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What changed in Safehold Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Safehold Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+525 added−446 removedSource: 10-K (2024-02-13) vs 10-K (2023-02-22)

Top changes in Safehold Inc.'s 2023 10-K

525 paragraphs added · 446 removed · 64 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

14 edited+103 added−57 removed4 unchanged
Biggest changeThe purpose of the Code of Conduct is to promote honest and ethical conduct, compliance with applicable governmental rules and regulations, full, fair, accurate, timely and understandable disclosure in periodic reports, prompt internal reporting of violations of the Code of Conduct and a culture of honesty and accountability.
Biggest changeThe purpose of the Code of Conduct is to promote honest and ethical conduct; full, fair, accurate, timely and understandable disclosure; compliance with applicable governmental laws, rules and regulations; prompt internal reporting of violations of law or the Code of Conduct; accountability for adherence to the Code of Conduct; consistent enforcement of the Code of Conduct; protection for persons reporting any questionable behavior; protection of the Company’s legitimate business interests; and confidentiality of information entrusted to our directors, officers and employees.
The information on our website is not incorporated by reference in this report, and our web address is included only as an inactive textual reference. In addition to this Annual Report on Form 10-K, the Company files quarterly and special reports, proxy statements and other information with the SEC.
The information on our website is not incorporated by reference in this Annual Report on Form 10-K, and our web address is included only as an inactive textual reference. In addition to this Annual Report on Form 10-K, we file quarterly and special reports, proxy statements and other information with the SEC.
The Company will disclose to shareholders material changes to its Code of Conduct, or any waivers for directors or executive officers, if any, within four business days of any such event.
The Company will disclose on its website material changes to its Code of Conduct, or any waivers for directors or executive officers, if any, within four business days of any such event.
In addition to the safety protocols that we instituted in response to the pandemic, we have established emergency procedures that address emergency health and safety situations. 5 Table of Contents Additional Information We maintain a website at www.istar.com .
In addition to the safety protocols that we instituted in response to the COVID pandemic, we have established emergency procedures that address emergency health and safety situations. 8 Table of Contents Additional Information We maintain a website at www.safeholdinc.com .
We also offer our professionals the opportunity to participate in a variety of development programs, including discussions led by outside speakers on topics of interest and a learning management tool that enables employees and their managers to select courses that enhance professional development.
We also offer our professionals the opportunity to participate in a variety of development programs, including discussions led by outside speakers on topics of interest and a learning management tool that enables employees and their managers to select courses that enhance professional development. We maintain a number of health and wellness programs to support the welfare of our people.
Code of Conduct The Company has adopted a code of conduct that sets forth the principles of conduct and ethics to be followed by our directors, officers and employees (the "Code of Conduct").
The Code of Conduct sets forth the principles of conduct and ethics to be followed by our directors, officers and employees.
Through the Company’s corporate website, www.istar.com , the Company makes available free of charge its annual proxy statement, annual reports to shareholders, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.
Through our website, we make available free of charge our annual proxy statement, annual reports to shareholders, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
A copy of the Code of Conduct has been provided to each of our directors, officers and employees, who are required to acknowledge that they have received and will comply with the Code of Conduct.
A copy of the Code of Conduct has been provided to each of our directors, officers and employees, who are required to acknowledge that they have received and will comply with the Code of Conduct. The Code of Conduct is available on the Company’s website at www.safeholdinc.com .
These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions.
Forward-looking statements are included with respect to, among other things, our current business plan, business strategy, portfolio management, prospects and liquidity. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "plan," "may," "should," "will," "would," "will be," "will continue," "will likely result," and similar expressions.
In our recruiting efforts, we generally strive to have a diverse group of candidates to consider for roles. We have designed a compensation structure, including an array of benefits, that we believe is attractive to current and prospective personnel.
We have designed a compensation structure, including an array of benefits, that we believe is attractive to current and prospective personnel.
Important factors that iStar Inc. believes might cause such differences are discussed in the section entitled, "Risk Factors" in Part I, Item 1A of this Form 10-K or otherwise accompany the forward-looking statements contained in this Form 10-K.
Important factors that we believe might cause such differences are discussed in the section entitled, "Risk Factors" in Part I, Item 1A of this Form 10-K or otherwise accompany the forward-looking statements contained in this Form 10-K. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
As of December 31, 2022, there have been no amendments to the Code of Conduct and the Company has not granted any waivers from any provision of the Code of Conduct to any directors or executive officers.
As of December 31, 2023, there have been no amendments to the Code of Conduct and the Company has not granted any waivers from any provision of the Code of Conduct to any directors or executive officers. Human Capital Resources Central to our business strategy is attracting, developing and retaining a talented, diverse and engaged workforce to drive our success.
Substantially all of our employees are full time employees and they are not represented by any collective bargaining agreements. As we have transitioned the focus of our business to growing our Ground Lease platform, we have sought to recruit new talent and provide training to existing employees to support our business strategy.
As we have transitioned the focus of our business to growing our Ground Lease platform, we have sought to recruit new talent and provide training to existing employees to support our business strategy. In our recruiting efforts, we generally strive to have a diverse group of candidates to consider for roles.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-K. Overview iStar Inc.
In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-K. Merger Transaction On August 10, 2022, Safehold Inc. (“Old SAFE”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with iStar Inc.
Removed
Forward-looking statements are included with respect to, among other things, iStar Inc.’s (the “Company’s”) current business plan, including the planned Merger with Safehold Inc. (“SAFE”) and the Spin-Off and related transactions (refer to “Business – Overview” and Note 1 to the consolidated financial statements), business strategy, portfolio management, prospects and liquidity.
Added
(“iStar”), and on March 31, 2023, in accordance with the terms of the Merger Agreement, Old SAFE merged with and into iStar, at which time Old SAFE ceased to exist, and iStar continued as the surviving corporation and changed its name to “Safehold Inc.” (the “Merger”).
Removed
(references to the "Company," "we," "us" or "our" refer to iStar Inc.) finances, invests in and develops real estate and real estate related projects as part of its fully-integrated investment platform. The Company also manages entities focused on ground lease ("Ground Lease") investments.
Added
For accounting purposes, the Merger is treated as a “reverse acquisition” in which iStar is considered the legal acquirer and Old SAFE is considered the accounting acquirer. As a result, the historical financial statements of Old SAFE became the historical financial statements of Safehold Inc.
Removed
The Company has invested over $40 billion over the past two decades and is structured as a real estate investment trust ("REIT") with a diversified portfolio focused on larger assets located in major metropolitan markets.
Added
Unless the context otherwise requires, references to “iStar” refer to iStar prior to the Merger, and references to “we,” “our” and “the Company” refer to the business and operations of Old SAFE and its consolidated subsidiaries prior to the Merger and to Safehold Inc. (formerly known as iStar Inc.) and its consolidated subsidiaries following the consummation of the Merger.
Removed
The Company’s primary reportable business segments are net lease (refer to note 3 to the consolidated financial statements), real estate finance, operating properties and land and development. Merger with Safehold Inc. On August 10, 2022, we entered into an Agreement and Plan of Merger (the “ Merger Agreement ”) with Safehold Inc.
Added
Periods presented prior to the Merger date of March 31, 2023 reflect the operations of Old SAFE and periods presented as of December 31, 2023 represent the financial statements of the Company.
Removed
(“SAFE”) pursuant to which SAFE will merge with and into the Company (the " Merger "), with the Company surviving the Merger and changing its name to Safehold Inc. (“ New SAFE ”).
Added
Additionally, in connection with the Merger, Safehold Operating Partnership LP converted from a Delaware limited partnership into a Delaware limited liability company and changed its name to “Safehold GL Holdings LLC” (“Portfolio Holdings”), with the Company as its managing member. The Company conducts all of its business and owns all of its properties through Portfolio Holdings.
Removed
New SAFE's shares of common stock will trade on the New York Stock Exchange under the symbol “SAFE.” We currently expect that the Merger will close in the first half of 2023. In the Merger and related transactions, each outstanding share of common stock of SAFE will be converted into one share of common stock of New Safe.
Added
In addition, holders of Caret units in Old SAFE’s subsidiary, Caret Ventures LLC (“Caret Ventures”), contributed their interests in Caret Ventures to Portfolio Holdings in return for Caret units issued by Portfolio Holdings.
Removed
Each outstanding share of common stock of the Company will undergo a reverse split and will be converted into a fraction of a share of New Safe common stock based on the number of shares of Safe common stock held by the Company at the time of the reverse split, after giving effect to certain adjustments.
Added
Following the restructuring, 100% of the equity interests in Caret Ventures is held by Portfolio Holdings, and Portfolio Holdings is owned by the Company, management of the Company, employees and former employees of the Company, affiliates of MSD Partners, L.P. (“MSD Partners”) and other outside investors.
Removed
Each outstanding share of preferred stock of the Company will be converted into a cash amount equal to the liquidation preference of the share plus accrued and unpaid dividends to and including the closing date of the Merger. ​ Shortly before the closing of the Merger, the Company intends to separate its remaining legacy non-ground lease assets and businesses into a separate public company (“ Star Holdings ”) by distributing to the Company’s stockholders, on a pro rata basis, the issued and outstanding equity interests of Star Holdings (the “ Spin-Off ”). ​ If the Merger, Spin-Off and related transactions are completed, the Company's business thereafter will be focused on its Ground Lease and Ground Lease-adjacent businesses.
Added
Immediately before the closing of the Merger, iStar separated its remaining legacy non-ground lease assets and businesses, approximately $50.0 million of cash, exclusive of working capital reserves and restricted cash, and approximately 13.5 million shares of Old SAFE common stock into Star Holdings, a Maryland statutory trust (“Star Holdings”), by distributing to iStar’s stockholders, on a pro rata basis, the issued and outstanding equity interests of Star Holdings (the “Spin-Off”).
Removed
Completion of the Merger, Spin-Off and related transactions is subject to a number of conditions, some of which are outside of our control, including, without limitation, approval of the stockholders of each of the Company and SAFE, and there can be no assurance that they will close within our currently anticipated time frame or at all.
Added
Following the Merger, the Company serves as external manager to Star Holdings. 1 Table of Contents Other Merger related transactions ​ On August 10, 2022, iStar entered into an agreement (the “MSD Stock Purchase Agreement”) with MSD Partners pursuant to which MSD Partners agreed to purchase 5,405,406 shares of Old SAFE’s common stock then owned by iStar (the “MSD Stock Purchase”) for an aggregate purchase price of approximately $200 million, or $37.00 per share, payable in cash.
Removed
See note 1 to the consolidated financial statements and "Risk Factors – Risks Related to the Merger and Related Transactions" for more information.
Added
MSD Partners’ rights and obligations under the MSD Stock Purchase Agreement were subsequently assigned to certain of its affiliates. The MSD Stock Purchase closed on March 31, 2023, shortly before the closing of the Merger.
Removed
In addition, the Company has filed a joint proxy 1 Table of Contents statement/prospectus with the Securities and Exchange Commission with respect to the special meeting of the Company's stockholders to consider and approve the Merger. ​ The Company’s primary sources of revenues and earnings in 2022 were rent and reimbursements that tenants pay to lease the Company’s properties, interest that borrowers pay on loans, land development revenue from condo, lot and parcel sales, income from our operating properties, proceeds from asset sales and income from management fees and equity investments.
Added
MSD Partners has the right to designate an observer to the board of directors of the Company, a top-up right on future equity issuances (subject to certain exceptions) and registration rights. MSD Partners is subject to a customary standstill and certain restrictions on sales of its shares of the Company’s common stock.
