Safehold Inc. New · NYSE:SAFE
Safehold Inc. New — Safehold — Debt Investor Presentation (May 2023)
50 slides from Safehold Inc. New's debt investor presentation, May 2023
Slide 1: Fixed Income Update Q1'23
Fixed Income Update Q1'23
Slide 2: Forward-Looking Statements and Other Matters
Safehold 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”, “repr
Slide 3: Forward-Looking Statements and Other Matters
Safehold Forward-Looking Statements and Other Matters Inflation Adjusted Yield / CPI Adjustments: Safehold™ originated ground leases typically include a periodic rent increase based on prior years cumulative CPI growth with the initial lookback year generally starting between lease year 11 and 21. T
Slide 4: Credit Update
Gatgho Credit Update
Slide 5: Executive Summary
Gatgho 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 Executive Summary We have built national scale, relationships and brand equity over the last ~6 years, grow
Slide 6: Recent Internalization
Gatgho Safehold has internalized, creating the only self-managed, pure-play ground lease company in the public markets and is now better equipped for its next phase of growth Recent Internalization + Enhances governance, widely distributes voting power, expands number of independent Better directors
Slide 7: Financial Performance
Gatgho Financial Performance Safehold benefits from steady, predictable revenue and collections against primarily fixed, accretive 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
Slide 8: Unencumbered Asset Diversification
Unencumbered Asset Diversification Gatgho Safehold primarily invests in the top 30 MSAs across the U.S., positioned for long-term sustainable growth $3.4b UA Ground Lease Portfolio! (96-year w.a. extended lease term) oo Top 5 UA Gateway Markets (% of GBV) 1. New York (12%]? - 9 Assets Boston (12%] -
Slide 9: Unencumbered Asset Evolution
Gatgho Unencumbered Asset Evolution Q4’20 Q1°23 +$2.6b Total UA GBV" $0.8b $3.4b Since our initial rating / first unsecured offering... +56 Total UA Count 34 > 90 v Emphasis on multifamily (~70% of investments] Top 10 UA by GBV 56% 22% _, 34% Vv Largest new market: Boston (now 12% of UA] Est. UA UCA
Slide 10: Unencumbered Asset Overview
Safehold Unencumbered Asset Overview 90 Toure $3. Ab sev = $6.2b Est.UCA 39x Rent ~~ 40% eLTv2 Coverage? Multifamily 55 Multifamily $1.8b Multifamily $3.7b Multifamily 3.6x Multifamily 36% Office 21 Office $0.9b Office $1.1b Office 4.2x Office 48% Life Science 5 Life Science $0.3b Life Science $0.7b
Slide 11: Capital Structure
Capital Structure Safehold 100% unsecured debt use since initial credit rating, $0 of non-recourse secured debt raised in last 3+ years; commitment to further rating upgrades $4.2b Total Debt! 23 Years W.A. Maturity! 3.3% / 3.8% Current Cash / Effective Cost of Debt! 2 1.9x Corporate Leverage! 58% U
Slide 12: Underlying Risk Comparison
Safehold 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 effectively financing long-term, low-risk cash flow streams that have the most subordinate
Slide 13: Relative Value Comparison
Relative Value Comparison Gatgho 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 cataly
Slide 14: Credit Ratings Momentum
Gatgho Safehold’s recent internalization was viewed favorably by both Moody’s and Fitch, as it answered key questions about go-forward strategy and governance. As a result, Safehold was put on Positive Outlook at both agencies, with a clear path to becoming an A-rated borrower Credit Ratings Momentu
Slide 15: Safehold Update
Gatgho Safehold Update
Slide 16: Company Snapshot as of Q1'23
Safehold Company Snapshot as of Q1'23 Portfolio Balance Sheet $6.2b Aggregate GBV Baal 7 . 93 Years W.A. Extended (Positive] Moody's 131 Ground Leases Lease Term BBB+ (Positive) Fitch 10.0b &st. Unrealized Capital Annualized Cash Yield 900m Liquidity’ ape $ Appreciation (“UCA") $ Maturities 9 Ground
Slide 17: Addressable Market
afghan 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 (~90% of activity] in addition to competing to purchase existing ground leases when they are marketed for sale
Slide 18: Capital
