Safehold Inc. Q2 FY2025 earnings call

• Rolled out a test program for one-stop capital solutions combining ground leases and leasehold loans in certain markets.
• Continued efforts to enhance affordable multifamily projects.
• New origination activity of ~$220M, with 4 ground leases and 3 leasehold loans.
• Portfolio metrics: GLTV 52%, rent coverage 3.5x, liquidity $1.2B.
• GAAP earnings: $93.8M revenue, $27.9M net income, EPS $0.39, excluding noncash provisions EPS $0.42.
• Portfolio yields: 3.7% cash yield, 5.4% annualized yield, 5.8% economic yield.
• Diversification: Unrealized capital appreciation includes ~37M sq ft of commercial real estate with various property types.

During the second quarter, new origination activity was approximately $220 million, including 4 ground leases for $123 million and 3 leasehold loans for $97 million. The total portfolio was $6.9 billion and UCA was estimated at $9.1 billion. GAAP revenue was $93.8 million, net income was $27.9 million, and earnings per share was $0.39. The ground lease portfolio has 151 assets and has grown 20x by book value since IPO, with estimated unrealized capital appreciation growing 21x. The portfolio earns a 3.7% cash yield and a 5.4% annualized yield, and an economic yield of 5.8%. The unrealized capital appreciation portfolio consists of approximately 37 million square feet of commercial real estate.

• Pipeline: Signed LOIs increased, heavily weighted towards multifamily, ahead of last year's pace.
• Leasehold loans: Meant to be accelerators, average term 3 years or less.
• Future capital deployment: Cadence influenced by market, year-end closings typical, affordable deals have longer lead times.

• Market conditions remain challenging with cross currents and uncertainty.
• Volatility in getting deals over the line.
• Impact of legislation and economic factors on development pipelines.

Q: Mitch Germain inquired about new sponsor conversion and timeline of discussions.

A: Tim Doherty stated timelines vary, with some deals in discussion for years and others converted in 4 weeks.

Q: Anthony Paolone asked about pipeline roll-forward and leasehold loans.

A: Tim Doherty said the pipeline remains strong with increased LOIs, and leasehold loans are accelerators with average term 3 years or less.

Q: Ravi Vaidya questioned capital deployment and bill impact.

A: Tim Doherty spoke about cadence influenced by market, and Jay Sugarman discussed bill impact on development.

Q: Ronald Kamdem asked about new sponsors and hotel deal.

A: Tim Doherty mentioned potential repeat business, and Jay Sugarman discussed the hotel deal as an accelerator.

Q: Jeremy Kuhl asked about funding future originations.

A: Brett Asnas talked about funding sources, revolver hedging, and equity dependence.

Q: Ki Bin Kim inquired about Park hotels.

A: Jay Sugarman discussed the Park portfolio, coverage, and transition impact.

Q: Harsh Hemnani asked about hotel origination and Park assets.

A: Tim Doherty spoke about hotel deal ROA, and Jay Sugarman discussed Park assets transition.

Q: Jonathan Petersen asked about office, markets, and affordable housing.

A: Jay Sugarman discussed New York market dynamics and affordable housing political impact.