Removed
As of December 31, 2022, based on our book value, our total investment portfolio has the following property/collateral type characteristics ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Property/Collateral Net Real Estate Operating Land & ​ ​ ​ ​ % of Types ​ Lease ​ Finance ​ Properties ​ Development ​ Corporate ​ Total ​ Total Ground Leases ​ $ 1,302,877 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 1,302,877 74.0 % Land and Development ​ — ​ — ​ — ​ 207,997 ​ — ​ 207,997 11.8 % Multifamily ​ — ​ 39,304 ​ 36,382 ​ — ​ — ​ 75,686 4.3 % Hotel ​ — ​ 12,893 ​ 61,863 ​ — ​ — ​ 74,756 4.2 % Retail ​ — ​ 37,650 ​ 371 ​ 8,784 ​ — ​ 46,805 2.7 % Condominium ​ — ​ 6,665 ​ — ​ 15,233 ​ — ​ 21,898 1.2 % Office ​ ​ — ​ ​ 15,183 ​ ​ — ​ ​ — ​ ​ — ​ ​ 15,183 0.9 % Entertainment / Leisure ​ ​ — ​ — ​ 14,262 ​ — ​ — ​ 14,262 0.8 % Other Property Types ​ — ​ — ​ — ​ — ​ 11 ​ 11 — % Total ​ $ 1,302,877 ​ $ 111,695 ​ $ 112,878 ​ $ 232,014 ​ $ 11 ​ $ 1,759,475 100.0 % Percentage of Total ​ ​ 74% ​ ​ 6% ​ ​ 6% ​ ​ 13% ​ ​ ​ ​ 100% ​ ​ ​ ​ Net Lease : In March 2022, we, through certain subsidiaries of ours and entities managed by us, sold our portfolio of net lease assets for an aggregate gross sales price of $3.07 billion (the “Net Lease Sale”).
Added
On August 10, 2022, MSD Partners also agreed to purchase 100,000 Caret units (refer to Note 12 to the consolidated financial statements) from the Company for an aggregate purchase price of $20.0 million (the “MSD Caret Purchase”).
Removed
Refer also to Note 3 to the consolidated financial statements. ​ The portfolio sold consisted of office, entertainment and industrial properties located in the United States comprising approximately 18.3 million square feet. It included assets wholly-owned by us and assets owned by two joint ventures managed by us and in which we owned 51.9% interests.
Added
MSD Partners received a credit against their purchase price for Caret units equal to the amount they would have received had they held Caret units at the time of a December 2022 distribution to other Caret unit holders, which was equal to $0.6 million.
Removed
At the time of the sale, the portfolio was encumbered by an aggregate of $702.0 million of mortgage indebtedness, including indebtedness of equity method investments, which was repaid with proceeds from the sale.
Added
MSD Partners’ rights and obligations under the purchase agreement were subsequently assigned to certain of its affiliates.
Removed
After repayment of the mortgage indebtedness and prepayment penalties, repayment of our Senior Term Loan (refer to Note 10 to the consolidated financial statements), payments to terminate derivative contracts, payments to joint venture partners, and payments of promotes, transaction expenses and amounts due under employee incentive plans, we retained net cash proceeds of $1.2 billion from the transaction.
Added
The closing of the MSD Caret Purchase took place in conjunction with the closing of the Merger on March 31, 2023. ​ Star Holdings was capitalized in part with an 8.0%, four-year term loan from the Company having an initial principal amount of $115.0 million, as well as SOFR plus 3.00% bank debt with an initial principal balance of $140.0 million from Morgan Stanley Bank, N.A. which is secured by approximately 13.5 million shares of the Company.
Removed
Two net lease properties were not included in the sale but were sold to other third parties in the first quarter 2022. Our net lease assets associated with our Ground Lease businesses were not included in the sale.
Added
In connection with the Spin-Off, Safehold Management Services Inc. (“SpinCo Manager”), a Delaware corporation and a subsidiary of the Company, entered into a management agreement with Star Holdings effective as of March 31, 2023, pursuant to which SpinCo Manager will continue to operate and pursue the orderly monetization of Star Holding’s assets.
Removed
Prior to the Net Lease Sale, our net lease business created stable cash flows through long-term net leases primarily to single tenants on our properties. We targeted mission-critical facilities leased on a long-term basis to tenants, offering structured solutions that combined our capabilities in underwriting, lease structuring, asset management and build-to-suit construction.
Added
Star Holdings will pay SpinCo Manager an annual management fee of $25.0 million in year one, $15.0 million in year two, $10.0 million in year three and $5.0 million in year four and 2.0% of the gross book value of Star Holdings’ assets, excluding shares of the Company’s common stock, for each annual term thereafter.
Removed
Leases typically provide for expenses at the facility to be paid by the tenant on a triple net lease basis. Under a typical net lease agreement, the tenant agrees to pay a base monthly operating lease payment and most or all of the facility operating expenses (including taxes, utilities, maintenance and insurance).
Added
The Company and Star Holdings also entered into a governance agreement that places certain restrictions on the transfer and voting of the shares of the Company owned by Star Holdings, and a registration rights agreement under which the Company agreed to register such shares for resale in accordance with applicable securities laws. ​ Business We are a publicly-traded company that operates our business through one reportable segment by acquiring, managing and capitalizing ground leases.
Removed
After the Net Lease Sale, the net lease segment includes our Ground Lease investments made primarily through Safehold Inc. ("SAFE"), a publicly traded REIT focused exclusively on Ground Leases that we launched in 2017 and manage pursuant to a management agreement, and our Ground Lease adjacent businesses.
Added
We believe that our business has characteristics comparable to a high-grade, fixed income investment business, but with certain unique advantages.
Removed
As of December 31, 2022, we owned approximately 54.3% of SAFE’s outstanding common stock. Real Estate Finance : The real estate finance portfolio is comprised of leasehold loans (including leasehold loans to SAFE’s tenants) and senior and subordinated loans to business entities and may be either secured or unsecured.
Added
Relative to alternative fixed income investments generally, our ground leases typically benefit from built-in growth derived from contractual base rent increases (either at a specified percentage or consumer price index ("CPI") based, or both), and the opportunity to realize value from residual rights to take ownership of the buildings and other improvements on our land at no additional cost to us.
Removed
The 2 Table of Contents Company’s loan portfolio includes whole loans and loan participations. The Company’s real estate loans may be either fixed-rate or variable-rate and are structured to meet the specific financing needs of borrowers.
Added
Our CPI lookbacks are generally capped between 3.0% - 3.5% and generally start between years 11 and 21 of the lease term. In the event cumulative inflation growth for the lookback period exceeds the cap, these rent adjustments may not keep up fully with changes in inflation.
Removed
Operating Properties : The operating properties portfolio is comprised of commercial and residential properties, which represent a pool of assets across a range of geographies and property types. The Company generally seeks to reposition or redevelop its transitional properties with the objective of maximizing their value through the infusion of capital and/or concentrated asset management efforts.
Added
We believe that these features offer us the opportunity to realize superior risk-adjusted total returns when compared to certain alternative highly-rated investments.
Removed
The commercial properties within this portfolio include hotel, multifamily, entertainment/leisure, retail and other property types. The residential properties within this portfolio are comprised of single-family homes that the Company intends to sell through retail channels.
Added
Ground leases generally represent the ownership of land underlying commercial real estate projects that is net leased on a long-term basis (base terms are typically 30 to 99 years, often with tenant renewal options) by the fee owner of the land (landlord) to the owners/operators of the real estate projects built thereon ("Ground Lease"), or what we refer to as a Safehold TM .
Removed
Land & Development : The land and development portfolio is primarily comprised of land entitled for master planned communities and waterfront and urban infill land parcels located throughout the United States. Master planned communities represent large-scale residential projects that the Company will entitle, plan and/or develop and may sell through retail channels to homebuilders or in bulk ("MPCs").
Added
The property is generally leased on a triple net basis with the tenant generally responsible for taxes, maintenance and insurance as well as all operating costs and capital expenditures.
Removed
The communities also typically have a smaller portion of their land reserved for future commercial development. Waterfront parcels are generally entitled for residential projects and urban infill parcels are generally entitled for mixed-use projects.
Added
Ground Leases typically provide that at the end of the lease term or upon tenant default and the termination of the Ground Lease upon such default, the land, building and all improvements revert to the landlord.
Removed
The Company may develop these properties itself, or in partnership with commercial real estate developers, or may sell the properties. ​ Investment Strategy Throughout our history, we have focused on providing capital to the commercial real estate sector in a differentiated way that emphasizes custom-tailored solutions over commoditized products.
Added
We have become the industry leader in Ground Leases by 2 Table of Contents demonstrating the value of the product to real estate investors, owners, operators and developers and expanding their use throughout major metropolitan areas. We have a portfolio of properties diversified by property type and region.
Removed
We have adjusted the allocation of our capital and resources from time to time based on market conditions. Our Ground Lease strategy is the most recent example of our approach.
Added
Our portfolio is comprised of Ground Leases and one master lease (relating to five hotel assets that we refer to as our “Park Hotels Portfolio”) that provide for contractual periodic rent escalations and in some cases percentage rent participations in gross revenues generated at the relevant properties.
Removed
We believe that investment and financing opportunities in the Ground Lease sector currently offer more attractive risk adjusted returns than other investment opportunities, and should enable us to benefit from the unique insights and competitive advantages we have gained through SAFE.
Added
We have chosen to focus on Ground Leases because we believe they meet an important need in the real estate capital markets for our customers.
Removed
We have been actively transitioning our portfolio to be primarily focused on Ground Lease and Ground Lease adjacent investments, held directly and through our investment in SAFE.
Added
We also believe Ground Leases offer a unique combination of safety, income growth and the potential for capital appreciation for investors for the following reasons: High Quality Long-Term Cash Flow : We believe that a Ground Lease represents a safe position in a property’s capital structure.
Removed
In furtherance of this objective, we completed the Net Lease Sale in March 2022 and have significantly reduced the level of our "legacy assets," which refer primarily to properties that we took back from defaulting borrowers in the financial crisis.
Added
The combined value of the land and buildings and improvements thereon subject to a Ground Lease (the "Combined Property Value") typically significantly exceeds the Ground Lease landlord’s investment in the Ground Lease; therefore, even if the landlord takes over the property following a tenant default or upon expiration of the Ground Lease, the landlord is reasonably likely to recover substantially all of its Ground Lease investment, and possibly amounts in excess of its investment, depending upon prevailing market conditions.
Removed
As we sell these assets, we expect to use the net proceeds primarily to make additional investments in our Ground Lease business, to repay indebtedness and for general corporate purposes. Financing Strategy We use leverage to enhance our return on assets.
Added
Additionally, the typical structure of a Ground Lease provides the landlord with a residual right to regain possession of its land and take ownership of the buildings and improvements thereon upon a tenant default. The landlord’s residual right provides a strong incentive for a Ground Lease tenant or its leasehold lender to make the required Ground Lease rent payments.
Removed
As of December 31, 2022 our principal financing sources are unsecured bonds issued in capital markets transactions and trust preferred securities.
Added
Income Growth : Ground Leases typically provide growing income streams through contractual base rent escalators that may compound over the duration of the lease. These rent escalators may be based on fixed increases, CPI or a combination thereof, and may also include a participation in the gross revenues of the property.
Removed
Beginning in April 2022 and continuing through September 2022, we completed separate, privately-negotiated transactions with holders of our 3.125% convertible notes in which the noteholders exchanged their convertible notes with us for newly issued shares of our common stock and cash (refer to Note 10 to the consolidated financial statements).
Added
We believe that this growth in the lease rate over time can mitigate the effects of inflation and capture anticipated increases in land values over time, as well as serving as a basis for growing our dividend. Opportunity for Capital Appreciation: The opportunity for capital appreciation comes in two forms.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

30 edited+237 added−168 removed2 unchanged
Biggest changeSAFE recognized no percentage rent from its Park Hotels Portfolio in 2022 in respect of 2021 hotel operating performance ; 10 Table of Contents ● a decline in real estate transaction activity and constrained credit conditions which could adversely affect our ability to monetize legacy assets and scale SAFE’s portfolio as its Manager; ● the negative impact on our earnings from increased allowances against potential future losses and impairment charges and placing certain assets on accrual status; ● deteriorations in our financial condition, if they were to cause us to be unable to satisfy financial covenants in our debt obligations, which could trigger a default and acceleration of outstanding borrowings; ● the negative impacts on our operations if the health of a significant number of our employees were to be impacted by the pandemic; and ● difficulty accessing debt and equity capital on attractive terms, or at all, to fund business operations or address maturing liabilities.
