Safehold Inc. New · NYSE:SAFE
Safehold Inc. New — Safehold — Debt Investor Presentation (August 2023)
46 slides from Safehold Inc. New's debt investor presentation, August 2023
Slide 1: Fixed Income Update Q2'23
Fixed Income Update Q2’23
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
Credit Update Gatgho
Slide 5: Executive Summary
Gatgho 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 During Q2’23, we originated 3 new ground leases totaling $129 million’, all multifamily,
Slide 6: Unencumbered Asset Diversification
. coe . Safehold Unencumbered Asset Diversification Safehold primarily invests in the top 30 MSAs across the U.S., positioned for long-term sustainable growth $3.5b UA Core Ground Lease Portfolio @ {e-year w.a, extended lease term) Top 5 UA Gateway Markets (% of av, Count, Rent Coverage’, GLTV9) 1.
Slide 7: Unencumbered Asset Evolution
Gatgho Unencumbered Asset Evolution i +$2.7b . _ . : . Total UA GBV $0.8b $3.5b Since our initial rating / first unsecured offering... 59 . . A . Total UA Count 34 ts 93 v Emphasis on multifamily (~70% of investments] Top 10 UA by GBV 56% 722% __ 34% Vv Largest new market: Boston (now 13% of UA] Est
Slide 8: Unencumbered Asset Overview
Safehold Unencumbered Asset Overview 93 Ground $3.5b GBV! $6.4b Est, UCA 3.8x Rent 40% GLTV3 Leases Coverage? Multifamily 58 Multifamily $1.9b Multifamily $3.9b Multifamily 3.4x Multifamily 36% Office 21 Office $0.9b Office $1.1b Office 4.1x Office 49% Life Science 5 Life Science $0.3b Life Science
Slide 9: Capital Structure
Safehold Capital Structure 100% unsecured debt use since initial credit rating of Baal / BBB+, $0 of non-recourse secured debt raised in last 3+ years; commitment to further rating upgrades $4.3b 23 Years 3.3% / 3.8% 1.9x 59% Total Debt! W.A. Maturity! 2 Current Cash / Corporate Unsecured Debt as Ef
Slide 10: 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 11: 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 12: 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 13: Safehold Update
Gatgho Safehold Update
Slide 14: Company Snapshot as of Q2'23
Safehold Company Snapshot as of Q2'23 Portfolio Balance Sheet 3.71 — Unencum $6.3b CG CHA eT Baal (Positive) Moody's $ 92 Years ees BBB+ (positive : 15 Unencumb: 134 Ground Leases celia) Fitch +X to Unsecured Debt No 10.1b Est. Unrealized Capital Annualized Cash Yield 816m Liquidity® ape $ Appreciat
Slide 15: Financial Performance
Gatgho 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 t
Slide 16: Large Addressable Market
Gatgho 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 (SAFExSWAP, GL Plus, Leasehold Loan Fund, SAFExSELL) create opportunity for
Slide 17: Capital Highlights
Capital Ratings 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 Capital Highlights Total Capital Activity: $0.5b Total equity raised: $199m Total debt raised: $268m
Slide 18: Joint venture with sovereign wealth fund
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 19: Value Proposition
Safehold 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, i
Slide 20: Portfolio Diversification
re Safehold Portfolio Diversification a Safehold primarily invests in the top 30 MSAs across the U.S., which we believe are positioned for long-term sustainable growth $6.1b Core Ground Lease Portfolio Top 10 Markets (% of Gav, count, Rent Coverage’, GLTV4) 3 (92-year w.a. extended lease term} 1. Ma
Slide 21: Growing Customer Adoption
Growing Customer Adoption Diversifying Customer Base 5% 6% Other Public REIT = Global Fund Manager = Family Office = Domestic Fund Manager = Owner/Operator/Developer Increasing Customer Awareness 699 279 2017 2019 2023 Cumulative # of unique sponsors that have been pitched a Safehold ground lease So
Slide 22: Institutional Customers
Gatgho Institutional Customers Safehold's 134 ground leases include 91 unique tenants These tenants include financial sponsors, owner/operators, public companies, sovereign wealth funds, and other institutions NEW ENGAND Bioinerstein DEVELOPMENT Companies Blackstone TusCaxoeGrour @Hickcate SAMSUNG U
Slide 23: Leasehold Liquidity - Institutional Lenders
Leasehold Liquidity - Institutional Lenders Safehold’s 134 ground leases include 55 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 24: 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 25: 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 of the ground lease, we completed an agreement with the leasehold equity sponsor to conve
Slide 26: New Investors: Introduction to Safehold and the Modern Ground Lease
Gatgho New Investors: Introduction to Safehold and the Modern Ground Lease
Slide 27: 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 What is a Ground Lease Ground Lessee / Leaseholder (Safehold'’s Tenant} Building (Safe
Slide 28: 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 29: 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 30: Illustrative Principal and Income Safety
Gatgho Illustrative Principal and Income Safety Principal Safety Risk Illustrative Asset s Backed Security BB (55-60% LTV) BBB (50-55% LTV) A (45-50% LTV) Income Safety Illustrative Safehold Structure Leasehold Value $60m $150k monthly ground rent equals Leasehold / Mortgage of leasehold value (40-7
Slide 31: 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 32: 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 ___________ > . (Lesealnrll] Operating Expenses 4.0 Property NOI $6.0 I | Ground
Slide 33: 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 34: 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 35: Illustrative Growth - Contractual Cash Flow and Inflation Capture
Safehold 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 captu
Slide 36: 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 37: 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 38: Management and Organization
Gatgho Management and Organization
Slide 39: Leadership team and organization structure
Gatgho Safehold benefits from its full-service platform (85 employees) and leadership team with decades of experience in all key functions Jay Sugarman Chairman & CEO Marcos Alvarado President & CIO Organization Structure Brett Asnas Kyle Curtin Chief Financial Officer Chief Administrative Officer D
Slide 40: Appendix
Gatgho Appendix 40
Slide 41: Income Statement
Safehold Income Statement For the three months ended June 30, s ended June 30, 2023 2022 2022 Revenues: Interest income from sales-type leases $58,158 $48,247 $115,220 $91,278 Operating lease income 16,750 16,452 37,651 33,418 Interest income - related party 2,381 - 2,381 - Other income 8,372 185 8,
Slide 42: Balance Sheet
Balance Sheet As of June 30, 2023 As of December 31, 2022 Note: Figures in thousands. 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 Total real estate, n
Slide 43: Portfolio Reconciliation
Portfolio Reconciliation Net investment in Sales-Type Leases Ground Lease receivables Pro-rata interest in Ground Leases held as equity method investments Real estate, net (Operating Leases) Add: Accumulated depreciation Add: Lease intangible assets, net Add: Accumulated amortization Add: Other asse
Slide 44: Earnings Reconciliation
Safehold Earnings Reconciliation For the 12 months For the year ended ended June 30, December 31, 2023 2020 Net income attributable to Safehold Inc. common shareholders $114,684 $59,296 93% Less: Gain on sale of Net Investment in Lease! (55,811) - Add: Merger & Caret related costs and non-recurring
Slide 45: 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 46: Glossary
Glossary Aggregate Cost Basis Aggregate Gross Book Value Annualized Cash Yield Annualized Yield Caret Adjusted Yield Cash Interest Rate Cash Rent Core Ground Lease Portfolio Combined Property Value (CPV) Cost Basis Current Portfolio Economic Yield Effective Interest Rate GAAP Rent Gross Book Value (