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What changed in Safehold Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Safehold Inc.'s 2023 and 2024 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 2024 report.

+242 added−233 removedSource: 10-K (2025-02-06) vs 10-K (2024-02-13)

Top changes in Safehold Inc.'s 2024 10-K

242 paragraphs added · 233 removed · 183 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

32 edited+2 added−2 removed87 unchanged
Biggest changeIn the event market liquidity of the Caret units is not achieved within such two year period at a valuation not less than the purchase price for the Caret units purchased in February 2022, reduced by an amount equal to the amount of subsequent cash distributions made to investors on account of such Caret units, then the investors in the February 2022 transaction have the right to cause their Caret units purchased in February 2022 to be redeemed by Portfolio Holdings at such purchase price as so reduced. ​ On March 31, 2023, Old SAFE sold 100,000 Caret units to affiliates of MSD Partners for an aggregate purchase price of $20.0 million (refer to Note 1 to the consolidated financial statements) pursuant to a subscription agreement entered into on August 10, 2022 and sold an aggregate of 22,500 Caret units to third-party investors for an aggregate $4.5 million pursuant to a subscription agreement entered into in November 2022. ​ In September 2022, Old SAFE sold a Ground Lease in the Washington, D.C. market for $136.0 million to a third-party purchaser.
Biggest changeIn April 2024, all of the investors in the February 2022 transaction exercised this right and elected to have their Caret units redeemed at the original purchase price less the amount of distributions previously made on such units. ​ On March 31, 2023, Old SAFE sold 100,000 Caret units to affiliates of MSD Partners for an aggregate purchase price of $20.0 million (refer to Note 1 to the consolidated financial statements) pursuant to a subscription agreement entered into on August 10, 2022 and sold an aggregate of 22,500 Caret units to third-party investors for an aggregate $4.5 million pursuant to a subscription agreement entered into in November 2022. ​ In September 2022, Old SAFE sold a Ground Lease in the Washington, D.C. market for $136.0 million to a third-party purchaser.
We intend to capture this market opportunity by utilizing multiple sourcing and origination channels, including manufacturing new Ground Leases with third-party owners and 5 Table of Contents developers of commercial real estate and originating Ground Leases to provide capital for development and redevelopment.
We intend to capture this market opportunity by utilizing multiple sourcing and origination channels, including manufacturing new Ground Leases with third-party owners and developers of commercial real estate and originating Ground Leases to provide capital for development and 5 Table of Contents redevelopment.
Our structure as a holding company gives us the ability to acquire Ground Leases from owners, particularly estates and high net worth individuals, using GL units or Caret units that may provide the seller with tax advantages, as well as liquidity, portfolio diversification and professional management. ​ We generally intend to target Ground Leases that meet some or all of the following investment criteria: ● Properties of any type that are located in the top 30 metropolitan areas; ● Properties that we believe are well located in markets with high barriers to entry and that have durable cash flow; ● Transaction sizes between $10 million and $500 million or more; ● Average remaining initial lease terms that are typically 30 to 99 years; ● Periodic contractual rent escalators or percentage rent participations; 6 Table of Contents ● Ground Rent Coverage, defined as the ratio of the Property’s NOI to the annualized rental payment due us, of approximately 2.0x to 4.5x.
Our structure as a holding company gives us the ability to acquire Ground Leases from owners, particularly estates and high net worth individuals, using GL units or Caret units that may provide the seller with tax advantages, as well as liquidity, portfolio diversification and professional management. ​ We generally intend to target Ground Leases that meet some or all of the following investment criteria: ● Properties of any type that are located in the top 30 metropolitan areas; ● Properties that we believe are well located in markets with high barriers to entry and that have durable cash flow; ● Transaction sizes between $10 million and $500 million or more; ● Average remaining initial lease terms that are typically 30 to 99 years; ● Periodic contractual rent escalators or percentage rent participations; ● Ground Rent Coverage, defined as the ratio of the Property’s NOI to the annualized rental payment due us, of approximately 2.0x to 4.5x.
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.
Following the Merger, the Company serves as external manager to Star Holdings. 1 Table of Contents Other Merger and Spin-Off 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.
Property NOI is defined as the trailing twelve month net operating income of the building and improvements being operated at the property without giving effect to any rent paid or payable under our Ground Lease, and for this purpose we use estimates of the stabilized Property NOI if we don’t receive current tenant information and for properties under construction or in transition, in each case based on leasing activity at the property and available market information, including leasing activity at comparable properties in the relevant market; ● Value of approximately 30% to 45% of the Combined Property Value at the commencement of the lease or the acquisition date; and ● First year cash return on asset of between 2.5% and 5.0% and effective yields between 4.5% and 7.0%.
Property NOI is defined as the trailing twelve month net operating income of 6 Table of Contents the building and improvements being operated at the property without giving effect to any rent paid or payable under our Ground Lease, and for this purpose we use estimates of the stabilized Property NOI if we don’t receive current tenant information and for properties under construction or in transition, in each case based on leasing activity at the property and available market information, including leasing activity at comparable properties in the relevant market; ● Value of approximately 30% to 45% of the Combined Property Value at the commencement of the lease or the acquisition date; and ● First year cash return on asset of between 2.5% and 5.5% and effective yields between 4.5% and 7.5%.
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.
In assessing all forward-looking statements, readers are urged to read carefully all cautionary statements contained in this Form 10-K. Merger Transaction and Spin-Off On August 10, 2022, Safehold Inc. (“Old SAFE”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with iStar Inc.
Combined Property Value excludes the term loan to Star Holdings, the assets in the Leasehold Loan Fund (refer to Note 7 to the consolidated financial statements), the remainder of the Ground Lease Plus Fund assets and amounts attributable to noncontrolling interests.
Combined Property Value excludes the term loan to Star Holdings, the assets in the Leasehold Loan Fund (refer to Note 7 to the consolidated financial statements), the rest of the assets in the Ground Lease Plus Fund and amounts attributable to noncontrolling interests.
Ground Lease Cost as of December 31, 2023 includes one investment in our Ground Lease Plus Fund (which we acquired from the Ground Lease Plus Fund in January 2024), and for both periods includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $135.6 million (including amounts paid to the Ground Lease Plus Fund in January 2024 to acquire the investment) and $308.2 million of unfunded commitments as of December 31, 2023 and 2022, respectively.
Ground Lease Cost as of December 31, 2023 includes one investment in our Ground Lease Plus Fund (which we acquired from the Ground Lease Plus Fund in January 2024), and for both periods includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $46.2 million and $135.6 million (including amounts paid to the Ground Lease Plus Fund in January 2024 to acquire the investment) of unfunded commitments as of December 31, 2024 and 2023, respectively.
In connection with the Merger, certain of Old SAFE’s executive officers entered into re-vesting agreements pursuant to which the executives agreed to subject 25% of their previously vested Caret units to additional vesting conditions which will be satisfied on the second anniversary of the Merger, subject to the applicable executive’s continued employment through such date.
In connection with the Merger, certain of Old SAFE’s executive officers entered into re-vesting agreements pursuant to which the executives agreed to subject 25% of their previously vested Caret units to additional vesting conditions which will be satisfied on March 31, 2025 (the second anniversary of the Merger), subject to the applicable executive’s continued employment through such date.
The transaction generated a net book gain for us of approximately $46.4 million. After paying closing costs, establishing reserves for Caret-related expenses and deducting the original $76.7 million cost basis to us, the remaining proceeds have been distributed approximately 84% to Old SAFE and approximately 16% to the minority holders of Caret units.
The transaction generated a net book gain for us of approximately $46.4 million. After paying closing costs, establishing reserves for Caret-related expenses and deducting the original $76.7 million cost basis to us, the remaining proceeds were distributed approximately 84% to Old SAFE and approximately 16% to the minority holders of Caret units.
Additionally, we have created additional channels and products that allows us to build a larger, captive pipeline. In connection with the Merger, Old SAFE acquired iStar’s 53% interest in iStar’s two Ground Lease ecosystem funds, Ground Lease Plus Fund and Leasehold Loan Fund (refer to Note 7 to the consolidated financial statements).
Additionally, we have created additional channels and products that allows us to build a larger, captive pipeline. In connection with the Merger, Old SAFE acquired iStar’s interests in iStar’s two Ground Lease ecosystem funds, Ground Lease Plus Fund and Leasehold Loan Fund (refer to Note 7 to the consolidated financial statements).
(2) Combined Property Value as of December 31, 2023 includes one investment in our Ground Lease Plus Fund (which we acquired from the Ground Lease Plus Fund in January 2024 - refer to Note 7 to the consolidated financial statements), and for both periods includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $1,357.4 million and $1,653.2 million related to transactions with remaining unfunded commitments as of December 31, 2023 and 2022, respectively.
(2) Combined Property Value as of December 31, 2023 includes one investment in our Ground Lease Plus Fund (which we acquired from the Ground Lease Plus Fund in January 2024 - refer to Note 7 to the consolidated financial statements), and for both periods includes our applicable percentage interests in our unconsolidated Ground Lease ventures and $319.8 million and $1,357.4 million related to transactions with remaining unfunded commitments as of December 31, 2024 and 2023, respectively.
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.
We have become the industry leader in Ground Leases by 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.
See "Risk Factors – Risks Related to the Spin-Off and Our Relationship with Star Holdings – “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.” ​ Competition We compete with numerous commercial developers, real estate companies (including other REITs), financial institutions (such as banks and insurance companies) and other investors (such as pension funds, investment funds, private 7 Table of Contents companies and individuals) for investment opportunities and tenants.
See "Risk Factors – Risks Related to Our Relationship with Star Holdings – “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.” ​ Competition We compete with numerous commercial developers, real estate companies (including other REITs), financial institutions (such as banks and insurance companies) and other investors (such as pension funds, investment funds, private companies and individuals) for investment opportunities and tenants.
This competition may result in higher costs for properties, lower returns and impact our ability to grow. Some of these competitors have greater financial and other resources and access to more attractive capital than we do.
This competition may result in higher costs for 7 Table of Contents properties, lower returns and impact our ability to grow. Some of these competitors have greater financial and other resources and access to more attractive capital than we do.
Ground Lease Cost excludes the term loan to Star Holdings, the assets in the Leasehold Loan Fund, the remainder of the Ground Lease Plus Fund assets and amounts attributable to noncontrolling interests.
Ground Lease Cost excludes the term loan to Star Holdings, the assets in the Leasehold Loan Fund, the rest of the assets in the Ground Lease Plus Fund and amounts attributable to noncontrolling interests.
In connection with the sale of 137,142 Caret units in February 2022 (28,571 of which were committed to be purchased at the time, but have not yet closed), Old SAFE agreed to use commercially reasonable efforts to provide public market liquidity for such Caret units by seeking to provide a listing of the Caret units (or securities into which they may be exchanged) on a public exchange within two years of the sale.
In connection with the sale of 137,142 Caret units in February 2022 (28,571 of which were committed to be purchased at the time, but did not close), Old SAFE agreed to use commercially reasonable efforts to provide public market liquidity for such Caret units by seeking to provide a listing of the Caret units (or securities into which they may be exchanged) on a public exchange within two years of the sale.
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.