Biggest changeWe recognized $2.8 million of percentage rent from our Park Hotels Portfolio in 2023 in respect of 2022 operating performance versus no percentage rent in 2022 in respect of 2021 hotel operating performance or 2021 in respect of 2020 hotel performance during the peak of the COVID-19 pandemic; ● deteriorations in our financial performance which could cause us to be unable to satisfy debt covenants, including cash flow coverage tests in our revolving credit facility, which could trigger a default and acceleration of outstanding borrowings; ● difficulty accessing debt and equity capital on attractive terms, or at all, to fund business operations, growth or address maturing liabilities; and ● delays in the supply of products or services that are needed for our and our tenants’ efficient operations. ​ The after-effects of the COVID-19 pandemic on certain sectors of the economy and commercial real estate markets remain uncertain.
We also have duties as the manager of SAFE which may come in conflict with our duties to our shareholders from time to time.
We also have duties as the manager of Star Holdings which may come in conflict with our duties to our shareholders from time to time.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of any duty owed by us or by any director or officer or other employee to us or to our shareholders; (c) any action asserting a claim against us or any director or officer or other employee arising pursuant to any provision of the Maryland General Corporation Law or our charter or bylaws; or (d) any action asserting a claim against us or any director or officer or other employee that is governed by the internal affairs doctrine shall be the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division.
Additionally, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of any duty owed by us or by any director or officer or other employee to us or to our shareholders; (iii) any action asserting a claim against us or any director or officer or other employee arising pursuant to any provision of the MGCL or our charter or bylaws; or (iv) any action asserting a claim against us or any director or officer or other employee that is governed by the internal affairs doctrine shall be the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division.
Our directors and executive officers have duties to our company under applicable Maryland law, and our executive officers and our directors who are also directors or officers of SAFE have duties to SAFE under applicable Maryland law. Those duties may come in conflict from time to time.
Our executive officers have duties to our company under applicable Maryland law, and our executive officers who are also officers of Star Holdings have duties to Star Holdings under applicable Maryland law. Those duties may come in conflict from time to time.
Transactions between iStar and SAFE are subject to certain approvals of our independent directors; however, there can be no assurance that such approval will be successful in achieving terms and conditions as favorable to us as would be available from a third party.
Transactions between Star Holdings and us are subject to certain approvals of our independent directors; however, there can be no assurance that such approval will be successful in achieving terms and conditions as favorable to us as would be available from a third party. Certain of our executive officers are also Star Holdings’ executive officers.
We are generally required to take certain amounts into income no later than the time such amounts are reflected on our financial statements.
In addition, we may be required to take certain amounts into income no later than the time such amounts are reflected on our financial statements.
We believe that we have been organized and operated in a manner so as to qualify for taxation as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 1998.
We believe we have been organized and operated and intend to continue to operate in a manner that will enable us to qualify as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 1998.
Even if we qualify as a REIT for U.S. federal income tax purposes, we will be required to pay some U.S. federal, state, local and non-U.S. taxes on our income and property, including taxes on any undistributed income, taxes on income from certain activities conducted as a result of foreclosures, and property and transfer taxes.
Even if we qualify as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, taxes on income from some activities conducted as a result of a foreclosure, and state or local income, franchise, property and transfer taxes.
Certain provisions of Maryland law and our organizational documents could inhibit changes in control of our company that might involve a premium price for our common stock or that our shareholders otherwise believe to be in their best interest, including, among others, the following: ● Pursuant to the Maryland General Corporation Law, or the MGCL, our board of directors has by resolution exempted business combinations between us and any other person from the business combination provisions of the MGCL, and our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock.
Certain provisions of Maryland law, including the Maryland General Corporation Law (the “MGCL”), and our organizational documents could inhibit changes in control of our company that might involve a premium price for our common stock or that our shareholders otherwise believe to be in their best interest, including, among others, the following: ​ ● Although our board of directors has by resolution exempted business combinations between us and any other person from the business combination provisions of the MGCL, and our bylaws exempt from the control share acquisition statute any and all acquisitions by any person of shares of our stock, there can be no assurance that these exemptions will not be amended or eliminated at any time in the future; ● Our ability as managing member of Portfolio Holdings to make certain amendments to the Portfolio Holdings LLCA is limited.
However, there can be no assurance that these exemptions will not be amended or eliminated at any time in the future. ● Our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding capital stock. ● Our board of directors, without shareholder approval, has the power under our charter to amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue, to authorize us to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock into one or more classes or series of stock and set the terms of such newly classified or reclassified shares.
See “Risks Related to Our Common Stock—The Portfolio Holdings LLCA contains provisions that may delay, defer or prevent a change in control ;” 22 Table of Contents ● Our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of all classes and series of our capital stock or more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock; and ● Our board of directors, without stockholder approval, has the power under our charter to amend our charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue, to authorize us to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock into one or more classes or series of stock and set the terms of such newly classified or reclassified shares.
As a result, our board of directors could establish a class or series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our shareholders otherwise believe to be in their best interest. 16 Table of Contents Our Investment Company Act exemption limits our investment discretion and loss of the exemption would adversely affect us.
As a result, our board of directors could establish a class or series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or that our shareholders otherwise believe to be in their best interest. ​ These provisions may frustrate or prevent attempts by stockholders to cause a change in control of our company or to replace members of our board of directors.
Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis. Our ability to satisfy these asset tests depends upon our analysis of the characterization of our assets for U.S. federal income tax purposes and fair market values of our assets.
Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis.
The risks set forth below speak only as of the date of this report and the Company disclaims any duty to update them except as required by law. For purposes of these risk factors, the terms "our Company," "we," "our" and "us" refer to iStar Inc. and its consolidated subsidiaries, unless the context indicates otherwise.
The risks set forth below speak only as of the date of this report and the Company disclaims any duty to update them except as required by law.
If we were to fail to qualify as a REIT for any taxable year, we would not be allowed a deduction for distributions to our shareholders in computing our net taxable income and would be subject to U.S. federal income tax on our net taxable income at regular corporate rates and applicable state and local taxes.
If we fail to qualify as a REIT in any taxable year, and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income at the regular corporate rate, and distributions to our shareholders would not be deductible by us in determining our taxable income.
Potential conflicts of interest in our relationship with SAFE include, without limitation: conflicts arising from the enforcement of agreements between us and SAFE; conflicts in the amount of time that our officers and employees will spend on SAFE’s affairs vs. our other affairs; conflicts in determining whether to seek reimbursement from SAFE of certain expenses we incur on its behalf; conflicts in transactions that we pursue with SAFE; conflicts between the interests of our shareholders and members of our management who hold SAFE common stock and other equity interests in SAFE such as grants of interests in a subsidiary of SAFE’s operating partnership (called Caret units) that will entitle them to participate in distributions arising from certain sales and financings of SAFE’s Ground Leases; and conflicts in allocating investments to, and managing an investment fund (see Ground Lease Plus Fund below) in which we have invested, and SAFE may invest, as discussed further below.
Potential conflicts of interest in our relationship with Star Holdings include, without limitation: conflicts arising from the enforcement of agreements between us and Star Holdings; conflicts in the amount of time that our officers and employees will spend on Star Holdings’ affairs vs. our other affairs; conflicts in determining whether to seek reimbursement from Star Holdings of certain expenses we incur on its behalf; and conflicts between the interests of our shareholders and members of our management who hold Star Holdings common stock.
Our borrowing costs and our access to the debt capital markets depend significantly on our credit ratings. Our unsecured corporate credit ratings from major national credit rating agencies are currently below investment grade.
Our unsecured corporate credit ratings from major national credit rating agencies are currently investment grade.
In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
In addition, we will be subject to U.S. federal income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income (including net capital gains) and will be subject to a 4% nondeductible excise tax on the amount by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws.
SAFE’s SEC filings also include certifications and disclosure regarding internal controls over financial reporting and disclosure controls. ​ 8 Table of Contents There are various potential conflicts of interest in our relationship with SAFE, which could result in decisions that are not in the best interest of our shareholders.
There are various potential conflicts of interest in our relationship with Star Holdings , which could result in decisions that are not in the best interest of our shareholders.
Our business and the growth of SAFE were adversely affected by the COVID-19 pandemic and could be adversely affected in the future by the outbreak of future COVID-19 variants or other highly infectious or contagious diseases.
Our business and growth prospects could be adversely affected by future epidemics, pandemics or other health crises, as they were during the peak of the COVID-19 pandemic. During its peak, the COVID-19 pandemic adversely affected our growth.
A change in these policies could have a material adverse effect on our financial performance, liquidity and the market price of our common stock. Certain provisions of Maryland law and our organizational documents could inhibit changes in control of our company.
Certain provisions of Maryland law and our organizational documents could inhibit changes in control of our company.
This forum selection provision may limit the ability of shareholders of our company to obtain a judicial forum that they find favorable for disputes with our company or our directors, officers, employees, if any, or other shareholders. Tax Risks Related to Ownership of Our Shares We would be subject to adverse consequences if we fail to qualify as a REIT.
These provisions of our organizational documents may limit shareholder recourse for actions of our present and former directors and executive officers and limit their ability to obtain a judicial forum that they find favorable for disputes with our company or our directors, officers, employees, if any, or other shareholders.
The fair market values of certain of our assets are not susceptible to a precise determination.
Our ability to satisfy these asset tests depends upon the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals.
Any of the foregoing could have a material adverse effect on our business, liquidity and the market price of our common stock. We utilize derivative instruments to hedge risk, which may adversely affect our borrowing cost and expose us to other risks.
Any downgrade in our credit ratings will increase our borrowing costs under our credit facilities and could have a material adverse effect on our ability to raise capital in the debt capital markets, which could in turn have a material adverse effect on our business, liquidity and the market price of our common stock.
Our qualification as a REIT, however, has depended and will continue to depend on our ability to meet various requirements concerning, among other things, the ownership of our outstanding stock, the nature of our assets, the sources of our income and the amount of our distributions to our shareholders.
To qualify as a REIT, we must meet, on an ongoing basis, various tests regarding the nature and diversification of our assets and our income, the ownership of our outstanding shares, and the amount of our distributions.
To qualify as a REIT, we generally must distribute to our shareholders at least 90% of our net taxable income, excluding net capital gains each year, and we will be subject to U.S. federal income tax, as well as applicable state and local taxes, to the extent that we distribute less than 100% of our net taxable income each year.
In order to qualify as a REIT, we must distribute to our shareholders, on an annual basis, at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains.
Our success depends on our ability to retain our senior management and the other key members of our management team and recruit additional qualified personnel. We rely in part on equity compensation to retain and incentivize our personnel.
The success of our business depends, in part, on the leadership and performance of our executive management team and key employees. Our ability to attract, retain and develop talented employees, and develop talent internally, could impact our future performance.
Joint venture and other investments we hold or may make in the future may not provide us with full control. We also hold investments in the Ground Lease Plus Fund and a loan fund (refer to Note 8 to the consolidated financial statements) and certain funds and limited partnerships managed by third parties.
We hold certain of our Ground Leases through ventures owned by us and a third party, and we may co-invest in the future with third parties through partnerships, joint ventures or other entities.
In order to qualify as a REIT and avoid the payment of income and excise taxes, we may need to borrow funds or take other actions to meet our REIT distribution requirements for the taxable year in which the phantom income is recognized.
Furthermore, if we fail to qualify or maintain our qualification as a REIT, we no longer would be required to distribute substantially all of our net taxable income to our shareholders. The REIT distribution requirements could require us to borrow funds or take other actions that may be disadvantageous to our shareholders.
