,294 Add: Impairment for goodwill 145,365 - 1 Add: Merger & Caret related costs 22,082 - 2 Less: Gain on sale of ground leases (
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 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 Aggregate Cost Basis commitments. Represents the Gross Book Value plus unfunded commitments of the Core Ground Lease P
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