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 12.9 million shares of the Company as of December 31, 2024.
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.
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, 2 Table of Contents building and all improvements revert to the landlord.
As of December 31, 2023, the Company had 86 employees. The Company believes it has good relationships with its employees. Substantially all of our employees are full time employees and they are not represented by any collective bargaining agreements.
As of December 31, 2024, the Company had 74 employees. The Company believes it has good relationships with its employees. Substantially all of our employees are full time employees and they are not represented by any collective bargaining agreements.
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.
Periods presented prior to the Merger date of March 31, 2023 reflect the operations of Old SAFE and periods presented subsequent to March 31, 2023 represent the financial statements of the Company.
We have adopted a policy that all transactions between Star Holdings and us must be approved by a majority of our independent directors. However, we cannot assure you this policy or other policies and provisions of law will always succeed in eliminating the influence of such conflicts.
We have adopted a policy that all transactions between Star Holdings and us must be approved by our Audit Committee (the “Committee”). However, we cannot assure you this policy or other policies and provisions of law will always succeed in eliminating the influence of such conflicts.
As of December 31, 2023, our gross book value as a percentage of combined property value was 44%. ​ In 2018, Old SAFE established the Caret program (as defined below).
As of December 31, 2024, our gross book value as a percentage of combined property value was 49%. ​ In 2018, Old SAFE established the Caret program (as defined below).
In addition, we may be held directly liable for any such damages or claims irrespective of the provisions of any lease. Code of Ethics and Conduct On March 31, 2023, the Company adopted a new Code of Ethics and Conduct that applies to our directors, officers and employees (the "Code of Conduct").
In addition, we may be held directly liable for any such damages or claims irrespective of the provisions of any lease. Code of Ethics and Conduct The Company has adopted a Code of Ethics and Conduct that applies to our directors, officers and employees (the "Code of Conduct").
Initial grants under the Original Caret Performance Incentive Plan were subject to graduated vesting based on time-based service conditions and hurdles of our common stock price, all of which were satisfied as of December 31, 2023.
Initial grants under the Original Caret Performance Incentive Plan were subject to graduated vesting based on time-based service conditions and hurdles of our common stock price, all of which have been satisfied.
The table below shows the current estimated UCA as of December 31, 2023 and 2022 ($ in millions): (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 December 31, 2022 Combined Property Value (2) ​ $ 16,001 ​ $ 16,529 Ground Lease Cost (2) ​ 6,174 ​ 6,008 Unrealized Capital Appreciation in Our Owned Residual Portfolio ​ 9,827 ​ 10,521 (1) Please review our Current Report on Form 8-K filed on February 12, 2024 for a discussion of the valuation methodology used and important limitations and qualifications of the calculation of UCA.
The table below shows the current estimated UCA as of December 31, 2024 and 2023 ($ in millions): (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 December 31, 2023 Combined Property Value (2) ​ $ 15,523 ​ $ 16,001 Ground Lease Cost (2) ​ 6,395 ​ 6,174 Unrealized Capital Appreciation in Our Owned Residual Portfolio ​ 9,128 ​ 9,827 (1) Please review our Current Report on Form 8-K filed on February 5, 2025 for a discussion of the valuation methodology used and important limitations and qualifications of the calculation of UCA.
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.
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 draw from the largest feasible pool of candidates to consider for roles.
As a result, as of December 31, 2023, vested and unvested Caret units beneficially owned by our officers and other employees represent approximately 15.4% of the outstanding Caret units and 12.5% of the authorized Caret units, including 6.1% held directly and indirectly by Jay Sugarman, our Chairman and Chief Executive Officer. ​ In addition to the Caret units awarded or reserved for issuance under our Caret Performance Incentive Plan, as of December 31, 2023, Old SAFE sold or contracted to sell an aggregate of 259,642 Caret units to third-party investors, including affiliates of MSD Partners and an entity affiliated with one of our independent directors.
As a result, as of December 31, 2024, vested and unvested Caret units beneficially owned by our officers and other employees represent approximately 14.4% of the outstanding Caret units and 11.4% of the authorized Caret units, including 6.1% held directly and indirectly by Jay Sugarman, our Chairman and Chief Executive Officer. ​ In addition to the Caret units awarded or reserved for issuance under our Caret Performance Incentive Plan, we have sold 122,500 Caret units to third-party investors, including affiliates of MSD Partners, that remain outstanding as of December 31, 2024.
As of December 31, 2023, the Company owned 82.2% of the outstanding Caret units.
As of December 31, 2024, the Company owned 84.3% of the outstanding Caret units.
These programs include an employee assistance program that offers confidential assessment, counseling and referral services at no cost to the employee. We seek to provide a safe workplace for our employees.
These programs include an employee assistance program that offers confidential assessment, counseling and referral services at no cost to the employee. We seek to provide a safe workplace for our employees and 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 .
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.
The annual fee declines to $15.0 million, $10.0 million and $5.0 million, respectively, in each of following annual terms, and adjusts to 2.0% of the gross book value of Star Holdings’ assets, excluding shares of the Company’s common stock held by Star Holdings, thereafter.
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.
The Company will post on its website all disclosures that are required under the Exchange Act or NYSE listing standards concerning any amendments to, or waivers from, any provision of the Code of Conduct. Human Capital Resources Central to our business strategy is attracting, developing and retaining a talented, diverse and engaged workforce to drive our success.
Removed
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.
Added
Star Holdings paid SpinCo Manager an annual management fee of $25.0 million for the term ended March 31, 2024.
Removed
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 .
Added
Because public market liquidity was not achieved by February 2024, the investors in the February 2022 transaction had the right to cause their Caret units purchased in February 2022 to be redeemed by Portfolio Holdings at such purchase price less the amount of distributions previously made on such units.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

78 edited+15 added−17 removed174 unchanged
Biggest changeFor 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.
Biggest changeFor 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. ● Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect current market values, including the decline in office values, 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 may decide to further expand our operations through acquisitions, development opportunities and other strategic transactions. ● 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. 10 Table of Contents ● Star Holdings owns a significant amount of our common stock, some of which serves as collateral for a margin loan. ● 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 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 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.
Subject to certain agreed exceptions, any material amendment adverse to the interest of Caret unit holders with respect to: (i) capital contributions, (ii) the designation and number of membership interests in Portfolio Holdings, (iii) economics, (iv) restrictions on the authority of Portfolio Holdings’ managing member, us, (v) certain decisions with respect to Ground Leases and the fee or other interest in real property subject to a Ground Lease, (vi) our commitment that, subject to certain exceptions, all commercial Ground Leases, including any improvements built thereon, that are directly or indirectly owned by us must be owned through Portfolio Holdings, (vii) the use of proceeds from the issuance of Caret units by Portfolio Holdings or Caret Financings, (viii) drag-along rights, or (ix) amendments to the Portfolio Holdings LLCA, as well as any definitions related to such matters, will require the consent of (1) prior to a Liquidity Transaction (as defined in the Portfolio Holdings LLCA), a majority of Caret unit holders other than us and persons employed by us or any of our subsidiaries (“Outside Unitholders”) and (2) following a Liquidity Transaction, the majority of the members of a committee of independent directors and, for certain amendments, Outside Unitholders holding a majority of Caret units held by Outside Unitholders.
Subject to certain agreed exceptions, any material amendment adverse to the interest of Caret unit holders with respect to: (i) capital contributions, (ii) the designation and number of membership interests in Portfolio Holdings, (iii) economics, (iv) restrictions on the authority of Portfolio Holdings’ managing member, us, (v) certain decisions with respect to Ground Leases and the fee or other interest in real property subject to a Ground Lease, (vi) our commitment that, subject to certain exceptions, all commercial Ground Leases, including any improvements built thereon, that are directly or indirectly owned by us must be owned through Portfolio Holdings, (vii) the use of proceeds from the issuance of Caret units by Portfolio Holdings or Caret Financings, (viii) drag-along rights, or (ix) amendments to the Portfolio Holdings LLCA, as well as any definitions related to such matters, require the consent of (1) prior to a Liquidity Transaction (as defined in the Portfolio Holdings LLCA), a majority of Caret unit holders other than us and persons employed by us or any of our subsidiaries (“Outside Unitholders”) and (2) following a Liquidity Transaction, the majority of the members of a committee of independent directors and, for certain amendments, Outside Unitholders holding a majority of Caret units held by Outside Unitholders.
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.
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 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.
Pursuant to agreements with us, each of MSD and SFTY Venture LLC have certain rights to maintain their percentage interest in us, but other existing shareholders have no preemptive rights. 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.
Pursuant to agreements with us, each of MSD Partners and SFTY Venture LLC have certain rights to maintain their percentage interest in us, but other existing shareholders have no preemptive rights. 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.
Our level of debt following the Merger, the costs of our debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including, without limitation, the following: ● our cash flow may be insufficient to meet our required principal and interest payments; ● we may be unable to borrow additional funds as needed on favorable terms, or at all; ● we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; ● increases in interest rates could materially increase our interest expense and adversely affect our growth by significantly increasing the costs of future investments; ● we may be forced to dispose of one or more of our assets, possibly on disadvantageous terms; ● restricting us from making strategic acquisitions, developing properties, or exploiting business opportunities; ● our credit agreements prohibit us from paying distributions if there is a default thereunder, subject to limited exceptions relating to the maintenance of our REIT qualification; ● the actions or omissions of our tenants over which we have no direct control, such as a failure to pay required taxes, may trigger an event of default under certain of our mortgages (refer to Note 9 to the consolidated financial statements); ● our default under debt agreements could trigger cross-default or cross acceleration of our other debt; ● exposing us to potential credit rating downgrades; ● increasing our vulnerability to a downturn in general economic conditions; and ● limiting our ability to react to changing market conditions in our industry.
Our level of debt, the costs of our debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including, without limitation, the following: ● our cash flow may be insufficient to meet our required principal and interest payments; ● we may be unable to borrow additional funds as needed on favorable terms, or at all; ● we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; ● increases in interest rates could materially increase our interest expense and adversely affect our growth by significantly increasing the costs of future investments; ● we may be forced to dispose of one or more of our assets, possibly on disadvantageous terms; ● restricting us from making strategic acquisitions, developing properties, or exploiting business opportunities; ● our credit agreements prohibit us from paying distributions if there is a default thereunder, subject to limited exceptions relating to the maintenance of our REIT qualification; ● the actions or omissions of our tenants over which we have no direct control, such as a failure to pay required taxes, may trigger an event of default under certain of our mortgages (refer to Note 9 to the consolidated financial statements); ● our default under debt agreements could trigger cross-default or cross acceleration of our other debt; ● exposing us to potential credit rating downgrades; ● increasing our vulnerability to a downturn in general economic conditions; and 21 Table of Contents ● limiting our ability to react to changing market conditions in our industry.
We entered into a Governance Agreement with Star Holdings, pursuant to which, among other things, Star Holdings and its subsidiaries agreed to certain lockup and standstill provisions, and to vote all shares of our common stock owned by them (i) in favor of all persons nominated to serve as our directors by our board of directors or our nominating and corporate governance committee, (ii) against any stockholder proposal that is not recommended by our board of directors and (iii) in accordance with the recommendations of our board on all other proposals brought before our stockholders, in each case until the earliest to occur of (a) the termination of our management agreement with Star Holdings, (b) the date on which both (1) Star Holdings ceases to beneficially own at least 7.5% of our outstanding common 19 Table of Contents stock and (2) Star Holdings is no longer managed by us or our affiliates, or (c) a “change of control” of us, as defined in the Governance Agreement.