There may be instances where we are unable to find a purchaser or lessee for the improvements, in which case we will be subject to the risks of owning operating properties.
We may directly own one or more commercial properties, which will expose us to the risks of ownership of operating properties. There may be instances where we take ownership of a commercial property for a period of time prior to the separating it into fee and leasehold interests.
Future outbreaks of COVID-19 variants or another pandemic could adversely affect us and SAFE due to, among other factors: ● the impact of mandated or voluntary closures, reduced economic activity, supply chain constraints and other effects on customers' ability to meet their obligations to us and SAFE; ● the adverse impact on SAFE’s hotel Ground Leases, which accounted for approximately 11.9% of SAFE’s total revenues in 2022, including percentage rent from certain properties.
Epidemics, pandemics or other health crises, including a resurgence of the COVID-19 pandemic could adversely affect us due to, among other factors: ● closures of, or other operational issues at, one or more of our properties resulting from government or tenant action; ● deteriorations in our tenants’ financial condition and access to capital which could cause one or more of our tenants to be unable to meet their Ground Lease obligations to us in full, or at all; ● a negative impact on the travel industry, and as a result, the hotel industry, which could adversely affect our hotel assets, which accounted for approximately 10.3%, 11.9% and 14.4% of our total revenues for the years ended December 31, 2023, 2022 and 2021, respectively, including percentage rent; ● the impact on our percentage rent revenues, all of which are based on operating performance at our hotel properties.
Removed
Risks Related to the Merger and Related Transactions The Merger and related transactions may not be completed on the terms or timeline currently contemplated, or at all.
Added
For purposes of these risk factors, the terms "our Company," "we," "our" and "us" refer to Safehold Inc. and its consolidated subsidiaries, unless the context indicates otherwise. ​ 9 Table of Contents Summary Risk Factors – ● The market for Ground Lease transactions and the availability of investment opportunities may not meet our growth objectives. ● Our operating performance and the market value of our properties are subject to risks associated with real estate assets. ● The rental payments under our leases may not keep up with changes in market value and inflation. ● We may be unable to renew expiring Ground Leases, re-lease the land or sell the properties on favorable terms or at all. ● Counterparty, geographic and industry concentrations may expose us to financial credit risk. ● A lack of recourse to creditworthy counterparties may adversely affect us and our tenants. ● Percentage rent payable under our master lease relating to the Park Hotels Portfolio is calculated on an aggregate portfolio-wide basis. ● Certain tenant rights under our Ground Leases may limit the value and the UCA we are able to realize upon lease expiration, sale of our land and Ground Leases or other events. ● We rely on Property NOI as reported to us by our tenants. ● Our estimates of Ground Rent Coverage for properties in development or transition, or for which we do not receive current tenant financial information, may prove to be incorrect. ● Our estimates of Combined Property Value are based on various assumptions and information supplied to us by our tenants, and accordingly may not be indicative of actual values. ● There can be no assurance that we will realize any incremental value from the UCA in our owned residual portfolio or that the market price of our common stock will reflect any value attributable thereto. ● Ground Leases with developers expose us to risks associated with property development and redevelopment that could materially and adversely affect us. ● We may be materially and adversely affected by the exercise of leasehold mortgagee protections. ● We are subject to the risk of bankruptcy of our tenants. ● We may directly own one or more commercial properties, which will expose us to the risks of ownership of operating properties. ● Competition may adversely affect our ability to acquire and originate investments. ● Cybersecurity risk and cyber incidents may adversely affect our business. ● Our business and growth prospects could be adversely affected by future epidemics, pandemics or other health crises, as they were during the peak of the COVID-19 pandemic. ● Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not accurately reflect the current market value of the properties and may decline materially in future periods. ● Our success depends in part on our ability to attract, retain and develop talented employees, and our failure to do so, including the loss of any of our key employees, could adversely impact our business. ● We are party to several agreements with Star Holdings, and may be unable to collect amounts to which we are contractually entitled, which could negatively affect our performance, financial condition, results of operations and cash flow. ● Star Holdings owns a significant amount of our common stock, all of which serves as collateral for a margin loan. 10 Table of Contents ● The concentration of our voting power may adversely affect the ability of investors to influence our policies. ● There are various potential conflicts of interest in our relationship with Star Holdings, which could result in decisions that are not in the best interest of our shareholders. ● Our management agreement with Star Holdings and other effects from the Spin-Off could distract management time and attention and give rise to disputes or other unfavorable effects, which could materially and adversely affect our business, financial position or results of operations. ● Our debt obligations, which include the substantial amount of indebtedness we assumed in connection with the Merger, will reduce cash available for distribution and expose us to the risk of default. ● Our failure to hedge interest rates effectively could materially and adversely affect us. ● Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on partners’ or co-venturers’ financial position and liquidity and disputes between us and our co-venturers. ● Our depreciation expenses are expected to be limited for financial and tax reporting purposes, with the result that we will be highly dependent on external capital sources to fund our growth. ● Our credit ratings will impact our borrowing costs and our access to debt capital markets. ● We are a holding company and will rely on funds from Portfolio Holdings to pay our obligations and distributions to our shareholders. ● Certain provisions of Maryland law and our organizational documents could inhibit changes in control of our company. ● Certain provisions of our organizational documents limit shareholder recourse and access to judicial fora. ● Cash available for distribution may not be sufficient to make distributions to our shareholders at expected levels, or at all. ● The availability of shares for future sale could adversely affect the market price of our common stock. ● Distributions to holders of Caret units will reduce distributions to us upon certain transactions, and sales of additional Caret units may dilute the economic interests of our common stockholders. ● The changes to the Caret program in connection with the Merger may fail to improve the recognition of SAFE’s two distinct components of value by market participants. ● The terms of Caret units could result in conflicts of interest between holders of our common stock and holders of Caret units.
Removed
The completion of the Merger and related transactions are subject to certain conditions, including: (i) the approval of SAFE’s stockholders, (ii) the approval of the Company’s stockholders, (iii) completion of the spin-off, (iv) the approval of the shares of New SAFE common stock to be issued in the Merger for listing on the NYSE, (v) the absence of any temporary restraining order, injunction or other order of any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the reverse stock split or the Merger, (vi) generation of certain cash proceeds and repayment of the Company’s senior unsecured notes and preferred stock, (vii) the receipt of certain tax opinions by the Company and SAFE that the Merger will qualify as a reorganization under the Internal Revenue Code and that the Company and SAFE each qualifies as a REIT for federal income tax purposes, (viii) the accuracy of certain representations and warranties of the Company and SAFE contained in the Merger agreement and the compliance by the parties with the covenants contained in the Merger agreement (subject to customary materiality qualifiers), and (ix) certain other conditions specified in the Merger agreement.
Added
Our management’s ownership of Caret units creates potential conflicts of interest. ● The Portfolio Holdings LLCA sets forth certain limitations on our ability to make changes to such agreement that could be beneficial to us and our stockholders without the consent of certain of the Caret unitholders. ● The Portfolio Holdings LLCA contains provisions that may delay, defer or prevent a change in control. ● Future issuances of debt or preferred equity securities could adversely affect our common shareholders and result in conflicts of interest. ● Following the Merger and the Spin-Off, the Company may not continue to pay dividends at or above the rate previously paid by us or Old SAFE. ● Our failure to remain qualified as a REIT would subject us to taxes, which would reduce the amount of cash available for distribution to our shareholders. ● The REIT distribution requirements could require us to borrow funds or take other actions that may be disadvantageous to our shareholders. ● Even if we qualify as a REIT, we may incur tax liabilities that reduce our cash flow. ​ 11 Table of Contents Risks Related to Our Portfolio and Our Business The market for Ground Lease transactions and the availability of investment opportunities may not meet our growth objectives.
Removed
The previously announced proposed sale of shares of SAFE common stock by the Company to MSD Partners is also subject to certain closing conditions and if it did not close for any reason, the Company would have to identify new sources of funds in order to satisfy its obligations under the Merger Agreement that the Company repay its senior unsecured notes and cash out its preferred stock in the Merger.
Added
The achievement of our investment objectives depends, in part, on our ability to continue to grow our portfolio. We cannot assure you that the market for Ground Leases will enable us to meet our growth objectives. Potential tenants may prefer to own the land underlying the improvements they intend to develop, rehabilitate or own.
Removed
Neither the Company nor SAFE can provide assurances that the Merger and related transactions will be consummated on the terms or timeline currently contemplated, or at all. ​ Failure to complete the Merger and related transactions could adversely affect the stock prices and the future business and financial results of the Company and SAFE.
Added
Negative publicity about the experience of tenants with non-Safehold Ground Leases may also discourage potential tenants. In addition, increases in interest rates have and may continue to result in a reduction in the availability or an increase in costs of leasehold financing, which is critical to the growth of a robust Ground Lease market.
Removed
If the Merger and related transactions are not completed, the ongoing businesses of the Company or SAFE may be adversely affected and the Company and SAFE will be subject to numerous risks, including the following: ​ ● upon termination of the Merger Agreement under specified circumstances, a termination fee of $63 million may be payable by either the Company or SAFE; ● each of the Company and SAFE having to pay substantial costs relating to the Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees and integration preparation costs that have already been incurred or will continue to be incurred until the closing of the Merger; 6 Table of Contents ● the management of each of the Company and SAFE focusing on the Merger instead of on pursuing other opportunities that could be beneficial to the companies, in each case, without realizing any of the benefits of having the Merger completed; and ● reputational harm due to the adverse perception of any failure to successfully complete the Merger. ​ If the Merger and related transactions are not completed, neither the Company nor SAFE can assure their respective stockholders that these risks will not materialize or will not materially affect the business, financial results and stock prices of either the Company or SAFE. ​ SAFE will have the option to internalize the Company's management if the Merger has not occurred by the outside date under the Merger Agreement.
Added
These and other factors outside our control may materially adversely affect the market for our leases and our ability to grow and meet our investment objectives. Our operating performance and the market value of our properties are subject to risks associated with real estate assets.
Removed
If the Merger Agreement is terminated because the Merger has not occurred by September 30, 2023, SAFE will have the option under certain circumstances to terminate the existing external management agreement and internalize the Company's management, which may adversely affect the Company.
Added
Real estate investments are subject to various risks and fluctuations and cycles in value and demand, many of which are beyond our control. Certain events may adversely affect our operating results and decrease cash available for distributions to our shareholders, as well as the market value of our properties.
Removed
If SAFE exercises its option under the Merger agreement to become internalized, it must pay the Company $100.0 million, of which up to $60.0 million may be paid in cash, at SAFE’s discretion, with the remainder being paid in shares of SAFE common stock, which is less than the consideration that the Company would receive pursuant to the terms of the Merger.
Added
These events include, but are not limited to: ● adverse changes in international, national, regional or local economic and demographic conditions; ● adverse changes in the financial position or liquidity of tenants and potential buyers of properties; ● competition from other real estate investors with significant capital, including real estate operating companies, other publicly traded REITs, institutional investment funds, banks, insurance companies and individuals; ● potential liability under environmental laws as an owner of real property; ● our tenants’ failures to maintain adequate insurance on their properties as is typically required by our leases and the inability to insure against certain events, including acts of God; and ● changes in, and changes in enforcement of, laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning and tax laws and governmental fiscal policies.
Removed
If SAFE exercises this option, the Company would become externally-managed by SAFE pursuant to a management agreement that SAFE and the Company have agreed to negotiate in good faith.
Added
In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that such events may occur or have occurred, could result in a general decline in attractive investment opportunities, the availability of financing for buyers and lessees of our properties or an increased incidence of defaults under our existing leases.
Removed
These changes in the Company's management structure may adversely affect the Company and the market value of its securities. ​ The Merger Agreement contains provisions that could discourage a potential competing acquirer of either the Company or SAFE or could result in any competing proposal being at a lower price than it might otherwise be.