Capital Ratings Capital Highlights Total Capital Activity: $2.1b Total equity raised: $762m Total debt raised: $1,145m Incr. RCF (Capacity): $200m ($525m) 2019 Fully secured balance sheet with no public credit ratings Balance Sheet Philosophy: Total Capital Activity: $0.5b Total equity raised: $199m
Slide 19: Recently Formed Joint Venture
Gatgho In March 2023, Safehold formed a joint venture program with a leading sovereign wealth fund, focused on ground lease investments Recently Formed Joint Venture Target $500m SAFE: $275 Million - 55% stake Commitment! Partner: $225 Million - 45% stake Management Fee: 25 bps on invested equity fo
Slide 20: Value Proposition
Gatgho Customers: 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 Value Proposition Investors: Ground leases offer durable, compounding cash flows, inflatio
Slide 21: Portfolio Diversification
Gatgho Portfolio Diversification Safehold primarily invests in the top 30 MSAs across the U.S., positioned for long-term sustainable growth $6.0b Ground Lease Portfolio! . (93-year w.a. extended lease term] Top 10 Markets (% of GBV) 5 1, Manhattan (24%F - 10 Assets 2. Washington D.C. (11%) - 17 Asse
Slide 22: Growing Customer Adoption
Safehold Growing Customer Adoption Diversifying Customer Base High Customer “Stickiness” & Improving Efficiency 5% go Other 40% 64% Public REIT Of customers have closed Of existing customers have looked at or = Global Fund M: a i iewi opal Fung manager multiple deals with Safehold are currently revi
Slide 23: Institutional Customers
Gatgho Institutional Customers Safehold's 131 ground leases include 87 unique tenants These tenants include financial sponsors, owner/operators, public companies, sovereign wealth funds, and other institutions NEW ENGLAND DEVELOPMENT WAYPOINT » Blackstone Tue CartvieGrour (Hy HiGHcaTE SAMSUNG &sUBS
Slide 24: Leasehold Liquidity - Institutional Lenders
Leasehold Liquidity - Institutional Lenders Safehold’s 131 ground leases include 54 unique leasehold lenders Gatgho These lenders include agencies, banks, insurance, CMBS, REITs and debt funds mi MORTGAGE CAPITAL nuveen A TIAA Company Blackstone @ LOANCORE Bank of America capital’ 3 Citizens Bank’ |
Slide 25: Case Study of Highest and Best Use
Case Study of Highest and Best Use 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 ground lease in June 2017 from the Nederlander’s. For decades,
Slide 26: Case Study of Payments During Covid
Gatgho Case Study of Payments During 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, we completed an agreement with the leasehold equity sponsor to convert the existing grou
Slide 27: New Investors: Introduction to Safehold and the Modern Ground Lease
Gatgho New Investors: Introduction to Safehold and the Modern Ground Lease
Slide 28: What is a Ground Lease
What is a Ground Lease Gatgho 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 Traditional “Fee Simple” Ownership = Land + Building together A
Slide 29: Typical Safehold Ground Lease Terms
Gatgho 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 era Mevntenene Tenant
Slide 30: The Modern Ground Lease
Gatgho 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 The Modern Ground Lease Old
Slide 31: Illustrative Principal and Income Safety
Gatgho Illustrative Principal and Income Safety Principal Safety Income Safety Risk Illustrative Asset Illustrative Safehold Backed Security Structure Leasehold Value $60m $142k monthly ground rent equals | less than BB (55-60% LTV) Leasehold 1 /4 0 0 Mortgage BBB (50-55% LTV) (40-70% CPV) of leaseh
Slide 32: UCA Growth Increases Security
UCA Growth Increases Security What is UCA? Unrealized Capital Appreciation (UCA) represents an estimate of today’s value of the buildings on top of our land Safehold typically is the future contractual owner of the property upon lease expiration or tenant default and the termination of the lease upo
Slide 33: Most Senior Payment in Capital Stack
Gatgho Safehold is the most senior payment in a commercial property's capital stack, akin to taxes or utilities Leasehold P&L (Annual) Illustrative P&L Ground Rent Payment Seniority (SAFE Tenant) Gross Income $10.0 $60m ___________ > . Leasehold Operating Expenses 4.0 Property NOI $6.0 I | Ground Re
Slide 34: Unrealized Capital Appreciation (UCA)