We entered into a Governance Agreement with Star Holdings, pursuant to which, among other things, Star Holdings and its subsidiaries agreed to certain lockup and standstill provisions, and to vote all shares of our common stock owned by them (i) in favor of all persons nominated to serve as our directors by our board of directors or our nominating and corporate governance committee, (ii) against any stockholder proposal that is not recommended by our board of directors and (iii) in accordance with the recommendations of our board on all other proposals brought before our stockholders, in each case until the earliest to occur of (a) the termination of our management agreement with Star Holdings, (b) the date on which both (1) Star Holdings ceases to beneficially own at least 7.5% of our outstanding common stock and (2) Star Holdings is no longer managed by us or our affiliates, or (c) a “change of control” of us, as defined in the Governance Agreement.
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.
See “Risks Related to Our Common Stock—The Portfolio Holdings LLCA contains provisions that may delay, defer or prevent a change in control ;” ● 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.
Under the terms of the Portfolio Holdings LLCA, we will have the sole discretion, prior to a specified liquidity transactions, to acquire all Caret units to consummate a change of control in us or the sale of our ground lease business. However, we will not have such drag-along right after a liquidity transaction.
Under the terms of the Portfolio Holdings LLCA, we have the sole discretion, prior to specified liquidity transactions, to acquire all Caret units to consummate a change of control in us or the sale of our ground lease business. However, we do not have such drag-along right after a liquidity transaction.
In connection with such requirements, for so long as any stockholders, either individually or together in the aggregate, hold 10% or more of the shares of our common stock, we will be deemed to own any tenant in which such stockholder or such stockholders together own, at any time during a taxable year, a 10% or greater interest, applying certain constructive 27 Table of Contents ownership rules, which could cause us to receive rental income from a related party tenant.
In connection with such requirements, for so long as any stockholders, either individually or together in the aggregate, hold 10% or more of the shares of our common stock, we will be deemed to own any tenant in which such stockholder or such stockholders together own, at any time during a taxable year, a 10% or greater interest, applying certain constructive ownership rules, which could cause us to receive rental income from a related party tenant.
This creates potential conflicts of interest when management is faced with decisions that could have different implications for holders of Caret units and holders of our common stock, as management may be incentivized to make decisions that benefit holders of Caret units as opposed to holders of our common stock. ​ 25 Table of Contents 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.
This creates potential conflicts of interest when management is faced with decisions that could have different implications for holders of Caret units and holders of our common stock, as management may be incentivized to make decisions that benefit holders of Caret units as opposed to holders of our common stock. ​ 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 Ventures are with an institutional third-party partner. The combined gross book value of the Ventures is less than 2% of our gross book value. The assets owned by these Ventures create higher returns but also may involve additional risk than our typical Ground Leases.
The Ventures are with an institutional third-party partner. The combined book value of the Ventures is less than 1% of our gross book value. The assets owned by these Ventures create higher returns but also may involve additional risk than our typical Ground Leases.
Thus, while we believe we have been organized and operated and intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we have qualified or will continue to so qualify for any particular year.
Thus, while we believe we have been organized and operated and intend to continue to operate so that we will qualify as a REIT, given the highly complex nature of the 27 Table of Contents rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we have qualified or will continue to so qualify for any particular year.
Certain tenant rights under our Ground Leases may limit the value we are able to realize upon lease expiration, sale of our land or other events, including, among others: (i) our Park Hotels master lease gives the tenant the right to purchase one or more of the hotels at fair market value if the hotel suffers a major casualty or condemnation event, as defined under the master lease; (ii) prior to the expiration of the Ground Lease relating to an office property that represents 1.1% of the gross book value of our portfolio as of December 31, 2023, the tenant has the right to demolish the building 13 Table of Contents and improvements on the property, although it cannot do so during the last five years of the lease without our prior consent.
Certain tenant rights under our Ground Leases may limit the value we are able to realize upon lease expiration, sale of our land or other events, including, among others: (i) our Park Hotels Portfolio master lease gives the tenant the right to purchase one or more of the hotels at fair market value if the hotel suffers a major casualty or condemnation event, as defined under the master lease; (ii) prior to the expiration of the Ground Lease relating to an office property that represents 1.1% of the gross book value of our portfolio as of December 31, 2024, the tenant has the right to demolish the building and improvements on the property, although it cannot do so during the last five years of the lease without our prior consent.
Therefore, cash available for distribution to GL unit holders will be reduced by all payments with respect to debt by Portfolio Holdings. ​ 24 Table of Contents Thus, holders of our common stock bear the risk that Caret units will dilute their economic interests and other attributes of ownership in us and may materially and adversely affect the market price of shares of our common stock.
Therefore, cash available for distribution to GL unit holders will be reduced by all payments with respect to debt by Portfolio Holdings. ​ Thus, holders of our common stock bear the risk that Caret units will dilute their economic interests and other attributes of ownership in us and may materially and adversely affect the market price of shares of our common stock.
Our board of directors intends to exercise its judgment from time to time, depending on the circumstances, as it believes the advantage of retaining flexibility in determining how to fulfill its responsibilities in any such circumstances as they may arise outweigh any perceived advantages of adopting additional specific procedures. ​ Additionally, our management’s ownership of Caret units creates potential conflicts of interest.
Our board of directors 25 Table of Contents intends to exercise its judgment from time to time, depending on the circumstances, as it believes the advantage of retaining flexibility in determining how to fulfill its responsibilities in any such circumstances as they may arise outweigh any perceived advantages of adopting additional specific procedures. ​ Additionally, our management’s ownership of Caret units creates potential conflicts of interest.
If the underlying Ground Lease is not renewed by the landlord on or before its expiration in 2044, our lease of the Doubletree Seattle Airport hotel to our tenant would also terminate which would result in the loss to us of the rental income from this hotel as well as any UCA that had not been realized by that time.
If the underlying Ground Lease is not renewed by the landlord on or before its expiration in 2044, our lease of the Doubletree Seattle Airport hotel to our tenant 13 Table of Contents would also terminate which would result in the loss to us of the rental income from this hotel as well as any UCA that had not been realized by that time.
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.
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 or other health crises.
Our future success will depend, in part, upon our ability to manage our expansion opportunities, which may pose substantial challenges for us to integrate new operations into its existing business in an efficient and timely manner, and to successfully monitor our operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls.
Our future success will depend, in part, upon our ability to manage our expansion opportunities and other strategic transactions, which may pose substantial challenges for us to integrate new operations into our existing business in an efficient and timely manner, and to successfully monitor our operations, costs, regulatory compliance and service quality, and to maintain other necessary internal controls.
The Portfolio Holdings LLCA further provides that prior to specified liquidity transactions, any amendment or modification of the terms of our drag-along right will require the consent of Caret unit holders (other than us or any person that is employed by us or our subsidiaries) holding a majority of Caret units held by such persons.
The Portfolio Holdings LLCA further provides that prior to specified liquidity transactions, any amendment or modification of the terms of our drag-along right requires the consent of Caret unit holders (other than us or any person that is employed by us or our subsidiaries) holding a majority of Caret units held by such persons.
Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to 21 Table of Contents fund their share of required capital contributions.
Investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions.
In connection with the Merger, certain officers entered into re-vesting agreements pursuant to which they have agreed to subject a portion of their otherwise vested Caret units to additional vesting conditions which will be satisfied on the second anniversary of the closing date of the Merger.
In connection with the Merger, certain officers entered into re-vesting agreements pursuant to which they have agreed to subject a portion of their otherwise vested Caret units to additional vesting conditions which will be satisfied on March 31, 2025, the second anniversary of the closing date of the Merger.
This potential adverse effect may be increased by the large number of shares of our common stock that are or will be owned by 23 Table of Contents Star Holdings to the extent that it resells, or there is a perception that it may resell, a significant portion of its holdings.
This potential adverse effect may be increased by the large number of shares of our common stock that are or will be owned by Star Holdings to the extent that it resells, or there is a perception that it may resell, a significant portion of its holdings.
As of December 31, 2023, the Term Loan Facility had an outstanding principal balance of $115.0 million and no borrowing had been made under the Incremental Term Loan Facility.
As of December 31, 2024, the Term Loan Facility had an outstanding principal balance of $115.0 million and no borrowing had been made under the Incremental Term Loan Facility.
(“MSD”), Star Holdings and SFTY Venture LLC each received rights to have shares of common stock issued from time to time registered for resale under the Securities Act. We may also issue shares of common stock in connection with future acquisitions.
(“MSD Partners”), Star Holdings and SFTY Venture LLC each received rights to have shares of common stock issued from time to time registered for resale under the Securities Act. We may also issue shares of common stock in connection with future acquisitions.
In addition, if our tenant has obtained leasehold financing to complete construction, and the construction lender forecloses on the mortgage following a default, there is a risk that the mortgagee or a new tenant may not have necessary or sufficient development experience to complete the project or to do so to the same standards as the original developer.
In addition, if our tenant has obtained leasehold financing to complete construction, and the construction lender forecloses on the mortgage following a default, there is a risk that the 15 Table of Contents mortgagee or a new tenant may not have necessary or sufficient development experience to complete the project or to do so to the same standards as the original developer.
The result of these incidents may include disrupted operations, misstated 16 Table of Contents or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance cost, litigation and damage to our business relationships.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance cost, litigation and damage to our business relationships.
Additionally, 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 our business. Cybersecurity risk and cyber incidents may adversely affect our business.
Additionally, the rise in interest rates and increased 16 Table of Contents 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 our business. Cybersecurity risk and cyber incidents may adversely affect our business.
Additionally, immediately following the Merger, 76,801 Caret units were awarded to executive officers and other employees that are subject to cliff vesting on the fourth anniversary of their grant date if our common stock has traded at an average per share price of $60.00 or more for at least 30 consecutive trading days during that four year period. ​ As a result, as of December 31, 2023, vested and unvested Caret units beneficially owned by our officers and other employees represent approximately 12.50% of the authorized Caret units, including 6.13% held directly and indirectly by Jay Sugarman, our Chairman and Chief Executive Officer.
Additionally, immediately following the Merger, 76,801 Caret units were awarded to executive officers and other employees that are subject to cliff vesting on the fourth anniversary of their grant date if our common stock has traded at an average per share price of $60.00 or more for at least 30 consecutive trading days during that four-year period. ​ As a result, as of December 31, 2024, vested and unvested Caret units beneficially owned by our officers and other employees represent approximately 11.4% of the authorized Caret units, including 6.1% held directly and indirectly by Jay Sugarman, our Chairman and Chief Executive Officer.
The sum of our cash base rental income in place for our Doubletree Seattle Airport property as of December 31, 2023 and total percentage cash rental income during the year ended December 31, 2023 for such property totaled an aggregate of $5.1 million, or approximately 2.2% of the cash revenues of the Company.