Added
As a result of the foregoing, there can be no assurance that we can achieve our investment objectives. The rental payments under our leases may not keep up with changes in market value and inflation. The leases at most of our properties provide for rental payments that are CPI-Linked or fixed with future CPI adjustments.
Removed
The Merger Agreement contains provisions that, subject to limited exceptions, restrict the ability of each of the Company and SAFE to, directly or indirectly, initiate, solicit, propose, knowingly encourage or facilitate competing third-party proposals to effect, among other things, a merger, reorganization, share exchange, consolidation or the sale of 15% or more of the stock or consolidated net revenues, net income or total assets of the Company or SAFE.
Added
Many of our Ground Leases include a periodic rent increase based on prior years’ cumulative CPI growth, with the initial lookback year generally starting between years 11 and 21 of the lease term. These CPI lookbacks are generally capped between 3.0% - 3.5%.
Removed
In addition, either the Company or SAFE generally has an opportunity to offer to modify the terms of the Merger Agreement in response to any competing “superior proposal” (as defined in the Merger Agreement) that may be made to the other party before the special committee of the boards of directors of the Company or SAFE, as the case may be, may withdraw or modify its recommendation in response to such superior proposal or terminate the Merger Agreement to enter into such superior proposal.
Added
In the event cumulative inflation growth for the lookback period exceeds the cap, these rent adjustments may not keep up fully with changes in inflation. They may also not keep up with increases in market rental rates.
Removed
In some circumstances, one of the parties will be required to pay a substantial termination fee to the other party. ​ These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the Company or SAFE from considering or proposing such an acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than that market value proposed to be received or realized in the Merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the Merger Agreement.
Added
As a result, we may not capture the full value of the land underlying our leases at given points in time or the UCA at lease expiration.
Removed
In addition, the Company's significant ownership interest and voting power in SAFE could discourage a potential competing acquirer for SAFE. ​ The pendency of the Merger and related transactions could adversely affect the business and operations of the Company and SAFE.
Added
Future leases that we enter into are likely to contain similar or other limitations on rent increases, which may limit the appreciation in value of our land, our net asset value and our UCA. We may be unable to renew expiring Ground Leases, re-lease the land or sell the properties on favorable terms or at all.
Removed
In connection with the pending Merger and related transactions, some tenants, vendors or other counterparties of each of the Company and SAFE may delay or defer decisions, which could adversely affect the revenues, earnings, funds from operations, cash flows and expenses of the Company and SAFE, regardless of whether the Merger is completed.
Added
Above-market lease rates at some of the properties in our portfolio at the time of any Ground Lease renewal or re-lease may force us to renew some expiring leases or re-lease properties at lower rates.
Removed
Similarly, current and prospective employees of the Company and New SAFE may experience uncertainty about their future roles with New SAFE following the Merger and related transactions, which may materially adversely affect the ability of the Company to attract and retain key personnel during the pendency of the Merger and related transactions.
Added
We cannot assure you existing tenants will exercise any extension options or that our expiring leases will be renewed or that our properties will be re-leased at lease rates equal to or above their then weighted average lease rates.
Removed
In addition, due to interim operating covenants in the Merger agreement, each of the Company and SAFE may be unable (without the other party’s prior written consent), during the pendency of the Merger and related transactions, to pursue strategic transactions, 7 Table of Contents undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial. ​ Risks Related to Our Business Our future success will depend on our ability to execute our corporate strategy, which is subject to risks.
Added
Tenants may fail to properly maintain their improvements, and certain improvements may become obsolete over the long terms of our Ground Leases, which may impair the value and the UCA that we are able to realize upon a sale or re-leasing, or require us to make significant investments in order to restore the property to a suitable condition. 12 Table of Contents A lack of recourse to creditworthy counterparties may adversely affect us and our tenants.
Removed
After completion of the Net Lease Sale, the Company's portfolio is primarily comprised of Ground Lease assets and legacy assets.
Added
The tenants under our Ground Leases are typically special purpose entities formed to enter into our leases and own the improvements built on our land. Likewise, our tenants’ lenders are often special purpose entities formed to enter into their debt arrangements.
Removed
Pending completion of the Merger, Spin-Off and related transactions, as to which there is no assurance, the Company intends to continue its stated corporate strategy of seeking to monetize legacy assets and using the net proceeds to make additional investments in Ground Lease and Ground Lease adjacent assets (directly and through SAFE), repay indebtedness and for general corporate purposes.
Added
If we have to take action to enforce our leases, we may not have access to tenants’ assets other than our lease and the tenant’s improvements. If our tenants have to take action to enforce their debt arrangements, they may not have access to the lenders’ assets. We may have limited or no recourse against a separate creditworthy guarantor.
Removed
Our strategy is subject to a number of risks, including the following: ​ ● our success will be highly correlated with the success of SAFE; adverse business developments at SAFE would likely result in a decline in the prices of the SAFE common stock that we own and our common stock and/or cause SAFE to reduce its distributions to shareholders, including us; ● our future operating revenues, earnings and cash flow will be sourced primarily from sales of legacy assets, management fees paid by SAFE, dividends paid by SAFE and income from legacy and Ground Lease adjacent investments, which are generally less predictable in timing and amount than contractual rents.
Added
Disputes may arise that result in the tenant withholding rent payments, possibly for an extended period. If a tenant fails to maintain our land and their improvements in accordance with our lease terms, their value may decline materially.
Removed
SAFE’s ability to access capital in 2023 and beyond will be subject to a number of factors, many of which are outside of its control, such as general economic conditions, changes in interest rates and conditions prevailing in the credit and real estate markets. There can be no assurance that SAFE will have access to liquidity when needed.
Added
Any of these situations may result in extended periods with a significant decline in revenues or no revenues generated by a property or may impair the value of our properties and the UCA that we may realize from them. Counterparty, geographic and industry concentrations may expose us to financial credit risk.
Removed
As a result, we may have to incur indebtedness, sell assets or take other steps to generate cash to pay operating expenses or satisfy indebtedness when due, and our reported results and common stock price may be less predictable and more volatile; ● the growth rate of SAFE's portfolio may not meet our expectations because, among other reasons, mortgage financing remains a relatively low-cost alternative for tenants; potential tenants may prefer to own both the land and the improvements on their properties; negative publicity about non-Safehold Ground Leases may discourage potential tenants; the availability and terms of tenant leasehold financing may be adversely affected by increases in interest rates; and new ventures are seeking to compete with SAFE; ● as of December 31, 2022, we owned approximately 54.3% of SAFE's outstanding common stock; the relatively low public float in SAFE common stock may contribute to volatility in SAFE's stock price and make it difficult for us to sell SAFE shares if we were ever to decide to do so; ● there are potential conflicts of interests in our relationship with SAFE, as discussed further below under "There are various potential conflicts of interest in our relationship with SAFE, including our executive officers and/or directors who are also officers and/or directors of SAFE, which could result in decisions that are not in the best interests of our shareholders;" ● we have waived or elected not to seek reimbursement in full for certain expenses that we have incurred on SAFE’s behalf while it is in its growth stage, and will likely continue to do so while we foster SAFE’s growth; ● if we terminate our management agreement with SAFE for convenience, we will be prohibited from competing with SAFE for one year after such termination; ● SAFE's board of directors is comprised of a majority of independent directors who may take actions with which we disagree, and our voting power in SAFE is limited to 41.9% as a result of which SAFE's shareholders may take actions with which we disagree; and ● we are exposed to asset concentrations in SAFE’s portfolio; for the year ended December 31, 2022, 11.9% of SAFE’s total revenues came from hotel properties, which have been adversely affected by the COVID-19 pandemic.
Added
For the year ended December 31, 2023, our two largest tenants by revenues each accounted for approximately 4.6% of our total revenues. For the year ended December 31, 2023, 10.3% of our total revenues came from hotel properties and 37.4% came from office properties. We could be materially and adversely affected by negative factors affecting such concentration.
Removed
SAFE is a public company that separately files public reports with the Securities and Exchange Commission ("SEC"). In its filings with the SEC, SAFE provides disclosure as to its business, including disclosure regarding its views as to the drivers of its financial performance and the risks it faces.
Added
For example, our office assets and business growth prospects may be adversely affected, including adverse impacts on our rents collected, Ground Rent Coverage and UCA as a result of reduced demand for office space and/or reduction in rents at our office properties as a result of an economic downturn or permanent shift in office space demand as a result of the COVID-19 pandemic.
Removed
Two directors of iStar serve on SAFE’s board of directors, including Jay Sugarman, who is the chief executive officer of SAFE and our chief executive officer.
Added
Moreover, certain office assets currently have material vacancies. If our Ground Lease tenants at such assets fail to re-tenant the building such Ground Leases may default and we may suffer losses. In addition, as of December 31, 2023, our portfolio had regional geographic concentrations based on gross book value (refer to “Our Portfolio” in Item 7.
Removed
We formed an investment fund with a third party (the “Ground Lease Plus Fund”), in which SAFE may invest, which targets the origination and acquisition of pre-development phase Ground Leases which do not fit SAFE’s investment criteria. We own a 53% interest in the Ground Lease Plus Fund and manage it.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations). Percentage rent payable under our master lease relating to the Park Hotels Portfolio is calculated on an aggregate portfolio-wide basis.
Removed
We may face conflicts of interest in fulfilling our duties to our shareholders, to the fund as its general partner and manager and to SAFE as its manager. We are responsible for identifying and appropriately allocating investments between the fund and SAFE.
Added
The tenant under our Park Hotels Portfolio master lease pays us percentage rent equal to 7.5% of the positive difference between the aggregate annual operating revenues of the five hotels in the portfolio for any year and a threshold amount of approximately $81.4 million.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding that would have a material adverse effect on the Company’s consolidated financial statements. Item 4. Mine Safety Disclosures Not applicable. ​ PART II
Biggest changeItem 3. Legal Proceedings We are not currently party to any pending legal proceedings that we believe could have a material adverse effect on our business or financial condition. However, we may be subject to various claims and legal actions arising in the ordinary course of business from time to time. ​ Item 4. Mine Safety Disclosures Not applicable.
Removed
Item 3. Legal Proceedings The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to the Company’s business as a finance and investment company focused on the commercial real estate industry, including foreclosure-related proceedings.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 20 PART II ​ 20 Item 5. Market for Registrant’s Equity and Related Stock Matters 20 Item 6. RESERVED 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 36 Item 8. Financial Statements and Supplementary Data 38
Biggest changeItem 4. Mine Safety Disclosures 30 PART II ​ 30 Item 5. Market for Registrant’s Equity and Related Stock Matters 30 Item 6. RESERVED 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 41 Item 8. Financial Statements and Supplementary Data 43

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Equity and Related Stock Matters The Company’s common stock trades on the New York Stock Exchange ("NYSE") under the symbol "STAR." The Company had 1,354 holders of record of common stock as of February 17, 2023.
Biggest changeItem 5. Market for Registrant’s Equity and Related Stock Matters Our common stock trades on the NYSE under the symbol "SAFE." Computershare is the transfer agent and registrar for our common stock. We had 1,615 holders of record of common stock as of February 9, 2024.
Removed
Issuer Purchases of Equity Securities We did not purchase any shares of our common stock during the three months ended December 31, 2022. 20 Table of Contents Disclosure of Equity Compensation Plan Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (c) ​ ​ ​ ​ ​ ​ Number of securities ​ ​ (a) ​ (b) ​ remaining available for ​ ​ Number of securities to ​ Weighted-average ​ future issuance under ​ ​ be issued upon exercise ​ exercise price of ​ equity compensation plans ​ ​ of outstanding options, ​ outstanding options, ​ (excluding securities Plans Category ​ warrants and rights ​ warrants and rights ​ reflected in column (a)) Equity compensation plans approved by security holders-restricted stock awards (1)(2) 793,590 N/A 2,333,815 (1) Restricted Stock—The amount shown in column (a) includes 633,550 unvested restricted stock units which may vest in the future based on the employees’ continued service to the Company (see Item 8—"Financial Statements and Supplemental Data—Note 15" for a more detailed description of the Company’s restricted stock grants).