Unrealized Capital Appreciation (UCA) Ownership At the end of its typical ground lease, SAFE will own everything on top of the land + t GL Basis _UCA (All value above basis) Capital Appreciation Tracker We track and report the current spot value of UCA, marked each quarter using current appraisals f
Slide 35: Ground Lease Income
Safehold Ground Lease Income Contractual rent increases create organic, long-term, call protected, compounding cash flows Reflects an illustrative example of how a $100 initial ground rent stream grows when increased by 2.0% annually over the life of a hypothetical 99-year ground lease. In addition
Slide 36: CPI Lookback Mechanics
Gatgho CPI Lookback Mechanics CPI Lookbacks! 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 Lookb
Slide 37: Long-Term, Low Risk Return Comparison
Safehold Long-Term, Low Risk Return Comparison Target Safehold Ground Lease 4.25% Initial Yield | 2.0% Rent Bumps per Annum | 10-Year CP! Lookbacks While the minimum contractual ground lease cash flows create higher returns vs. similar long-term, low risk fixed income securities, CPI lookbacks in ou
Slide 38: Target Investment Criteria
Target Investment Criteria Gatgho We believe appropriately sized and structured ground leases, located in top markets with significant asset- level subordination and institutional sponsorship, is an attractive risk-adjusted opportunity Top 30 MSAs with attractive fundamentals a Low GLTV (~35 to 45%
Slide 39: A Better Capital Solution
Gatgho 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 r_| X Transfer Tax $100m $70m X Mortgage Recording Tax Near-term maturity risk Lids X Title Insurance
Slide 40: Efficient Capital Creates Better Returns for New Transactions
Gatgho Efficient Capital Creates Better Returns for New Transactions $100m $40m puis Illustrative Example: $24m Safehold’s Modern Ground Lease creates value and liquidity for customers $60m Loan! $100m $36m Leasehold Loan? $40m Gp ol? $100m Fee Simple Purchase Price $100m [-0%) $40m Equity Required
Slide 41: Management and Organization
Gatgho Management and Organization
Slide 42: Full-service platform and leadership team
Gatgho Safehold benefits from its full-service platform (87 employees) and leadership team with decades of experience in all key functions Jay Sugarman Chairman & CEO Marcos Alvarado President & CIO Organization Structure Theresa Ulyatt Brett Asnas Kyle Curtin Chief Financial Officer Chief Administr
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Slide 44: Appendix
Gatgho Appendix Safehold | The Ground Lease Company | May 2023 le
Slide 45: Income Statement
Gatgho Income Statement is ended March 31, 2022 Revenues: Interest income from sales-type leases $57,062 $43,031 Operating lease income 20,901 16,966 Other income 366 366 Total revenues $78,329 $60,363 Costs and expenses: Interest expense $40,873 $25,321 Real estate expense 1,206 707 Depreciation an
Slide 46: Balance Sheet
Balance Sheet Note: Figures in thousands. As of March 31, 2023 _As of December 31, 2022 Assets: Net investment in sales-type leases Ground Lease receivables Real estate: Real estate, at cost Less: accumulated depreciation Real estate, net Real estate-related intangible assets, net Real estate availa
Slide 47: Portfolio Reconciliation
Gatgho Portfolio Reconciliation IPO (6/22/17) 3/31/19 3/31/20 3/31/21 3/31/22 3/31/23 Net investment in Sales-Type Leases - $129 $1,029 $1,312 $2,740 $3,140 Ground Lease receivables - - $422 $661 $1,017 $1,431 Pro-rata interest in Ground Leases held as . . $342 $346 $442 $466 equity method investmen
Slide 48: Earnings Reconciliation
Safehold Earnings Reconciliation For the three months ended March 31, 2023 2022 Net income attributable to Safehold Inc. common shareholders $4,682 $24,873 Add: Merger & Caret related costs and non-recurring gains! 21,597 - Net income excluding merger & Caret related costs and non-recurring gains fo
Slide 49: Unrealized Capital Appreciation Details
Safehold 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
Slide 50: Glossary
Glossary Safehold ‘Annualized Yield Calculated as the annualized base Net Rent plus Percentage Rent divided by GBV. DeeBOAN Represents the Current Portfolio plus unfunded commitments. For unfunded commitments, it represents the aggregate future amount to be paid under the commitments. Does not inclu