The sum of our cash base rental income in place for our Doubletree Seattle Airport property as of December 31, 2024 and total percentage cash rental income during the year ended December 31, 2024 for such property totaled an aggregate of $5.4 million, or approximately 2.2% of the cash revenues of the Company.
We have established an equity incentive plan (the “Plan”) providing for grants of Caret units to our directors, officers and employees and other eligible participants representing up to 1,500,000 Caret units, 1,496,982 of which are currently outstanding.
We have established an equity incentive plan (the “Plan”) providing for grants of Caret units to our directors, officers and employees and other eligible participants representing up to 1,500,000 Caret units, 1,371,254 of which are currently outstanding.
We cannot predict whether future issuances of shares of our common stock or the availability of shares for resale in the open market will decrease the market price of our common stock. Under the terms of registration rights agreements, MSD Partners, L.P.
The availability of shares for future sale could adversely affect the market price of our common stock. We cannot predict whether future issuances of shares of our common stock or the availability of shares for resale in the open market will decrease the market price of our common stock. Under the terms of registration rights agreements, MSD Partners, L.P.
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.
In addition, tenants may fail to properly maintain their improvements, and certain improvements may become obsolete 12 Table of Contents 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.
The Caret program was designed to recognize the two distinct components of value in SAFE’s Ground Lease portfolio: the “bond component,” which consists of the bond-like income stream SAFE receives from contractual rent payments under its Ground Leases and the return of invested capital, and the “Caret component,” which consists of the unrealized capital appreciation above SAFE’s investment basis in its Ground Leases due to SAFE’s ownership of the land and improvements at the end of the term of the applicable Ground Lease.
The Caret program was designed to recognize the two distinct components of value in our Ground Lease portfolio: the “bond component,” which consists of the bond-like income stream we receive from contractual rent payments under our Ground Leases and the return of invested capital, and the “Caret component,” which consists of the unrealized capital appreciation above our investment basis in our Ground Leases due to our ownership of the land and improvements at the end of the term of the applicable Ground Lease.
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.
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. ● 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.
Pursuant to the Plan, 1,500,000 Caret units were reserved for grants of performance-based awards under the Plan to Plan participants, including certain of our executives. Initial grants under the Plan were subject to vesting based on time-based service conditions and hurdles relating to our common stock price, all of which were satisfied as of December 31, 2023.
Pursuant to the Plan, 1,500,000 Caret units were reserved for grants of performance-based awards under the Plan to Plan participants, including certain of our executives. Initial grants under the Plan were subject to vesting based on time-based service conditions and hurdles relating to our common stock price, all of which have been satisfied.
In connection with the sale of 137,142 Caret units in February 2022 (28,571 of which were committed to be purchased at the time), we agreed to use commercially reasonable efforts to provide public market liquidity for such Caret units, or securities into which they may be exchanged, prior to the second anniversary of such sales.
In connection with the sale of 137,142 Caret units in February 2022 (28,571 of which were committed to be purchased at the time, but did not close), we agreed to use commercially reasonable efforts to provide public market liquidity for such Caret units, or securities into which they may be exchanged, prior to the second anniversary of such 24 Table of Contents sales.
We do not independently investigate or verify the information provided to us by our tenants and no assurance can be given that the information is accurate.
We do not independently investigate or verify the information provided to us by our tenants and 14 Table of Contents no assurance can be given that the information is accurate.
With respect to other properties, the property NOI available to us at December 17 Table of Contents 31, 2023 may not be indicative of future periods, depending on the direction and magnitude of demand shifts for the entire period.
With respect to other properties, the property NOI available to us at December 31, 2024 may not be indicative of future periods, depending on the direction and magnitude of demand shifts for the entire period.
We may grant a leasehold mortgagee additional time to cure certain non-monetary defaults and may agree to defer certain remedies while the leasehold 15 Table of Contents mortgagee is endeavoring to cure a default.
We may grant a leasehold mortgagee additional time to cure certain non-monetary defaults and may agree to defer certain remedies while the leasehold mortgagee is endeavoring to cure a default.
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.
Epidemics, pandemics or other health crises 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, due to declines in corporate budgets and consumer travel demand or otherwise, which could adversely affect our hotel assets, which accounted for approximately 10.2%, 10.3% and 11.9% of our total revenues for the years ended December 31, 2024, 2023 and 2022, respectively, including percentage rent; ● the impact on our percentage rent revenues, all of which are based on operating performance at our hotel properties.
These potential management distractions increased expenses, changes to operations, disputes with third parties, or other effects could materially and adversely affect our financial condition, results of operations, cash flow and per share market price of our common stock. The Spin-Off may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws.
These potential management distractions, as well as increased expenses, changes to operations, potential disputes with third parties, or other effects related to our arrangements with Star Holdings could materially and adversely affect our financial condition, results of operations, cash flow and per share market price of our common stock. 20 Table of Contents The Spin-Off may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws.
Certain other changes to the Caret program in connection with the Merger could further impact the economic interests of our common stockholders, including the following: ● A lease extension (other than in accordance with the original terms of a Ground Lease) or other “GL Material Change,” as defined in the Portfolio Holdings LLCA, will result in accelerating, not increasing, the amounts SAFE is entitled to on account of the GL units it owns; ● Portfolio Holdings will have less discretion with respect to sales of Ground Lease Assets, as (i) it may be obligated to sell Ground Lease Assets (thereby triggering a distribution to holders of Caret units and GL units) upon any Ground Lease expiration or termination, not just those related to tenant defaults, as well as upon SAFE’s receipt of all amounts it is entitled to after a lease extension or other GL Material Change, and (ii) it will be required to sell either to an affiliate via an arm’s length marketed process (and, following specified liquidity transactions, as agreed by a majority of a committee of independent directors) or to an unaffiliated third party; ● Under the recently amended Caret program, SAFE, as owner of the GL units, will no longer have a redemption right with respect to GL units; and ● Caret distributions are not reduced for interest and principal repayment obligations of indebtedness (other than certain debt defined in the Portfolio Holdings LLCA as a “Caret Financing”).
Certain other aspects of the Caret program could further impact the economic interests of our common stockholders, including the following: ● A lease extension (other than in accordance with the original terms of a Ground Lease) or other “GL Material Change,” as defined in the Portfolio Holdings LLCA, will result in accelerating the amounts SAFE is entitled to on account of the GL units it owns; ● Portfolio Holdings may be obligated to sell Ground Lease Assets (thereby triggering a distribution to holders of Caret units and GL units) upon any Ground Lease expiration or termination, as well as upon SAFE’s receipt of all amounts it is entitled to after a lease extension or other GL Material Change, and will be required to sell either to an affiliate via an arm’s length marketed process (and, following specified liquidity transactions, as agreed by a majority of a committee of independent directors) or to an unaffiliated third party; ● SAFE, as owner of the GL units, does not have a redemption right with respect to GL units; and ● Caret distributions are not reduced for interest and principal repayment obligations of indebtedness (other than certain debt defined in the Portfolio Holdings LLCA as a “Caret Financing”).
We received $2.8 million of percentage rent payments from our Park Hotels Portfolio in 2023 (which reflect 2022 operations) and received no percentage rent payments in 2022 (which reflect 2021 operations) or 2021 (which reflect 2020 operations).
We received $3.5 million of percentage rent payments from our Park Hotels Portfolio in 2024 (which reflect 2023 operations), $2.8 million of percentage rent payments from our Park Hotels Portfolio in 2023 (which reflect 2022 operations) and received no percentage rent payments in 2022 (which reflect 2021 operations).
As a holding company, claims of shareholders are structurally subordinated to all existing and future creditors and preferred equity holders of Portfolio Holdings and its subsidiaries.
We conduct substantially all of our operations through Portfolio Holdings. As a holding company, claims of shareholders are structurally subordinated to all existing and future creditors and preferred equity holders of Portfolio Holdings and its subsidiaries.
While the changes to the Caret program in connection with the Merger were intended to improve the recognition of these two components, particularly the Caret component, by market participants, there can be no assurances that this will happen or that such recognition will be accretive to the market price of shares of our common stock. ​ The terms of Caret units could result in conflicts of interest between holders of our common stock and holders of Caret units.
While the Caret program is designed to allow for the recognition of these two components, particularly the Caret component, by market participants, there can be no assurances that this will happen or that such recognition will be accretive to the market price of shares of our common stock. ​ The terms of Caret units could result in conflicts of interest between holders of our common stock and holders of Caret units.
There can be no assurance that we will not be materially and adversely affected by a leasehold mortgagee’s exercise of such mortgagee protections. We are subject to the risk of bankruptcy of our tenants.
There can be no assurance that we will not be materially and adversely affected by a leasehold mortgagee’s exercise of such mortgagee protections. We are subject to the risk of bankruptcy of our tenants. We have had, and may in the future have, tenants file for bankruptcy protection.
Star Holdings owns a significant amount of our common stock, all of which serves as collateral for a margin loan. As of December 31, 2023, Star Holdings owned approximately 19% of the outstanding shares of our common stock.
Star Holdings owns a significant amount of our common stock, some of which serves as collateral for a margin loan. As of December 31, 2024, Star Holdings owned approximately 18.9% of the outstanding shares of our common stock.
Future issuances of debt or preferred equity securities could adversely affect our common shareholders and result in conflicts of interest. We may issue additional debt or equity securities in the future. Upon liquidation, holders of our debt and preferred stock will receive a distribution of our available assets before holders of our common stock.
We may issue additional debt or equity securities in the future. Upon liquidation, holders of our debt and preferred stock will receive a distribution of our available assets before holders of our common stock.
As a result, although those agreements are intended to reflect arm’s-length terms, they may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties. ​ 20 Table of Contents Financing and Investment Risks 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.
As a result, although those agreements are intended to reflect arm’s-length terms, they may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties. ​ Financing and Investment Risks Our debt obligations will reduce cash available for distribution and expose us to the risk of default.
We 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.
For example, we received no percentage rent payments from our Park Hotels Portfolio in 2022 (which reflects 2021 operations) and in 2021 (which reflects 2020 operations) due to the impact of the COVID-19 pandemic, and the percentage rent payment in 2023 (which reflects 2022 operations) was below pre-pandemic levels; ● declines in corporate budgets for, and demand for, office space; ● 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. ​ During its peak, the COVID-19 pandemic adversely affected our growth, and its after-effects on certain sectors of the economy and commercial real estate markets remain uncertain.
Moreover, a collateral call or mandatory repayment may occur at a time when Star Holdings is subject to contractual or statutory prohibitions from selling. The concentration of our voting power may adversely affect the ability of investors to influence our policies. As of December 31, 2023, Star Holdings owned approximately 19% of the outstanding shares of our common stock.
Moreover, a collateral call or mandatory repayment may occur at a time when Star Holdings is subject to contractual or statutory prohibitions from selling. 19 Table of Contents The concentration of our voting power may adversely affect the ability of investors to influence our policies.
Such subsidiary corporations will be subject to U.S. federal, state and local corporate income taxes, including potential penalty taxes, which would decrease the cash available for distribution to our shareholders. ​ 28 Table of Contents Item 1B. Unresolved Staff Comments None.