Added
Unregistered Sales of Equity Securities We did not have any sales of unregistered shares of our common stock during the three months ended December 31, 2023. Issuer Purchases of Equity Securities We did not purchase any shares of our common stock during the three months ended December 31, 2023. ​
Removed
All of the unvested restricted stock units included in column (a) are required to be settled on a net, after-tax basis (after deducting shares for minimum required statutory withholdings); therefore, the actual number of shares issued will be less than the gross amount of the awards.
Removed
The amount shown in column (a) also includes 160,040 of common stock equivalents and restricted stock awarded to our non-employee directors in consideration of their service to the Company as directors. Common stock equivalents represent rights to receive shares of common stock at the date the common stock equivalents are settled.
Removed
Common stock equivalents have dividend equivalent rights beginning on the date of grant.
Removed
The amount in column (c) represents the aggregate amount of stock options, shares of restricted stock units or other performance awards that could be granted under compensation plans approved by the Company’s security holders after giving effect to previously issued awards of stock options, shares of restricted stock units and other performance awards (see Item 8—"Financial Statements and Supplemental Data—Note 15" for a more detailed description of the Company’s Long-Term Incentive Plans).
Removed
(2) The amount shown in column (a) does not include a currently indeterminable number of shares that may be issued upon the satisfaction of performance and vesting conditions of awards made under the Company’s Performance Incentive Plan ("iPIP") approved by shareholders.
Removed
In no event may the number of shares issued exceed the amount available in column (c) unless shareholders authorize additional shares (see Item 8—"Financial Statements and Supplemental Data—Note 15" for a more detailed description of iPIP.)

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDebt Covenants —Our outstanding unsecured debt securities contain corporate level covenants that include a covenant to maintain a ratio of unencumbered assets to unsecured indebtedness, as such terms are defined in the indentures governing the debt securities, of at least 1.3x and a covenant restricting certain incurrences of debt based on a fixed charge 33 Table of Contents coverage ratio.
Biggest changeDebt Covenants —We are subject to financial covenants under the 2021 Unsecured Revolver and the 2023 Unsecured Revolver, including maintaining: (i) a ratio of total unencumbered assets to total unsecured debt of at least 1.33x; and (ii) a consolidated fixed charge coverage ratio of at least 1.15x, as such terms are defined in the documents governing the 2021 Unsecured Revolver and the 2023 Unsecured Revolver, as applicable.
Such estimate of cash flows considers factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors.
Such estimate of cash flows considers factors such as expected future operating income trends, as well as the effects of demand, competition and other economic factors.
We adjusted our Expected Loss through the use of third-party market data that provided current and future economic conditions that may impact the performance of the commercial real estate assets securing our investments.
We calculated our Expected Loss through the use of third-party market data that provided current and future economic conditions that may impact the performance of the commercial real estate assets securing our investments.
We consider, among other things, payment status, lien position, borrower or tenant financial resources and investment collateral, collateral type, project economics and geographical location as well as national and regional economic factors.
We consider, among other things, payment status, lien position, borrower financial resources and investment collateral, collateral type, project economics and geographical location as well as national and regional economic factors.
To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the asset and reflected as an adjustment to the basis of the asset. Impairments of real estate and land and development assets are recorded in "Impairment of assets" in our consolidated statements of operations.
To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the asset over the estimated fair value of the asset and reflected as an adjustment to the basis of the asset. Impairments of real estate assets, if any, are recorded in "Impairment of assets" in our consolidated statements of operations.
Our discussion related to the results of operations and changes in financial condition for 2021 compared to 2020 is included in Part II, Item 7 of our 2021 Annual Report on Form 10-K . Our historical results may not be indicative of our future performance.
Our discussion related to the results of operations and changes in financial condition for 2022 compared to 2021 is included in Part II, Item 7 of Old SAFE’s Annual Report on Form 10-K for the year ended December 31, 2022 . These historical financial statements may not be indicative of our future performance.
The asset’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the asset (taking into account the anticipated holding period of the asset) is less than the carrying value.
The value of a long-lived asset held for use is impaired if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the asset (taking into account the anticipated holding period of the asset) are less than its carrying value.
See the Risk Factors section of this report for additional discussion of certain potential risks to our business arising from the COVID-19 pandemic and other factors. ​ 22 Table of Contents Portfolio Overview Our portfolio is diversified by business, property type and geography.
See the "Risk Factors" section of this 10-K for additional discussion of certain potential risks to our business arising from the COVID-19 pandemic and certain potential risks to our business related to competition and industry concentrations . Our Portfolio Our portfolio of properties is diversified by property type and region.
We estimate our expected loss (“Expected Loss”) on our loans (including unfunded loan commitments), held-to-maturity debt securities and net investment in leases based on relevant information including historical realized loss rates, 34 Table of Contents current market conditions and reasonable and supportable forecasts that affect the collectability of our investments.
We estimate 39 Table of Contents our Expected Loss on our loans receivable (including unfunded commitments) based on relevant information including current market conditions and reasonable and supportable forecasts that affect the collectability of its investments. The estimate of our Expected Loss requires significant judgment.
Unfunded Commitments —We generally fund construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria. We refer to these arrangements as Performance-Based Commitments.
There can be no assurance that the conditions to closing for these transactions will be satisfied and that we will acquire the Ground Leases or fund the leasehold improvement allowances. ​ Through the Leasehold Loan Fund, we also fund construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria.
Impairment or disposal of long-lived assets — We periodically review real estate to be held for use and land and development assets for impairment in value whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Intangible liabilities may also include below-market leases, which are recorded at their fair values and included in “Accounts payable, accrued expenses and other liabilities” on our consolidated balance sheets. ​ Impairments—We review real estate assets for impairment in value whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
The COVID-19 pandemic adversely affected our strategies of monetizing legacy assets and materially scaling SAFE’s portfolio, primarily because of reduced levels of real estate transactions and constrained conditions for equity and debt financing for real estate transactions.
The COVID-19 pandemic is not currently materially impacting our new investment activity, but we continue to monitor its potential impact, which could slow new investment activity because of reduced levels of real estate transactions and constrained conditions for equity and debt financing for real estate transactions, including leasehold loans.
During the year ended December 31, 2022, we recorded $25.2 million income from sales of real estate from the sale of an operating property and $1.4 million from the sale of Ground Leases.
During the year ended December 31, 2023, we sold a Ground Lease to a third-party for $4.2 million and recognized a gain on sale of Ground Leases of $0.4 million.
Our significant accounting policies are described in Item 8—"Financial Statements and Supplemental Data—Note 3." The following is a summary of accounting policies that require more significant management estimates and judgments: Allowance for loan losses and losses on net investment in leases— We perform a quarterly comprehensive analysis of our loan and sales-type lease portfolios and assign risk ratings that incorporate management’s current judgments about credit quality based on all known and relevant internal and external factors that may affect collectability.
Our development properties are assigned a higher loss rate due to the higher inherent risk of deals under construction. ​ We perform a quarterly analysis of our loan receivable – related party that incorporates management’s current judgments about credit quality based on all known and relevant internal and external factors that may affect collectability.
During the year ended December 31, 2021, we recorded an aggregate impairment of $0.7 million in connection with the sale of residential condominiums. Other expense increased to $8.9 million in 2022 from $8.1 million in 2021.
In addition, we recorded other state and local income taxes in the amount of $0.7 million during the year ended December 31, 2023.
Removed
Certain prior year amounts have been reclassified in our consolidated financial statements and the related notes to conform to the current period presentation. Executive Overview Merger with SAFE —In August 2022, we entered into the Merger Agreement with SAFE.
Added
Merger Transaction On August 10, 2022, Safehold Inc. (“Old SAFE”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with iStar Inc. (“iStar”), and on March 31, 2023, the Merger was completed in accordance with the terms of the Merger Agreement.
Removed
We expect that the Merger will accelerate SAFE’s market leadership in the Ground Lease industry and will make SAFE the only internally-managed, pure-play Ground Lease company in the public markets.
Added
For accounting purposes, the Merger was accounted for as a business combination using the acquisition method of accounting under Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) and treated as a “reverse acquisition” in which iStar is considered the legal acquirer and Old SAFE is considered the accounting acquirer.
Removed
We currently expect that the Merger and related transactions will close in the first half of 2023, however, completion of the Merger and related transactions is subject to a number of conditions, some of which are outside of our control, including, without limitation, approval of the stockholders of each of the Company and SAFE, and there can be no assurance they will close within our currently anticipated timeframe or at all.
Added
The Company considered the following relevant facts for this determination: ● At the time of the Merger closing, Old SAFE shareholders, excluding the Old SAFE shares held directly by iStar, members of iStar management and Star Holdings, controlled a majority of the voting interests in the Company and the combined company operates under the name “Safehold Inc.;” ● The composition of the combined company’s board of directors, which includes three directors from Old SAFE, two directors from iStar, and two management members of both Old SAFE and iStar; ● Old SAFE was the larger entity by size when comparing the key metrics of total assets, total revenue and net income (loss) from continuing operations and allocable to common shareholders; and ● Substantially all of the assets and liabilities of the Company consist of the historical assets and liabilities of Old SAFE, and the go-forward business plan of the Company is to conduct the Ground Lease business conducted by Old SAFE prior to the Merger. ​ As a result, the historical financial statements of Old SAFE became the historical financial statements of Safehold Inc.
Removed
Refer to "Business – Overview" and Note 1 to the consolidated financial statements for more information on the Merger. ​ Corporate Strategy . We continue to execute our stated corporate strategy which is to grow our Ground Lease and Ground Lease adjacent businesses and simplify our portfolio through sales of other assets.
Added
Unless the context otherwise requires, references to “iStar” refer to iStar prior to the Merger, and references to “we,” “our” and “the Company” refer to the business and operations of Old SAFE and its consolidated subsidiaries prior to the Merger and to Safehold Inc. (formerly known as iStar Inc.) and its consolidated subsidiaries following the consummation of the Merger.
Removed
In March 2022, we, through certain subsidiaries of ours and entities managed by us, sold our portfolio of net lease assets for an aggregate gross sales price of $3.07 billion (the “Net Lease Sale”).
Added
Periods presented prior to the Merger date of March 31, 2023 reflect the operations of Old SAFE and periods presented as of December 31, 2023 represent the financial statement of the Company. ​ Immediately before the closing of the Merger, iStar separated its remaining legacy non-ground lease assets and businesses, approximately $50.0 million of cash, exclusive of working capital reserves and restricted cash, and approximately 13.5 million shares of Old SAFE common stock into Star Holdings by distributing to iStar’s stockholders, on a pro rata basis, the issued and outstanding equity interests of Star Holdings (the “Spin-Off”). ​ Business Overview We acquire, manage and capitalize Ground Leases and report our business as a single reportable segment.
Removed
If the Merger, Spin-Off and related transactions are completed our corporate strategy will be dedicated to growing our Ground Lease and Ground Lease – adjacent businesses. ​ ​ COVID-19 and Other Factors .
Added
We believe owning a portfolio of Ground Leases affords our investors the opportunity for safe, growing income. Safety is derived from a Ground Lease’s senior position in the commercial real estate capital structure. Growth is realized through long-term leases with contractual periodic increases in rent.
Removed
In addition, other macroeconomic factors such as interest rates, inflation and the market reaction and response of government policy to inflation may impact our or SAFE’s business.
Added
Capital appreciation is realized though appreciation in the value of the land over time and through our typical rights as landlord to acquire the commercial buildings on our land at the end of a Ground Lease, which may yield substantial value to us.
