Safehold Inc. Q1 FY2026 earnings call

Jay Sugarman mentioned that the company is in the early innings of building the ground lease business, focusing on multifamily and its variations, expanding affordable multifamily beyond California, dealing with the 50th Street asset situation where the tenant failed to pay property taxes, and starting a stock buyback program. Michael Trachtenberg detailed that the company closed four transactions in the first quarter with favorable credit metrics, and the portfolio grew with UCA trending up. Brett Asness went through the financials, discussed portfolio yields including cash yield, annualized yield, economic yield, and detailed the capital structure with debt details and hedging information.

In the first quarter, Safehold closed four transactions including three ground leases and one leasehold loan with an aggregate commitment of $68 million. The total portfolio was $7.1 billion at quarter end and UCA was estimated at $9.5 billion. GLTV was 51% and rent coverage was 3.4 times. Gap revenue was $110.9 million, net income was $28.9 million, and earnings per share was 40 cents in the first quarter.

Began a buyback program at the tail end of last quarter to take advantage of stock underpricing. Anticipated hotel performance to improve in the coming months as Q2 and Q3 are historically more profitable than Q1 and Q4. Expect new ground lease originations at current levels to add significant value to shareholders' long-term returns.

Tenant at 50th Street asset repeatedly failed to pay property taxes as required under the ground lease; actual results may differ materially from forward-looking statements due to risk factors detailed in SEC reports.

Q: What's the difference or challenge in getting an affordable transaction done outside of California?

A: Steve Wilder said it involves general awareness building, understanding the regulatory regime in the new market like Texas.

Q: Remind me of the history of 50th Street asset?

A: Original sponsor put it up for auction, received a bid from an unknown tenant who approached Safehold for conversion but lacks expertise.

Q: Capital allocation with LOIs and stock buybacks?

A: Brett Asness said they're constantly thinking about capital allocation, with pipeline deals and stock repurchases having good runway.

Q: Update on hotels?

A: Trial date for hotel lawsuit is early next year, hotel revenue and expenses will continue for a while.

Q: Rationale for share buybacks using book value benchmark?

A: Jay Sugarman said they look at go-forward opportunity and returns, dual mandates of creating value in capital structure and with new customers.

Q: I-Star liquidation process?

A: Originally targeted five years to wind down, still on track with some pieces to figure out at finish line.

Q: Time given to 50th Street tenant to fix tax issue?

A: Unspecified exactly but based on contract terms expecting customers to at minimum pay taxes and rent.

Q: Other asset types in portfolio?

A: Primarily focused on multifamily but open to other asset classes.

Q: Pipeline deals not completing reasons?

A: Sponsors couldn't put together capital stack or didn't win deals in processes.

Q: Ripple effect of park hotel lawsuit on business?

A: Park deal was an old-fashioned ground lease, Safehold is creating a gold standard modern ground lease and still learning to improve the business.