Such subsidiary corporations will be subject to U.S. federal, state and local corporate income taxes, including potential penalty taxes, which would decrease the cash available for distribution to our shareholders. ​
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.
A lack of recourse to creditworthy counterparties may adversely affect us and our tenants. 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.
The absence of the drag-along right after a liquidity transaction could make us a less attractive target for acquisition and therefore delay, deter or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interests of our common stockholders.
The absence of the drag-along right after a liquidity transaction could make us a less attractive target for acquisition and therefore delay, deter or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interests of our common stockholders. 26 Table of Contents Future issuances of debt or preferred equity securities could adversely affect our common shareholders and result in conflicts of interest.
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.
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 management agreement with Star Holdings 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.
Borrowings under the Term Loan Facility bear an interest at a fixed rate of 8.00% per annum, subject to increase in certain circumstances. The Term Loan Facility has certain prepayment obligations, and a maturity of March 31, 2027.
Borrowings under the Term Loan Facility bear interest at a fixed rate of 8.00% per annum, which may increase to 10.00% per annum if any loans remain outstanding under the Incremental Term Loan Facility. The Term Loan Facility has certain prepayment obligations, and a maturity of March 31, 2027.
In addition, our ability to recognize value through reversion rights may be limited by the rights of our tenants under some of our Ground Leases.
There can be no assurances as to the value that may be attributed to Caret units in the future. In addition, our ability to recognize value through reversion rights may be limited by the rights of our tenants under some of our Ground Leases.
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.
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. 23 Table of Contents Risks Related to Our Common Stock Cash available for distribution may not be sufficient to make distributions to our shareholders at expected levels, or at all.
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.
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, distributions to our shareholders would not be deductible by us in determining our taxable income, we could be subject to the one percent excise tax on stock repurchases imposed by the 2022 Inflation Reduction Act, and we may not elect to be taxed as a REIT for four taxable years following the year in which we were disqualified.
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.
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. 22 Table of Contents Risks Related to Our Organization and Structure We are a holding company and will rely on funds from Portfolio Holdings to pay our obligations and distributions to our shareholders.
Under our stockholder’s agreement with an institutional investor that invested in Old SAFE prior to Old SAFE’s initial public offering, we have agreed that it will have the right to participate as a co-investor in real estate investments for which we are seeking joint venture partners.
Under our stockholder’s agreement with an institutional investor, we have agreed that it will have the right to participate as a co-investor in real estate investments for which we are seeking joint venture partners. In a joint venture, we may not be in a position to exercise sole decision-making authority regarding material decisions.
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.
Our business and growth prospects could be adversely affected by future epidemics, pandemics or other health crises.
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.
In addition, as of December 31, 2024, our portfolio had regional geographic concentrations based on gross book value (refer to “Our Portfolio” in Item 7. 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.
As of November 8, 2023, the outstanding principal balance was $80.2 million. The Margin Loan Facility is secured by all of the shares of our common stock held by Star Holdings.
As of September 30, 2024, the outstanding principal balance was $87.4 million. As of December 31, 2024, the Margin Loan Facility is secured by 12.9 million shares of our common stock held by Star Holdings.
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.
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.
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 design of the Caret program may not result in the recognition of the two distinct components of value by market participants.
The application of alternative estimates or assumptions could result in valuations, by us or others, which are materially lower than those used in our underwriting and portfolio monitoring processes. 14 Table of Contents 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.
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.
If we fail to meet the market’s expectations with regard to future operating results and cash distributions, the market price of our common stock could be adversely affected. The availability of shares for future sale could adversely affect the market price of our common stock.
If we fail to meet the market’s expectations with regard to future operating results and cash distributions, the market price of our common stock could be adversely affected. Stockholders of the Company have no contractual or other legal right to dividends that have not been declared by our board of directors.
Our future operating results will suffer if we do not effectively manage our operations following the Merger. Following the Merger, we may continue to expand its operations through additional acquisitions, development opportunities and other strategic transactions, some of which involve complex challenges.
We may decide to further expand our operations through acquisitions, development opportunities and other strategic transactions, some of which involve complex challenges.
The possibility of another epidemic, pandemic or other health crisis presents material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.
The possibility of another epidemic, pandemic or other health crisis presents material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows. 17 Table of Contents Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect current market values, including the decline in office values, and may decline materially in future periods.
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.
For the year ended December 31, 2024, our two largest tenants by revenues accounted for approximately 4.5% and 4.4%, respectively, of our total revenues. For the year ended December 31, 2024, 36.9% of our total revenues came from multifamily properties, 36.4% came from office properties and 10.2% came from hotel properties.
In addition to the Caret units reserved for issuance under the Plan, we have sold or contracted to sell an aggregate of 259,642 Caret units to third-party investors, including affiliates of MSD and an entity affiliated with one of our independent directors. As a result, we currently own the remaining 82.2% of the outstanding Caret units.
In addition to the Caret units reserved for issuance under the Plan, we have sold 122,500 Caret units to third-party investors, including affiliates of MSD Partners, that remain outstanding as of December 31, 2024. As a result, we currently own the remaining 84.3% of the outstanding Caret units.
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.
We cannot assure you that any expansion or acquisition opportunities or other strategic transactions, will be successful, or that we will realize our expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits. ​ 18 Table of Contents Risks Related to Our Relationship with Star Holdings 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.
Stockholders of the Company have no contractual or other legal right to dividends that have not been declared by our board of directors. Tax Risks Related to Ownership of Our Shares 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.
Repurchase activity could have a negative effect on our stock price, increase volatility, or fail to enhance stockholder value. Tax Risks Related to Ownership of Our Shares 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.
Additionally, the compensation and benefits packages we may need to offer to remain competitive for these individuals could increase the cost of replacement and retention. Risks Related to the Spin-Off and Our Relationship with Star Holdings The Spin-Off may not deliver its intended results.
Additionally, the compensation and benefits packages we may need to offer to remain competitive for these individuals could increase the cost of replacement and retention. We may decide to further expand our operations through acquisitions, development opportunities and other strategic transactions.
We are Star Holdings’ external manager and our duties under the management agreement could distract the time and attention of our management away from Safehold. In addition, the Spin-Off may lead to increased recurring operating and other expenses and to changes to certain operations. Disputes with third parties could also arise out of these transactions.
We are Star Holdings’ external manager and our duties under the management agreement could distract the time and attention of our management away from Safehold.
In consideration for our management services, Star Holdings has agreed to pay us an annual management fee fixed at $25.0 million, $15.0 million, $10.0 million 18 Table of Contents and $5.0 million in each of the first four annual terms of the agreement, and 2.0% of the gross book value of Star Holdings’ assets thereafter, excluding the shares of us held by Star Holdings, as of the end of each fiscal quarter.
The annual fee declines to $10.0 million and $5.0 million, respectively, for each of the following annual terms, and adjusts to 2.0% of the gross book value of Star Holdings’ assets, excluding shares of the Company’s common stock held by Star Holdings, thereafter. The management fee is payable in cash quarterly, in arrears.
The price for our most recent sale of Caret units, in August 2022, implied a $2.0 billion valuation for 100% of Caret units, but there can be no assurances as to the value that may be attributed to Caret units in the future.
The price for our most recent sale of Caret units, in August 2022, implied a $2.0 billion valuation for 100% of Caret units, but in April 2024 Caret units purchased in February 2022 were redeemed at their original purchase price, less the amount of distributions previously made on such units, pursuant to a redemption option.
Removed
For example, we received no percentage rent payments from our Park Hotels Portfolio in 2022 (which reflect 2021 operations) due to the impact of the COVID-19 pandemic, and the percentage rent payments in 2023 (which reflect 2022 operations) were below pre-pandemic levels.
Added
For example, one of our tenants under our Park Hotels Portfolio master lease elected to not extend the leases underlying two of the five hotels past December 2025.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe team has primary responsibility for our overall 29 Table of Contents cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. ​ Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. ​
Biggest changeThese individuals have primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. ​ 29 Table of Contents Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. ​
Board members receive presentations on cybersecurity topics from our Head of IT, internal technology staff or external experts as part of the Board’s continuing education on topics that impact public companies. ​ Our management team, including the Head of Risk Management and Chief Legal Officer, is responsible for assessing and managing our material risks from cybersecurity threats.
Board members receive presentations on cybersecurity topics from our Head of IT, internal technology staff or external experts as part of the Board’s continuing education on topics that impact public companies. ​ Certain members of our management team, including the Head of Risk Management and our General Counsel, are responsible for assessing and managing our material risks from cybersecurity threats.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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.
Biggest changeItem 3. Legal Proceedings We are not currently party to any pending legal proceedings, nor is any property of the Company subject to any pending legal proceedings, that we believe could have a material adverse effect on our business or financial condition.
Added
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. PART II

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 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.
Biggest changeItem 5. Market for Registrant’s Equity, Related Stock Matters and Issuer Purchases of Equity Securities Our common stock trades on the NYSE under the symbol "SAFE." Computershare is the transfer agent and registrar for our common stock. We had 1,501 holders of record of common stock as of February 5, 2025.
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. ​
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, 2024. Issuer Purchases of Equity Securities We did not purchase any shares of our common stock during the three months ended December 31, 2024.
Added
On February 4, 2025, our Board authorized the repurchase of up to $50 million of our common stock. Repurchases may be made from time to time at management’s discretion at prices management considers to be attractive through open market purchases or through privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan, subject to availability.
Added
Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Exchange Act and other applicable legal requirements.
Added
We have no obligation to repurchase additional shares, and the timing, actual number and value of the shares that are repurchased, if any, will be at the discretion of management and will depend on a number of factors, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate.
Added
Repurchases may be suspended, terminated or modified at any time for any reason. The share repurchase program does not have an expiration date. Any repurchased shares shall be returned to the status of authorized but unissued shares of commons stock. ​ Item 6. RESERVED 30 Table of Contents

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe expect that we will be able to meet our liquidity requirements over the next 12 months and beyond. ​ The following table outlines our cash flows provided by operating activities, cash flows used in investing activities and cash flows provided by financing activities for the years ended December 31, 2023 and 2022 ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2023 2022 ​ Change Cash flows provided by operating activities ​ $ 15,391 ​ $ 64,852 ​ $ (49,461) Cash flows used in investing activities ​ (576,572) ​ ​ (1,145,953) ​ 569,381 Cash flows provided by financing activities ​ 559,531 ​ ​ 1,090,975 ​ (531,444) ​ The decrease in cash flows provided by operating activities during 2023 was primarily due to costs incurred in connection with the Merger and increased costs on our debt obligations in 2023 due to an increase in borrowings and interest rates, which were partially offset by an increase in percentage rent and rents collected in 2023 from new originations and acquisitions of Ground Leases throughout 2022 and 2023.
Biggest changeWe expect that we will be able to meet our liquidity requirements over the next 12 months and beyond. ​ The following table outlines our cash flows provided by operating activities, cash flows used in investing activities and cash flows provided by financing activities for the years ended December 31, 2024 and 2023 ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ ​ December 31, ​ ​ 2024 2023 Cash flows provided by (used in) operating activities ​ $ 37,855 ​ $ 15,391 ​ Cash flows provided by (used in) investing activities ​ (212,370) ​ (576,572) ​ Cash flows provided by (used in) financing activities ​ 144,893 ​ 559,531 ​ ​ The increase in cash flows provided by operating activities during 2024 was due primarily to an increase in distributions received from equity method investments in 2024 and the payment of Merger expenses in 2023, which was partially offset by the payment of annual performance awards in 2024.