Removed
As of December 31, 2022, based on our book value, our total investment portfolio has the following property/collateral type and geographic characteristics ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Property/Collateral Net Real Estate Operating Land & ​ ​ ​ ​ % of Types ​ Lease ​ Finance ​ Properties ​ Development ​ Corporate ​ Total ​ Total Ground Leases ​ $ 1,302,877 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 1,302,877 74.0 % Land and Development ​ — ​ — ​ — ​ 207,997 ​ — ​ 207,997 11.8 % Multifamily ​ — ​ 39,304 ​ 36,382 ​ — ​ — ​ 75,686 4.3 % Hotel ​ — ​ 12,893 ​ 61,863 ​ — ​ — ​ 74,756 4.2 % Retail ​ — ​ 37,650 ​ 371 ​ 8,784 ​ — ​ 46,805 2.7 % Condominium ​ — ​ 6,665 ​ — ​ 15,233 ​ — ​ 21,898 1.2 % Office ​ ​ — ​ ​ 15,183 ​ ​ — ​ ​ — ​ ​ — ​ ​ 15,183 0.9 % Entertainment / Leisure ​ ​ — ​ — ​ 14,262 ​ — ​ — ​ 14,262 0.8 % Other Property Types ​ — ​ — ​ — ​ — ​ 11 ​ 11 — % Total ​ $ 1,302,877 ​ $ 111,695 ​ $ 112,878 ​ $ 232,014 ​ $ 11 ​ $ 1,759,475 100.0 % Percentage of Total ​ ​ 74% ​ ​ 6% ​ ​ 6% ​ ​ 13% ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Real Estate Operating Land & ​ ​ ​ ​ % of Geographic Region ​ Lease ​ Finance ​ Properties ​ Development ​ Corporate ​ Total ​ Total Northeast ​ $ 497,301 ​ $ 65,726 ​ $ 76,124 ​ $ 133,317 ​ $ — ​ $ 772,468 43.9 % West ​ 318,016 ​ 10,206 ​ 18,462 ​ 8,939 ​ — ​ 355,623 20.2 % Mid-Atlantic ​ 164,317 ​ — ​ 4,260 ​ 89,758 ​ — ​ 258,335 14.7 % Southeast ​ 165,487 ​ 29,098 ​ — ​ — ​ — ​ 194,585 11.1 % Southwest ​ 124,973 ​ — ​ — ​ — ​ — ​ 124,973 7.1 % Central ​ 32,783 ​ 6,665 ​ 14,032 ​ — ​ — ​ 53,480 3.0 % Various ​ — ​ — ​ — ​ — ​ 11 ​ 11 — % Total ​ $ 1,302,877 ​ $ 111,695 ​ $ 112,878 ​ $ 232,014 ​ $ 11 ​ $ 1,759,475 100.0 % ​ Net Lease Prior to the Net Lease Sale, our net lease business created stable cash flows through long-term net leases primarily to single tenants on our properties.
Added
As of December 31, 2023, the percentage breakdown of the gross book value of our portfolio was 42% office, 38% multi-family, 11% hotels, 6% life science and 3% mixed use and other. The diversification by geographic location, property type and sponsor in our portfolio further reduces risk and enhances potential upside.
Removed
We targeted mission-critical facilities leased on a long-term basis to tenants, offering structured solutions that combined our capabilities in underwriting, lease structuring, asset management and build-to-suit construction. Leases typically provide for expenses at the facility to be paid by the tenant on a triple net lease basis.
Added
Many of our Ground Leases have CPI lookbacks, generally starting between years 11 and 21 of the lease term, to mitigate the effects of inflation that are typically capped between 3.0% - 3.5%; however, in the event cumulative inflation 31 Table of Contents growth for the lookback period exceeds the cap, these rent adjustments may not keep up fully with changes in inflation.
Removed
Under a typical net lease agreement, the tenant agrees to pay a base monthly operating lease payment and most or all of the facility operating expenses (including taxes, utilities, maintenance and insurance). After the Net Lease Sale, the net lease segment includes our Ground Lease investments made primarily through SAFE and our Ground Lease adjacent businesses.
Added
In 2022, the Consumer Price Index (“CPI”) rose to its highest rate in over 40 years. Since then the Federal Reserve has raised interest rates multiple times and it has stated that it could raise rates again.
Removed
SAFE —SAFE is a publicly-traded company that originates and acquires Ground Leases in order to generate attractive long-term risk-adjusted returns. We believe its business has characteristics comparable to a high-grade fixed income investment business, but with certain unique advantages.
Added
Any increase in interest rates may result in a reduction in the availability or an increase in costs of leasehold financing, which is critical to the growth of a robust Ground Lease market. An increase in interest rates could also increase the leasehold financing costs of our Ground Lease tenants and their ability to obtain leasehold financing.
Removed
Relative to alternative fixed income investments generally, SAFE’s Ground Leases typically benefit from built-in growth derived from contractual base rent increases and the opportunity to realize value from SAFE’s right to regain possession of the buildings and other improvements on its land upon expiration or earlier termination of the lease at no additional cost.
Added
In addition, following the onset of the COVID-19 pandemic, the U.S. office sector has been adversely affected by office vacancies, the rise in interest rates and a decline in market liquidity, all of which could negatively impact our tenants, Ground Rent Coverages and estimated Combined Property Values. Moreover, certain office assets currently have material vacancies.
Removed
We believe that these features offer us the opportunity through our ownership in SAFE to realize superior risk-adjusted total returns when compared to certain alternative highly-rated investments.
Added
If our Ground Lease tenants at such assets fail to re-tenant the building such Ground Leases may default and we may suffer losses. The rise in interest rates and increased investment spreads to treasury bonds in the Ground Lease market may attract new competitors, which may result in higher costs for properties, lower returns and impact our ability to grow.
Removed
As of December 31, 2022, we owned approximately 54.3% of SAFE’s common stock outstanding, subject to voting limitations described below. 23 Table of Contents We account for our investment in SAFE as an equity method investment (refer to Note 8 to the consolidated financial statements). We act as SAFE’s external manager pursuant to a management agreement.
Added
Our portfolio is comprised of Ground Leases and a master lease (relating to five hotel assets that we refer to as our “Park Hotels Portfolio”) that has many of the characteristics of a Ground Lease.
Removed
The management agreement generally provides for a base management fee that ranges from a minimum of 1.0% to a maximum of 1.5% as SAFE’s Total Equity (as defined in the agreement) increases. The management fee is payable in cash or in shares of SAFE common stock at SAFE’s election (as determined by SAFE’s independent directors).
Added
As of December 31, 2023, our estimated portfolio Ground Rent Coverage was 3.6x (see the "Risk Factors - Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect the full potential impact of the COVID-19 pandemic and may decline materially in future periods , - We rely on Property NOI as reported to us by our tenants, -Our estimates of Ground Rent Coverage for properties in development or transition, or for which we do not receive current tenant financial information, may prove to be incorrect " in this Form 10-K for a discussion of our estimated Ground Rent Coverage).
Removed
The initial term of the management agreement ends on June 30, 2023 during which the agreement is non-terminable, except for certain cause events.
Added
Below is an overview of the top 10 assets in our portfolio as of December 31, 2023 (based on gross book value and excluding unfunded commitments): (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lease ​ ​ ​ ​ ​ ​ Property ​ ​ ​ Expiration / ​ Rent Escalation ​ % of Gross ​ Property Name Type Location As Extended Structure Book Value ​ 425 Park Avenue (2) Office New York, NY 2090 / 2090 Fixed with Inflation Adjustments 5.7 % 135 West 50th Street Office New York, NY 2123 / 2123 Fixed with Inflation Adjustments 4.9 % 195 Broadway Office New York, NY 2118 / 2118 Fixed with Inflation Adjustments 4.7 % 20 Cambridgeside ​ Life Science ​ Cambridge, MA ​ 2121 / 2121 ​ Fixed with Inflation Adjustments ​ 3.9 % Park Hotels Portfolio (3) Hotel Various 2025 / 2035 % Rent 3.5 % Alohilani Hotel Honolulu, HI 2118 / 2118 Fixed with Inflation Adjustments 3.4 % 685 Third Avenue Office New York, NY 2123 / 2123 Fixed with Inflation Adjustments 3.1 % 1111 Pennsylvania Avenue Office Washington, DC 2117 / 2117 Fixed with Inflation Adjustments 2.4 % 100 Cambridgeside ​ Mixed Use and Other ​ Cambridge, MA ​ 2121 / 2121 ​ Fixed with Inflation Adjustments ​ 2.3 % Columbia Center ​ Office ​ Washington, DC ​ 2120 / 2120 ​ Fixed with Inflation Adjustments ​ 2.3 % (1) Gross book value represents the historical purchase price plus accrued interest on sales-type leases.
Removed
After the initial term, the agreement will be automatically renewed for additional one year terms, subject to certain rights of SAFE’s independent directors to terminate the agreement based on the manager’s materially detrimental long-term performance or, beginning with the seventh annual renewal term after the initial term, unfair management fees that the manager declines to renegotiate.
Added
(2) Gross book value for this property represents our pro rata share of the gross book value of our unconsolidated venture (refer to Note 7 to the consolidated financial statements). (3) The Park Hotels Portfolio consists of five properties and is subject to a single master lease.
Removed
SAFE will be obligated to pay the manager a termination fee equal to three times the annual management fee paid in respect of the last completed fiscal year prior to the termination.
Added
A majority of the land underlying one of these properties is owned by a third party and is ground leased to us through 2044 subject to changes in the CPI; however, our tenant at the property pays this cost directly to the third party. 32 Table of Contents The following tables show our portfolio by top 10 markets and property type as of December 31, 2023, excluding unfunded commitments: ​ ​ ​ ​ ​ ​ % of Gross Market Book Value ​ Manhattan (1) 23 % Washington, DC 11 ​ Boston 8 ​ Los Angeles 7 ​ San Francisco 4 ​ Denver ​ 4 ​ Honolulu ​ 4 ​ Nashville ​ 4 ​ Miami ​ 3 ​ Atlanta 3 ​ (1) Total New York MSA including areas outside of Manhattan makes up 29% of gross book value. ​ ​ ​ ​ ​ ​ % of Gross Property Type Book Value ​ Office 42 % Multifamily 38 ​ Hotel 11 ​ Life Science ​ 6 ​ Mixed Use and Other 3 ​ ​ Unfunded Commitments We have unfunded commitments to certain of our Ground Lease tenants related to leasehold improvement allowances that we expect to fund upon the completion of certain conditions.
Removed
We are party to an exclusivity agreement with SAFE pursuant to which we agreed, subject to certain exceptions, that we will not acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless we have first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity.
Added
As of December 31, 2023, we had $115.0 million of such commitments, excluding commitments to be funded by noncontrolling interests. We also have unfunded forward commitments related to agreements that we entered into for the acquisition of new Ground Leases or additions to existing Ground Leases if certain conditions are met (refer to Note 14 to the consolidated financial statements).
Removed
We are also party to a shareholders agreement with SAFE that: ● limits our discretionary voting power to 41.9% of the outstanding voting power of SAFE’s Common Stock until our aggregate ownership of SAFE common stock is less than 41.9%; ● subjects us to certain standstill provisions; and ● provides us certain preemptive rights.
Added
These commitments may also include leasehold improvement allowances that will be funded to the Ground Lease tenants upon the completion of certain conditions. As of December 31, 2023, we had an aggregate $283.1 million of such commitments.
Removed
The complete management agreement, exclusivity agreement and shareholder’s agreement between SAFE and us, as amended, are incorporated by reference as exhibits to this Annual Report on Form 10-K.
Added
We refer to these arrangements as performance-based commitments.
Removed
Ground Lease Plus Fund —The Company formed and manages an investment fund that targets the origination and acquisition of Ground Leases for commercial real estate projects that are in a pre-development phase (the “Ground Lease Plus Fund”). We own a 53.0% noncontrolling interest in the Ground Lease Plus Fund.