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.
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 31 Table of Contents are typically capped between 3.0% - 3.5%; however, 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.
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.
Periods presented prior to the Merger date of March 31, 2023 reflect the operations of Old SAFE and periods subsequent to March 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.
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.
Below is an overview of the top 10 assets in our portfolio as of December 31, 2024 (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 5.4 % 135 West 50th Street Office New York, NY 2123 / 2123 Fixed with Inflation Adjustments 4.7 % 195 Broadway Office New York, NY 2118 / 2118 Fixed with Inflation Adjustments 4.5 % 20 Cambridgeside ​ Life Science ​ Cambridge, MA ​ 2121 / 2121 ​ Fixed with Inflation Adjustments ​ 4.4 % Park Hotels Portfolio (3) Hotel Various 2025 / 2035 % Rent 3.3 % Alohilani Hotel Honolulu, HI 2118 / 2118 Fixed with Inflation Adjustments 3.3 % 685 Third Avenue Office New York, NY 2123 / 2123 Fixed with Inflation Adjustments 3.0 % 1111 Pennsylvania Avenue Office Washington, DC 2117 / 2117 Fixed with Inflation Adjustments 2.3 % 100 Cambridgeside ​ Mixed Use and Other ​ Cambridge, MA ​ 2121 / 2121 ​ Fixed with Inflation Adjustments ​ 2.2 % Columbia Center ​ Office ​ Washington, DC ​ 2120 / 2120 ​ Fixed with Inflation Adjustments ​ 2.2 % (1) Gross book value represents the historical purchase price plus accrued interest on sales-type leases.
Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our common stock, capital needs, and our determinations of the appropriate sources of funding. As of December 31, 2023, we had not sold any shares under the ATM.
Actual sales, if any, will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our common stock, capital needs, and our determinations of the appropriate sources of funding. As of December 31, 2024, we had not sold any shares under the ATM.
We may redeem the 2.85% Notes in whole at any time or in part from time to time prior to October 15, 2031, at our option and sole discretion, at a redemption price equal to the greater 37 Table of Contents of: (i) 100% of the principal amount of the 2.85% Notes being redeemed; and (ii) a make-whole premium calculated in accordance with the indenture, plus, in each case, accrued and unpaid interest thereon to, but not including, the applicable redemption date.
We may redeem the 2.85% Notes in whole at any time or in part from time to time prior to October 15, 2031, at our option and sole discretion, at a redemption price equal to the greater of: (i) 100% of the principal amount of the 2.85% Notes being redeemed; and (ii) a make-whole premium calculated in accordance with the indenture, plus, in each case, accrued and unpaid interest thereon to, but not including, the applicable redemption date.
Our 3.98% Notes and 5.15% Notes contain a provision whereby they will be deemed to include additional financial covenants and negative covenants to the extent such covenants are incorporated into Portfolio Holdings’ and/or our existing or future material credit facilities, including the 2021 Unsecured Revolver and 2023 Unsecured Revolver, and to the extent such covenants are more favorable to the lenders under such material credit facilities than the covenants contained in the 3.98% Notes and 5.15% Notes.
Our 3.98% Notes and 5.15% Notes contain a provision whereby they will be deemed to include additional financial covenants and negative covenants to the extent such covenants are incorporated into Portfolio Holdings’ and/or our existing or future material credit facilities, including the 2024 Unsecured Revolver, and to the extent such covenants are more favorable to the lenders under such material credit facilities than the covenants contained in the 3.98% Notes and 5.15% Notes.
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.
Depreciation and amortization was $9.9 million and $9.9 million during the years ended December 31, 2024 and 2023, 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.
We refer to this unrestricted cash and additional borrowing capacity on our 2021 Unsecured Revolver and 2023 Unsecured Revolver as our “equity” liquidity which can be used for general corporate purposes or leveraged to acquire or originate new Ground Lease assets.
We refer to this unrestricted cash and additional borrowing capacity on our 2024 Unsecured Revolver as our “equity” liquidity which can be used for general corporate purposes or leveraged to acquire or originate new Ground Lease assets.
Our 2.80% Notes, 2.85% Notes, 3.98% Notes and 5.15% Notes are subject to a financial covenant requiring a ratio of unencumbered assets to unsecured debt of at least 1.25x and contain customary affirmative and negative covenants.
Our 2.80% Notes, 2.85% Notes, 3.98% Notes, 5.15% Notes, 6.10% Notes and 5.65% Notes are subject to a financial covenant requiring a ratio of unencumbered assets to unsecured debt of at least 1.25x and contain customary affirmative and negative covenants.
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.
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, 2024, excluding unfunded commitments: ​ ​ ​ ​ ​ ​ % of Gross Market Book Value ​ Manhattan (1) 22 % Washington, DC 10 ​ Boston 8 ​ Los Angeles 7 ​ San Francisco 4 ​ Denver ​ 4 ​ Honolulu ​ 3 ​ Nashville ​ 3 ​ Miami ​ 3 ​ Atlanta 2 ​ (1) Total New York MSA including areas outside of Manhattan makes up 28% of gross book value. ​ ​ ​ ​ ​ ​ ​ % of Gross Property Type Book Value ​ Multifamily 41 % Office 40 ​ Hotel 11 ​ Life Science ​ 6 ​ Mixed Use and Other 2 ​ ​ 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.
Our primary sources of cash to date have been proceeds from equity offerings and private placements, proceeds from our initial capitalization by iStar and two institutional investors and borrowings from our debt facilities, unsecured notes and mortgages.
Our primary sources of cash to date have been proceeds from equity offerings and private placements, proceeds from our initial capitalization by iStar and two institutional investors and borrowings from our debt facilities, unsecured notes, Commercial Paper Program and mortgages.
Debt 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.
Debt Covenants —We are subject to financial covenants under the 2024 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 2024 Unsecured Revolver.
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).
As of December 31, 2024, we had $46.2 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).
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.
The rise in interest rates has also adversely affected the U.S. office sector, along with office vacancies and a decline in market liquidity following the onset of the COVID-19 pandemic, all of which could negatively impact our tenants, Ground Rent Coverages and estimated Combined Property Values. Moreover, certain office assets currently have material vacancies.
Our primary sources of liquidity going forward will generally consist of cash on hand and cash flows from operations, new financings, funds from our joint venture partners, unused borrowing capacity under our 2021 Unsecured Revolver (subject to the conditions set forth in the applicable loan agreement), our 2023 Unsecured Revolver (subject to the conditions set forth in the applicable loan agreement) and common and/or preferred equity issuances.
Our primary sources of liquidity going forward will generally consist of cash on hand and cash flows from operations, new financings, funds from our joint venture partners, unused borrowing capacity under our 2024 Unsecured Revolver (subject to the conditions set forth in the applicable loan agreement) and Commercial Paper Program, and common and/or preferred equity issuances.
We believe the strong credit profile we have established utilizing our modern Ground Leases and our current investment-grade credit ratings from Moody's Investors Services of A3 and Fitch Ratings of BBB+ will accelerate our ability to bring commercial real estate owners, developers and sponsors more efficiently priced capital and allows us significant operational and financial flexibility and supports our ability to scale our Ground Lease platform.
We believe the strong credit profile we have established utilizing our modern Ground Leases and our current investment-grade credit ratings from Moody's Investors Services of A3, Fitch Ratings of A- and S&P Global Ratings of BBB+ facilitates our ability to bring commercial real estate owners, developers and sponsors more efficiently priced capital and allows us significant operational and financial flexibility and supports our ability to scale our Ground Lease platform.
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.
In addition, during the years ended December 31, 2024 and 2023, we also recorded $0.5 million and $0.5 million, respectively, of real estate expense 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.
During the year ended December 31, 2023, we recorded a full impairment of the goodwill that was recognized as a result of the Merger (refer to Note 3 to the consolidated financial statements). During the year ended December 31, 2023, we recorded a provision for credit losses of $2.7 million.
During the year ended December 31, 2023, we recorded a full impairment of the goodwill that was recognized as a result of the Merger (refer to Note 3 to the consolidated financial statements). During the year ended December 31, 2024, we recorded a provision for credit losses of $9.5 million.
(4) For the year ended December 31, 2023, general and administrative expenses were 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.
(4) For the years ended December 31, 2024 and 2023, general and administrative expenses were partially offset by $16.8 million and $19.4 million, respectively, of management fees earned from Star Holdings, which are included in “Other income” in our consolidated statements of operations.
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.
(“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.
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.
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, 2024, we had an aggregate $150.3 million of such commitments.
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.
As of December 31, 2024, the percentage breakdown of the gross book value of our portfolio was 41% multi-family, 40% office, 11% hotels, 6% life science and 2% mixed use and other. The diversification by geographic location, property type and sponsor in our portfolio further reduces risk and enhances potential upside.
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.
Our discussion related to the results of operations and changes in financial condition for 2023 compared to 2022 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 . These historical financial statements may not be indicative of our future performance. Merger Transaction On August 10, 2022, Safehold Inc.
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.
Our Portfolio Our portfolio of properties is diversified by property type and region. 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.
We analyze historical data provided by Trepp (“Trepp”) for single asset borrower loans and considers comparable loan to value ratios, loss rates, timing of losses, vintage, property type and other statistics. We update our analysis for c urrent market conditions and reasonable and supportable forecasts of unemployment rates to develop an estimate of credit losses.
We analyzed historical data provided by Trepp (“Trepp”) for single asset borrower loans and considered comparable loan to value ratios, loss rates, timing of losses, vintage, property type and other statistics. We updated our analysis for current market conditions and reasonable and supportable forecasts of unemployment rates to develop an estimate of credit losses.
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).
As of December 31, 2024, our estimated portfolio Ground Rent Coverage was 3.5x (see the "Risk Factors - Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect current market values, including the decline in office values, 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).
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.
Real estate expense during the years ended December 31, 2024 and 2023 was $4.2 million and $4.7 million, respectively, and consisted primarily of the amortization of an operating lease right-of-use asset, property taxes, legal fees, 34 Table of Contents property appraisal fees and insurance expense.
In addition, the 2021 Unsecured Revolver and the 2023 Unsecured Revolver contain customary affirmative and negative covenants. Among other things, 38 Table of Contents these covenants may restrict our or certain of our subsidiaries’ ability to incur additional debt or liens, engage in certain mergers, consolidations and other fundamental changes, make other investments or pay dividends.
In addition, the 2024 Unsecured Revolver contains customary affirmative and negative covenants. Among other things, these covenants may restrict us or certain of our subsidiaries’ ability to incur additional debt or liens, engage in certain mergers, consolidations and other fundamental changes, make other investments or pay dividends.
During the year ended December 31, 2022, we sold a Ground Lease to a third-party for $136.0 million and recognized a gain on sale of Ground Leases of $55.8 million, or $46.3 million net of amounts attributable to noncontrolling interests and redeemable noncontrolling interests. ​ During the year ended December 31, 2023, earnings from equity method investments (refer to Note 7 to the consolidated financial statements) resulted from our $3.5 million share of income from our 425 Park Avenue venture, our $5.7 million share of income from our 32 Old Slip venture, our $5.4 million share of income from the Ground Lease Plus Fund and our $9.6 million share of income from the Leasehold Loan Fund.
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. ​ During the year ended December 31, 2024, earnings from equity method investments (refer to Note 7 to the consolidated financial statements) resulted from our $3.2 million share of income from our 425 Park Avenue venture, our $5.7 million share of income from our 32 Old Slip venture, our $2.3 million share of income from the Ground Lease Plus Fund and our $11.8 million share of income from the Leasehold Loan Fund.
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.
The increase was due primarily to acquisitions of Ground Leases and additional fundings on existing Ground Leases classified as sales-type leases and Ground Lease receivables. Operating lease income decreased to $71.1 million during the year ended December 31, 2024 from $71.3 million for the year ended December 31, 2023.
The following table presents our general and administrative expenses for the years ended December 31, 2023 and 2022 ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ December 31, ​ 2023 2022 Public company and other costs (1) ​ $ 37,015 ​ $ 4,316 Stock-based compensation (2) ​ 23,230 ​ 1,546 Management fees (3) ​ ​ 5,199 ​ ​ 20,252 Expense reimbursements to the Former Manager (3) ​ 3,125 ​ 12,500 Total general and administrative expenses (4) ​ $ 68,569 ​ $ 38,614 (1) For the year ended December 31, 2023, public company and other costs primarily includes compensation, occupancy, audit, legal, insurance and other office related costs.
The following table presents our general and administrative expenses for the years ended December 31, 2024 and 2023 ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ December 31, ​ 2024 2023 Public company and other costs (1) ​ $ 41,160 ​ $ 37,015 Stock-based compensation (2) ​ 13,757 ​ 23,230 Management fees (3) ​ ​ — ​ ​ 5,199 Expense reimbursements to the former manager (3) ​ — ​ 3,125 Total general and administrative expenses (4) ​ $ 54,917 ​ $ 68,569 (1) For the years ended December 31, 2024 and 2023, public company and other costs primarily includes compensation, occupancy, audit, legal, insurance and other office related costs.
The amendments became effective on January 4, 2021. We and Portfolio Holdings have filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of Portfolio Holdings, which will be fully and unconditionally guaranteed by us.
In April 2023, we and Portfolio Holdings filed a registration statement on Form S-3 with the SEC registering, among other securities, debt securities of Portfolio Holdings, which will be fully and unconditionally guaranteed by us.
The increase in 2023 was due primarily to the depreciation on corporate fixed assets acquired in the Merger. Subsequent to the Merger closing on March 31, 2023, general and administrative expenses primarily includes public company costs such as compensation (including equity-based compensation), occupancy and other costs.
Subsequent to the Merger closing on March 31, 2023, general and administrative expenses primarily includes public company costs such as compensation (including equity-based compensation), occupancy and other costs.
Trust Preferred Securities —We assumed trust preferred securities from iStar in connection with Merger. The trust preferred securities bear interest at three-month Adjusted Term SOFR plus 1.50% and mature in October 2035.
The trust preferred securities bear interest at three-month Adjusted Term SOFR plus 1.50% and mature in October 2035.
The provision was primarily the result of the adoption of a new accounting standard (refer to Note 3 to the consolidated financial statements) in 2023, which resulted in a $2.4 million provision on our loan receivable, net – related party.
The provision was primarily the result of the adoption of a new accounting standard (refer to Note 3 to the consolidated financial statements) in 2023, which resulted in a $2.4 million provision on our loan receivable, net – related party. During the year ended December 31, 2024, other expense consists primarily of costs related to our debt obligations.
We may, at our option, prepay at any time all, or from time to time any part of, the 5.15% Notes, in an amount not less than 5% of the aggregate principal amount of the 5.15% Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, and the applicable make-whole amount calculated in accordance with the indenture; provided, that, so long as no default or event of default shall then exist, at any time on or after February 13, 2052, we may, at our option, prepay all or any part of the 5.15% Notes at 100% of the principal amount so prepaid, together with, in each case, accrued interest to the prepayment date, without any make-whole amount. ​ 2021 Unsecured Revolver —In March 2021, Portfolio Holdings, then known as Safehold Operating Partnership LP, (as borrower) and us (as guarantor), entered into an unsecured revolving credit facility with an initial maximum aggregate principal amount of up to $1.0 billion (the “2021 Unsecured Revolver”).
We may, at our option, prepay at any time all, or from time to time any part of, the 5.15% Notes, in an amount not less than 5% of the aggregate principal amount of the 5.15% Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, and the applicable make-whole amount calculated in accordance with the indenture; provided, that, so long as no default or event of default shall then exist, at any time on or after February 13, 2052, we may, at our option, prepay all or any part of the 5.15% Notes at 100% of the principal amount so prepaid, together with, in each case, accrued interest to the prepayment date, without any make-whole amount. ​ In February 2024, Portfolio Holdings (as issuer) and us (as guarantor) issued $300.0 million aggregate principal amount of 6.10% Notes.
Our 36 Table of Contents primary uses of cash to date have been the acquisition/origination of Ground Leases, repayments on our debt facilities and distributions to our shareholders. ​ We expect our short-term liquidity requirements to include debt service on our debt obligations (refer to Note 9 to the consolidated financial statements), distributions to our shareholders, working capital, new acquisitions and originations of Ground Lease investments.
We expect our short-term liquidity requirements to include debt service on our debt obligations (refer to Note 9 to the consolidated financial statements), distributions to our shareholders, working capital, new acquisitions and originations of Ground Lease investments.
Our mortgages contain no significant maintenance or ongoing financial covenants. As of December 31, 2023, we were in compliance with all of our financial covenants. Supplemental Guarantor Disclosure In March 2020, the Securities and Exchange Commission (“SEC”) adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities.
As of December 31, 2024, we were in compliance with all of our financial covenants. 39 Table of Contents Supplemental Guarantor Disclosure In March 2020, the Securities and Exchange Commission (“SEC”) adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The amendments became effective on January 4, 2021.
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.
Other income for the years ended December 31, 2024 and 2023 primarily includes $16.8 million and $19.4 million, respectively, of management fees from Star Holdings and for the year ended December 31, 2023 includes $15.2 million of income due to a hedge forecasted for permanent debt that did not occur.
In April 2023, we entered into an at-the-market equity offering (the “ATM”) pursuant to which we may sell shares of our common stock up to an aggregate purchase price of $300.0 million.
As of December 31, 2024, there was $1.3 billion of undrawn capacity on the 2024 Unsecured Revolver. ​ In April 2023, we entered into an at-the-market equity offering (the “ATM”) pursuant to which we may sell shares of our common stock up to an aggregate purchase price of $300.0 million.
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.
The rise in interest rates and increased investment spreads to treasury bonds in the Ground Lease market may also attract new competitors, which may result in higher costs for properties, lower returns and impact our ability to grow.
The decrease in cash flows used in investing activities during 2023 was due primarily to a decrease in new originations and acquisitions of Ground Leases, which was partially offset by the origination of the Star Holdings Term Loan Facility, consideration paid in connection with the Merger and an increase in contributions to equity method investments.
The decrease in cash flows used in investing activities during 2024 was due primarily to the origination of the Star Holdings Term Loan Facility in 2023, consideration paid in connection with the Merger in 2023, a decrease in the funding of Ground Leases and an increase in net distributions received from equity method investments in 2024 and proceeds received from a derivative transaction in 2024.
In December 2021, we obtained additional lender commitments increasing the maximum availability to $1.35 billion. The 2021 Unsecured Revolver has an initial maturity of March 2024 with two 12-month extension options exercisable by us, subject to certain conditions, and accrued interest at an annual rate of applicable LIBOR plus 0.90%, subject to our credit ratings.
The 2021 Unsecured Revolver had an initial maturity of March 2024 with two 12-month extension options exercisable by us, subject to certain conditions, and accrued interest at an annual rate of applicable SOFR plus 0.90%, subject to our credit ratings. In March 2024, we exercised one of our options to extend the maturity to March 2025.
As of December 31, 2023, Portfolio Holdings had issued and outstanding the Notes, which were registered on a Form S-3 filed by Old SAFE and Portfolio Holdings (then known as Safehold Operating Partnership LP). The obligations of Portfolio Holdings to pay principal, premiums, if any, and interest on the Notes are guaranteed on a senior basis by us.
As of December 31, 2024, Portfolio Holdings had issued and outstanding the Senior Notes, which were registered on the Form S-3 filed in April 2023 or on a Form S-3 filed by Old SAFE and Portfolio Holdings (then known as Safehold Operating Partnership LP).
During the year ended December 31, 2022, 35 Table of Contents earnings from equity method investments resulted from our $3.4 million pro rata share of income from the 425 Park Avenue venture and our $5.7 million pro rata share of income from our 32 Old Slip venture.
During the year ended December 31, 2023, earnings from equity method investments (refer to Note 7 to the consolidated financial statements) resulted from our $3.5 35 Table of Contents million share of income from our 425 Park Avenue venture, our $5.7 million share of income from our 32 Old Slip venture, our $5.4 million share of income from the Ground Lease Plus Fund and our $9.6 million share of income from the Leasehold Loan Fund.
As of December 31, 2023, there was $233.0 million of undrawn capacity on the 2021 Unsecured Revolver. 2023 Unsecured Revolver —In January 2023, Portfolio Holdings, then known as Safehold Operating Partnership LP (as borrower) and us (as guarantor) closed on a new $500 million unsecured revolving credit facility (the “2023 Unsecured Revolver”).
The 2024 Unsecured Revolver replaced the 2021 Unsecured Revolver. 2023 Unsecured Revolver—In January 2023, Portfolio Holdings, then known as Safehold Operating Partnership LP (as borrower) and us (as guarantor) entered into a $500 million unsecured revolving credit facility (the “2023 Unsecured Revolver”).
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.
Other income for the years ended December 31, 2024 and 2023 also includes $0.5 million and $0.5 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 and $3.6 million and $3.3 million, respectively, of other ancillary income from our investments and interest income earned on our cash balances. ​ During the year ended December 31, 2024, we incurred interest expense from our debt obligations of $198.0 million compared to $181.0 million during the year ended December 31, 2023.
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.