Added
As of December 31, 2023, we had $111.1 million of such commitments. 33 Table of Contents Results of Operations for the Year Ended December 31, 2023 compared to the Year Ended December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​ 2023 ​ 2022 ​ $ Change ​ ​ (in thousands) Interest income from sales-type leases ​ $ 235,503 ​ $ 202,258 ​ $ 33,245 Operating lease income ​ ​ 71,287 ​ ​ 66,817 ​ ​ 4,470 Interest income - related party ​ ​ 7,143 ​ ​ — ​ ​ 7,143 Other income ​ 38,645 ​ 1,238 ​ 37,407 Total revenues ​ 352,578 ​ 270,313 ​ 82,265 Interest expense ​ 181,011 ​ 128,969 ​ 52,042 Real estate expense ​ 4,653 ​ 3,110 ​ 1,543 Depreciation and amortization ​ 9,936 ​ 9,613 ​ 323 General and administrative (1) ​ 68,569 ​ 38,614 ​ 29,955 Impairment of goodwill ​ ​ 145,365 ​ ​ — ​ ​ 145,365 Provision for credit losses ​ ​ 2,704 ​ ​ — ​ ​ 2,704 Other expense ​ 17,862 ​ 10,189 ​ 7,673 Total costs and expenses ​ 430,100 ​ 190,495 ​ 239,605 Gain on sale of Ground Leases ​ ​ 447 ​ 55,811 ​ (55,364) Earnings from equity method investments ​ 24,229 ​ 9,055 ​ 15,174 Net income (loss) before income taxes ​ ​ (52,846) ​ ​ 144,684 ​ ​ (197,530) Income tax expense ​ ​ (1,719) ​ ​ — ​ ​ (1,719) Net income (loss) ​ $ (54,565) ​ $ 144,684 ​ $ (199,249) (1) For the year ended December 31, 2023, general and administrative was partially offset by $19.4 million of management fees earned from Star Holdings, which are included in “Other income” in our consolidated statements of operations. ​ Interest income from sales-type leases increased to $235.5 million for the year ended December 31, 2023 from $202.3 million for the year ended December 31, 2022.
Removed
We do not have a controlling interest in the Ground Lease Plus Fund due to the substantive participating rights of our partner and account for this investment as an equity method investment. In addition, the Ground Lease Plus Fund has first look rights on qualifying pre-development projects through December 2023.
Added
The increase was due primarily to the origination of new Ground Leases and additional fundings on existing Ground Leases classified as sales-type leases and Ground Lease receivables. Operating lease income increased to $71.3 million during the year ended December 31, 2023 from $66.8 million for the year ended December 31, 2022.
Removed
Net Lease Venture —In February 2014, the Company partnered with a sovereign wealth fund to form a venture to acquire and develop net lease assets and gave a right of first refusal to the venture on all new net lease investments that met specified investment criteria.
Added
The increase was due primarily to a $3.1 million increase in percentage rent, which was primarily attributable to our Park Hotels Portfolio for which we recognized no percentage rent in 2022, and an increase in recovery income in 2023.
Removed
We obtained control over the Net Lease Venture when the investment period expired on June 30, 2018 and consolidated the assets and liabilities of the venture, which had previously been accounted for as an equity method investment. The Net Lease Venture was part of the Net Lease Sale.
Added
Interest income – related party was $7.1 million for the year ended December 31, 2023 and relates to the Star Holdings Term Loan Facility. Other income for the year ended December 31, 2023 primarily includes $19.4 million of management fees from Star Holdings and $15.2 million of income due to a hedge forecasted for permanent debt that did not occur.
Removed
Net Lease Venture II —In July 2018, we entered into Net Lease Venture II with similar investment strategies as the Net Lease Venture. The Net Lease Venture II had a right of first offer on all new net lease investments (excluding Ground Leases) originated by us.
Added
Other income for the years ended December 31, 2023 and 2022 includes $0.5 million and $0.4 million, respectively, of other income relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease.
Removed
We had an equity interest in the venture of approximately 51.9%, which was accounted for as an equity method investment, and were responsible for managing the venture in exchange for a management fee and incentive fee.
Added
Other income for the years ended December 31, 2023 and 2022 also includes $3.3 million and $0.8 million, respectively, of other ancillary income from our investments and interest income earned on our cash balances. ​ During the year ended December 31, 2023, we incurred interest expense from our debt obligations of $181.0 million compared to $129.0 million during the year ended December 31, 2022.
Removed
The Net Lease Venture II was part of the Net Lease Sale. 24 Table of Contents As of December 31, 2022, our net lease portfolio consisted of our equity method investments in SAFE and the Ground Lease Plus Fund.
Added
The increase in 2023 was primarily the result of issuances of unsecured notes to fund our growing portfolio of Ground Leases and additional borrowings on our 2021 Unsecured Revolver, which also accrued interest at higher rates in 2023 due to an increase in base interest rates.
Removed
The table below provides certain statistics for our net lease portfolio. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ground Lease ​ ​ SAFE ​ Plus Fund ​ Ownership % ​ ​ 54.3 % ​ 53.0 % Book value (millions) (1) ​ $ 1,237 ​ $ 66 ​ ​ ​ ​ ​ ​ ​ ​ ​ % Leased ​ 100.0 % 100.0 % Weighted average lease term (years) (2) ​ 91.9 ​ 104.3 ​ Weighted average yield (3) ​ 4.2 % 5.7 % (1) Represents the book value of our unconsolidated equity method investments.
Added
Real estate expense during the years ended December 31, 2023 and 2022 was $4.7 million and $3.1 million, respectively, and consisted primarily of the amortization of an operating lease right-of-use asset, property taxes, legal fees, property appraisal fees and insurance expense.
Removed
(2) Weighted average lease term is calculated using GAAP rent and the initial maturity and does not include extension options. SAFE includes its pro rata share of its unconsolidated equity method investments.
Added
In addition, during the years ended December 31, 2023 and 2022, we also recorded $0.5 million and $0.4 million, respectively, of real estate expense relating to a Ground Lease in which we are the 34 Table of Contents lessee but our tenant at the property pays this expense directly under the terms of a master lease.
Removed
(3) Yield for our investment in SAFE (refer to Note 8 to the consolidated financial statements) is calculated over the trailing twelve months and excludes dilution gains, the loss realized on our dividend of SAFE shares of common stock to our shareholders, management fees earned by us and a gain recognized by SAFE in connection with the sale of a Ground Lease.
Added
The increase in 2023 was primarily the result of an increase in recoverable property expenses.
Removed
Portfolio Activity — In March 2022, we, through certain subsidiaries of and entities managed by us, closed on a definitive purchase and sale agreement to sell a portfolio of net lease properties owned and managed by such subsidiaries and entities to a third party for an aggregate gross sales price of approximately $3.07 billion and recognized a gain of $663.7.
Added
Depreciation and amortization was $9.9 million and $9.6 million during the years ended December 31, 2023 and 2022, respectively, and primarily relates to our ownership of the Park Hotels Portfolio and a multi-family property , the amortization of in-place lease assets, and beginning in the second quarter of 2023, depreciation on corporate fixed assets acquired in the Merger.
Removed
We refer to this transaction as the "Net Lease Sale" in this report.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThere can be no assurance that our profitability will not be materially adversely affected during any period as a result of changing interest rates. 36 Table of Contents The following table quantifies the potential changes in annual net income, assuming no change in our interest earning assets or interest bearing liabilities, should interest rates decrease or increase by 10, 50 or 100 basis points, assuming no change in the shape of the yield curve (i.e., relative interest rates).
Biggest changeThe following table quantifies the potential changes in annual net income should interest rates decrease or increase by 10, 50 and 100 basis points, assuming no change in our interest earning assets, interest bearing liabilities or the shape of the yield curve (i.e., relative interest rates). Actual results could differ significantly from those estimated in the table.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market Risks Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market Risks Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market prices and interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.
Removed
Our operating results will depend in part on the difference between the interest and related income earned on our assets and the interest expense incurred in connection with our interest-bearing liabilities.
Added
One of the principal market risks facing us is interest rate risk on our floating rate indebtedness. Subject to qualifying and maintaining our qualification as a REIT for U.S. federal income tax purposes, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements.
Removed
Changes in the general level of interest rates prevailing in the financial markets will affect the spread between our floating rate assets and liabilities subject to the net amount of floating rate assets/liabilities and the impact of interest rate floors and caps.
Added
Our primary objectives when undertaking hedging transactions will be to reduce our floating rate exposure and to fix a portion of the interest rate for anticipated financing and refinancing transactions. However, we can provide no assurances that our efforts to manage interest rate volatility will successfully mitigate the risks of such volatility on our portfolio.
Removed
Any significant compression of the spreads between interest-earning assets and interest-bearing liabilities could have a material adverse effect on us. In the event of a significant rising interest rate environment or economic downturn, defaults could increase and cause us to incur additional credit losses which would adversely affect our liquidity and operating results.
Added
Our current portfolio is not subject to foreign currency risk. Our objectives with respect to interest rate risk are to limit the impact of interest rate changes on operations and cash flows and to lower our overall borrowing costs.
Removed
Such delinquencies or defaults would likely have a material adverse effect on the spreads between interest-earning assets and interest-bearing liabilities. In addition, an increase in interest rates could, among other things, reduce the value of our fixed-rate interest-bearing assets and our ability to realize gains from the sale of such assets.
Added
To achieve these objectives, we may borrow at fixed rates and may enter into hedging instruments such as interest rate swap agreements and interest rate cap agreements in order to mitigate our interest rate risk on a related floating rate financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes.
Removed
Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political conditions, and other factors beyond our control.
Added
As of December 31, 2023, we had $2.9 billion principal amount of fixed-rate debt outstanding and $1.2 billion principal amount of floating-rate debt outstanding.
Removed
We monitor the spreads between our interest-earning assets and interest-bearing liabilities and may implement hedging strategies to limit the effects of changes in interest rates on our operations, including engaging in interest rate swaps, interest rate caps and other interest rate-related derivative contracts.
Added
Estimated Change In Net Income ($ in thousands) (1) ​ ​ ​ ​ Change in Interest Rates Net Income (Loss) -100 Basis Points ​ $ 6,526 -50 Basis Points ​ ​ 3,263 -10 Basis Points ​ ​ 653 Base Interest Rate ​ — +10 Basis Points ​ (653) + 50 Basis Points ​ (3,263) +100 Basis Points ​ (6,526) ​ 41 Table of Contents (1) The table above includes the effect of interest rate swaps and our share of the impact of floating-rate loans in our Leasehold Loan Fund. ​ 42 Table of Contents
Removed
Such strategies are designed to reduce our exposure, on specific transactions or on a portfolio basis, to changes in cash flows as a result of interest rate movements in the market. We do not enter into derivative contracts for speculative purposes or as a hedge against changes in our credit risk or the credit risk of our borrowers.
Removed
While a REIT may utilize derivative instruments to hedge interest rate risk on its liabilities incurred to acquire or carry real estate assets without generating non-qualifying income, use of derivatives for other purposes will generate non-qualified income for REIT income test purposes.
Removed
This includes hedging asset related risks such as credit, foreign exchange and interest rate exposure on our loan assets. As a result our ability to hedge these types of risks is limited.
Removed
The base interest rate scenario assumes the one-month LIBOR rate of 4.39157% as of December 31, 2022. Actual results could differ significantly from those estimated in the table.
Removed
Estimated Change In Net Income ($ in thousands) ​ ​ ​ ​ ​ Change in Interest Rates ​ Net Income (1) -100 Basis Points ​ $ (13,848) -50 Basis Points ​ ​ (6,924) -10 Basis Points ​ ​ (1,385) Base Interest Rate ​ — +10 Basis Points ​ 1,385 +50 Basis Points ​ 6,924 +100 Basis Points ​ 13,848 (1) We have an overall net variable-rate liability position.
Removed
In addition, as of December 31, 2022, $36.1 million of our floating rate loans have a weighted average LIBOR floor of 2.1%. ​ 37 Table of Contents

Other SAFE 10-K year-over-year comparisons