As of December 31, 2024, we had $119.6 million of such commitments. 33 Table of Contents Results of Operations for the Year Ended December 31, 2024 compared to the Year Ended December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​ 2024 ​ 2023 ​ $ Change ​ ​ (in thousands) Interest income from sales-type leases ​ $ 264,250 ​ $ 235,503 ​ $ 28,747 Operating lease income ​ ​ 71,061 ​ ​ 71,287 ​ ​ (226) Interest income - related party ​ ​ 9,482 ​ ​ 7,143 ​ ​ 2,339 Other income ​ 20,892 ​ 38,645 ​ (17,753) Total revenues ​ 365,685 ​ 352,578 ​ 13,107 Interest expense ​ 198,042 ​ 181,011 ​ 17,031 Real estate expense ​ 4,224 ​ 4,653 ​ (429) Depreciation and amortization ​ 9,947 ​ 9,936 ​ 11 General and administrative ​ 54,917 ​ 68,569 ​ (13,652) Impairment of goodwill ​ ​ — ​ ​ 145,365 ​ ​ (145,365) Provision for (recovery of) credit losses ​ ​ 9,489 ​ ​ 2,704 ​ ​ 6,785 Other expense ​ 1,983 ​ 17,862 ​ (15,879) Total costs and expenses ​ 278,602 ​ 430,100 ​ (151,498) Gain on sale of Ground Leases ​ ​ — ​ 447 ​ (447) Earnings (losses) from equity method investments ​ 22,977 ​ 24,229 ​ (1,252) Net income (loss) before income taxes ​ ​ 110,060 ​ ​ (52,846) ​ ​ 162,906 Income tax expense ​ ​ (3,445) ​ ​ (1,719) ​ ​ (1,726) Net income (loss) ​ $ 106,615 ​ $ (54,565) ​ $ 161,180 (1) For the years ended December 31, 2024 and 2023, general and administrative was partially offset by $16.8 million and $19.4 million, respectively, 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 $264.3 million for the year ended December 31, 2024 from $235.5 million for the year ended December 31, 2023.
Unsecured Notes —In May 2021, Portfolio Holdings, then known as Safehold Operating Partnership LP, (as issuer) and the Company (as guarantor), issued $400.0 million aggregate principal amount of 2.80% senior notes due June 2031 (the “2.80% Notes”). The 2.80% Notes were issued at 99.127% of par.
As of December 31, 2024, our mortgages are full term interest only, bear interest at a weighted average interest rate of 3.99% and have maturities between April 2027 and November 2069. 37 Table of Contents Unsecured Notes —In May 2021, Portfolio Holdings, then known as Safehold Operating Partnership LP, (as issuer) and the Company (as guarantor), issued $400.0 million aggregate principal amount of 2.80% senior notes due June 2031 (the “2.80% Notes”).
We analyze our portfolio of Ground Leases in two categories, based on whether the underlying property is a stabilized property or a development project.
We also continue to analyze our portfolio of Ground Leases in two categories, based on whether the underlying property is a stabilized property or a development project (projects with unfunded commitments that are under development or in transition). Our development properties are assigned a higher loss rate due to the higher potential risk for deals under construction.
We do not expect goodwill to have any tax impact on our financial statements. ​ For a discussion of other critical accounting policies, refer to Note 3 to the consolidated financial statements. ​
For a discussion of other significant accounting policies, refer to Note 3 to the consolidated financial statements. ​ 41 Table of Contents
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.
In 2022, the Consumer Price Index (“CPI”) rose to its highest rate in over 40 years.
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.
The increase in 2024 was due primarily to additional borrowings on our revolvers and commercial paper program, which also accrued interest at higher rates in 2024 due to an increase in base interest rates, and interest expense on our trust preferred securities, 5.65% Notes and 6.10% Notes.
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.
The Federal Reserve has indicated that the economic outlook is uncertain and it will continue to monitor incoming data on unemployment and inflation before adjusting monetary policy; however, high interest rates have, and any future increase in interest rates may continue to result in a reduction in the availability or an increase in costs of leasehold financing for Ground Lease tenants, which is critical to the growth of a robust Ground Lease market.
For business combinations, we recognize and measure identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree at their fair values on our consolidated balance sheets.
For asset acquisitions, we recognize and measure identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree based on their relative fair values and acquisition-related costs are capitalized and recorded in "Real estate, net," "Real estate-related intangible assets, net" and "Real estate-related intangible liabilities, net" on our consolidated balance sheets. 40 Table of Contents We account for our acquisition of properties by recording the purchase price of tangible and intangible assets and liabilities acquired based on their relative fair values.
The guarantee is full and unconditional, and Portfolio Holdings is a consolidated subsidiary of ours.
The obligations of Portfolio Holdings to pay principal, premiums, if any, and interest on the Senior Notes are guaranteed on a senior basis by us. The guarantee is full and unconditional, and Portfolio Holdings is a consolidated subsidiary of ours.
The 2023 Unsecured Revolver has a current borrowing rate of Adjusted SOFR, as defined in the applicable agreement, plus 0.90%, subject to our credit ratings, with a maturity of July 31, 2025. As of December 31, 2023, there was $500.0 million of undrawn capacity on the 2023 Unsecured Revolver.
The 2023 Unsecured Revolver accrued interest at a rate of Adjusted SOFR, as defined in the applicable agreement, plus 0.90%, subject to our credit ratings. The 2024 Unsecured Revolver replaced the 2023 Unsecured Revolver. Trust Preferred Securities —We assumed trust preferred securities from iStar in connection with Merger.
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.
If our Ground Lease tenants at such assets fail to re-tenant the building such Ground Leases may default and we may suffer losses. See the "Risk Factors" section of this 10-K for additional discussion of certain potential risks to our business related to competition and industry concentrations .
The decrease in cash flows provided by financing activities during 2023 was due primarily to the issuance of common stock in 2022 and the issuance of unsecured debt to fund our growing Ground Lease portfolio in 2022, which was partially offset by the issuance of common stock in 2023 and contributions from noncontrolling interests in 2023. ​ Mortgages —Mortgages consist of asset specific non-recourse borrowings that are secured by our real estate and Ground Leases.
The decrease in cash flows provided by financing activities during 2024 was due primarily to a decrease in net borrowings on debt obligations in 2024, the acquisition of a noncontrolling interest in 2024 and proceeds from the issuance of common stock in 2023.
The Company also pays a facility fee of 0.10%, subject to our credit ratings. In January 2023, we amended the 2021 Unsecured Revolver primarily to transition from LIBOR to Adjusted SOFR, as defined in the applicable agreement.
The 2024 Unsecured Revolver has a borrowing rate of Adjusted SOFR, as defined in the applicable agreement, plus 0.85%, subject to our credit ratings, with an extended maturity date of May 1, 2029, which includes two six-month extension options. We also pay a facility fee of 0.10%, subject to our credit ratings.
In addition, we recorded other state and local income taxes in the amount of $0.7 million during the year ended December 31, 2023.
During the year ended December 31, 2024, we recorded income tax expense of $3.4 million. The provision for income taxes consists of current federal and state income taxes in the amount of $1.1 million and deferred federal and state taxes in the amount of $2.3 million with respect to our TRS.
Right of use assets are included in “Deferred expenses and other assets, net” and lease liabilities are recorded in “Accounts payable, accrued expenses and other liabilities” on our consolidated balance sheets. Above-market leases and in-place leases are each recorded at their fair values and included in “Deferred expenses and other assets, net” on our consolidated balance sheets.
Intangible assets may include the value of lease incentive assets, above-market leases, below-market Ground Lease assets and in-place leases, which are each recorded at their relative fair values determined using current market rents and leasing costs as inputs and included in "Real estate-related intangible assets, net" on our consolidated balance sheets.
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.
We may also engage in sale/leaseback transactions whereby we execute a net lease with the occupant simultaneously with the purchase of the asset. These transactions are accounted for as asset acquisitions. 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.
In the first quarter 2021, we entered into an unsecured revolver (refer to Note 9 to the consolidated financial statements) with a total capacity of $1.35 billion (the “2021 Unsecured Revolver”).
As of December 31, 2024, we had $8 million of unrestricted cash. We also have an aggregate $1.3 billion of undrawn capacity on our 2024 Unsecured Revolver (refer to Note 9 to the consolidated financial statements).
The fair value of financial instruments, which could include loans receivable or net investment in sales-type leases, is based on current market conditions and loan or lease agreements in place. The fair value of tangible assets, which could include land, buildings, building improvements and tenant improvements is determined as if these assets are vacant.
The value of the tangible assets, consisting of land, buildings, building improvements and tenant improvements is determined as if these assets are vacant, using estimated cash flow projections of the properties acquired which incorporate market rent, growth, discount and terminal capitalization rates.
Removed
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.
Added
To combat the increase in inflation, the Federal Reserve raised interest rates and has kept interest rates generally high. This increase in interest rates has produced progress on inflation and in September 2024, the Federal Reserve reduced the federal funds rate by 50 basis points, which marked the first interest rate cut in four years.
Removed
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.
Added
The Federal Reserve further reduced the federal funds rate by 25 basis points in each of November 2024 and December 2024.
Removed
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.
Added
The tenant under our Park Hotels Portfolio elected to extend the leases underlying three of the five hotels past the initial lease maturity of December 2025 (see the "Risk Factors - We may be unable to renew expiring Ground Leases, re-lease the land or sell the properties on favorable terms or at all , - Percentage rent payable under our master lease relating to the Park Hotels Portfolio is calculated on an aggregate portfolio-wide basis , - We are the tenant of a Ground Lease underlying a majority of our Doubletree Seattle Airport property " in this Form 10-K for a discussion of our Park Hotels Portfolio).
Removed
The increase in 2023 was primarily the result of an increase in recoverable property expenses.
Added
Operating lease income consists of rent from our operating leases and percentage rent from certain properties, including our Park Hotels Portfolio. Interest income – related party was $9.5 million and $7.1 million for the years ended December 31, 2024 and 2023, respectively, and relates to the Star Holdings Term Loan Facility that was originated on March 31, 2023.
Removed
During the year ended December 31, 2022, other expense consists primarily of legal costs associated with our Merger with iStar (refer to Note 1 to the consolidated financial statements) as well as fees related to our Caret units program, unsuccessful pursuit costs and fees related to our derivative transactions.
Added
The increase is due to a full year of interest for the year ended December 31, 2024.
Removed
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.
Added
The provision for credit losses was due primarily to enhancements to our general provision for credit loss methodology (refer to Note 3 to the consolidated financial statements), current market conditions and growth in the portfolio during the period. During the year ended December 31, 2023, we recorded a provision for credit losses of $2.7 million.
Removed
We expect to make quarterly cash distributions to our shareholders sufficient to meet REIT qualification requirements. In the first quarter 2021, we received investment-grade credit ratings from Moody's Investors Services of Baa1 and Fitch Ratings of BBB+. In October 2023, Moody’s Investors Services upgraded our credit ratings to A3 which reduced the interest rate on our unsecured revolvers (see below).
Added
The decrease in 2024 was due primarily to us buying an asset from the Ground Lease Plus Fund, which was partially offset by an increase in income from the Leasehold Loan Fund due to additional loan fundings and an increase in outside basis amortization (refer to Note 7 to the consolidated financial statements).

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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 changeEstimated 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
Biggest changeEstimated Change In Net Income ($ in thousands) (1) ​ ​ ​ ​ Change in Interest Rates Net Income (Loss) -100 Basis Points ​ $ 2,556 -50 Basis Points ​ ​ 1,278 -10 Basis Points ​ ​ 256 Base Interest Rate ​ — +10 Basis Points ​ (256) + 50 Basis Points ​ (1,278) +100 Basis Points ​ (2,556) ​ (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
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.
As of December 31, 2024, we had $3.6 billion principal amount of fixed-rate debt outstanding and $789 million principal amount of floating-rate debt outstanding.

Other SAFE 10-K year-over-year comparisons