Safehold 3 Nov 202020 Q3 Earnings call transcript

Good morning, and welcome to iStar's Third-Quarter 2020 earnings conference call. [Operator Instructions]. At this time for opening remarks and introduction, I would like to turn the conference over to Jason Fooks, Senior Vice President of Investor Relation and Marketing. Please go ahead sir.

Thank you, and good morning everyone. us review joining earnings. third-quarter for you today iStar's to XXXX Thank and Chief me Chairman President, Alvarado, Officer Sugarman, are and Fox-Geen, Chief Investment With Jay Marcos and today Officer. Financial Executive Officer, Chief Jeremy our our highlighting iStar.com This and third-quarter section. in these which the our earnings on found to results, can refer Investors our be morning will our an we slides, published presentation call website at call, beginning There at p.m. will of be a the replay X:XX Eastern Time today. X on our with website The (XXX) replay dialing XXXXXXX. XXX-XXXX confirmation by is of code accessible the or

cause Before I'd be SEC I to which that this expressed in these differences and to statements, except results turn are the forward-looking law. call materially forward-looking are iStar's call forward-looking. like statements reports. or obligation over disclaims could our any update intent Jay, differ earnings these will everyone required by to as statements the these risk may remind facts actual and not that iStar historical from in detailed factors

Now and CEO, I'd Jay. to iStar's Sugarman. the Chairman turn like Jay over call to

focus Thanks to third and recapturing our from assets spent our three our the lease quarter capital legacy continuing strategies; business, sheet. Jason. balance strengthening ground core We building on

positioning even the iStar's ground solid. lease were extended As adjusted for the of ecosystem. value our highlighting growth ourselves a and embedded expanded ground shrink result lease earnings primary platform legacy continued but asset our further debt to We in portfolio maturities and asset goal portfolio the remains and

working potential. markets building deeper Safehold ground continue are concurrent a part in ways to innovative its we owners and to needs lease market's the struggling to customers recently real portfolio Theaters major transaction regards across Safestar tailored and COVID to core as as operating are in see Seattle sectors multi-family a sector beginning impact certain having to transaction on expand and providing we're our on capabilities. capital custom meet a we as some and hotels hard pickup we with we With call estate not in earnings opportunities. entertainment in closed activity well-positioned of few senior and equity see to reinvent the one we NPL in status transaction are with understanding existing first our the that we our loans and lease As new we of continue on and debt currently further and country pickup been the the have Safehold hit principal any do remain put of expect loss its push ground iStar finding remaining the position. portfolio mentioned retail Safeholds and to increase to customers’ though in we significant new performance. subordinated and

exposure Bolero net developments operating that hand, On lease the positive largest as our liquidity basis. we exceeded other significantly the on company in expectations entertainment sector. EBITDA a and revenue bolstered generated results both and our their the saw in position

commitment As a is appears defer that to leases over for more amendment that pessimistic to in as the forecasts. what of me a stronger outrun sizable lease it growing turn much Jeremy and focus master firepower our with no go now the net to rent we strategy. with details. let some a tenant a with to to Jeremy? capital of overview executed fits a in our long-term a return ground two to forward master momentum result Bolero to some quick our eliminating position benefit now with the longer even COVID through comprehensive The be And leases

we published on to earnings everyone. deck comments My our website. refer the morning Thank you Jay and morning this good will

$X.X continued in business the $XXX strong $XXX billion our at just profile. the We performance extending billion highlighting an it Safehold intent during ground strengthened and $XX $X.X includes total ground uptick unrealized that and highlights by which game. continue asset with our maturity strategy. the additional to XXXX leases over undersigned an quarter now of Safehold rent $X.X of the notes With closed business well stressed portfolio we flows that monetizing the of through billion XX% Its simplify bodes to of in Turning is increased slide to on million QX of mentioned. Into portfolio investment billion value its balance the continues million against lease of sheet quarter our economic performance legacy in gain. origination in this by more of closed by its $XXX reducing which investment refinancing And demonstrate of end of X our the cash Since unsecured $XXX base. debt the Safehold. million future. investment Since for our to quarter million collect sore of that portfolio third I $X.X million our our investments. of addition to ground which unrealized Safehold our safety represents with asset XXX% activity potential transactions lease these of quarter Safehold times. to terms was ground dispositions which our slide senior a X both

sheet X year XX%. details Slide During three the we Safehold our of improved has the balance stock strengthened the credit appreciated and first by how quarters metrics.

refinanced XXXX corporate no we corporate our million two debt X.XX% during for unsecured quarter maturing years with and debt X.X $XXX weighted for under notes the During average extended of profile just maturity years. senior

of Year-over-year cash unencumbered $X.X billion revolver. increased based by and $XX our asset had our to As $X.X billion. available quarter at we $XXX million of end on capacity million

to debt improved ratio assets to Our times. X.X unsecured unencumbered

times our unsecured and debt X, adjusted X.X provide the primarily to we based asset portfolio. on an on debt as are We slide an value XX% market debt. levered remain Safe's unsecured On of total legacy represents update borrower equity we

assets legacy year million taking of sold over total During $XX sales $XXX the the past million. proceeds quarter we to

the $XXX XX% legacy reduced concentrated by reduction our assets balance taking million. In we've portfolio the with legacy which Over XX% portfolio with steady Magnolia X that activity of down continued our sales most long-term $XX park Green year investment the to is within through in seen legacy period. transactions asset our shows where entirety our and short-term quarter. that the Asbury Slide for million sales we COVID past our of have of

million of CapEx. market and During quarter and total loan open had venture the our our stock, a million portfolio net within we of lease activity including of investment of million $X $XXX $XXX development purchases Safe joint million $X of

market million portfolio collected remain overview. stock see which its million. based XX% represents the consistent prior X our Rent you approximately Star value quarter. slide of In X.X during rent. with ground for $XX of repurchased on collections addition, shares of we portfolio the XXX% On Safe our its quarter

due on only our XX% Excluding of which Bolero We a payments we of our quarter. quarter classified end operating interest a a at retail our second large of and at estate we which Unpaid the received loan on our XX% to finance we represents loan our properties collected single as lease portfolio. rent X% non-performing of collected XX% due rent interest of portfolio. and the real property with net consistent within portfolio is entertainment the third

business reached all deal Bolero flexibility disruption capital sufficient by a to COVID. mentioned providers through with created its to ensure comprehensive Jay the As manage

for months of defer years to October a for million. with that January we of XXXX. approximately nine agreed interest rents deal rent of commencing XX% part starting the This repaid XXXX will $XX and two will As deferred be accrue owed total over

results per XX, loss created conclusion, a of adjusted Moreover amortization $XX.XX which but scale share per us value back for terminated and million not value. Safehold. is we reported to million substantial center. agreement statements. loss reported In the we $XX share. at for let in origination or significant share and purchase discount from reported value which to in to of saw a adjusted which $X.XX quarter The market the depreciation, we've Including our stands seen earnings per of our As and adjusted me Safehold or net common of consistent from quarter. enable we per part we CECIL and loss equity the value slide million our it $XX.X of through $X.X our share net allowance when value is activity million $X.XX share value portfolio continue XX, this uptick With of pipeline and of per million Jay. of diversified current stock illustrates On per represents We earnings net $X.XX hand September book bowling our to share additional as Year-to-date commitment should details a share. $XX.XX. unrealized to which net that $X.XX business. X the a a present common gains $XX.X our recognized loss performance $XX.X a Safeholds forward is and the Slide for an financial embedded Safe's equity price a

behind Well on almost portfolio. COVID value Thanks the platform impacts other with Jeremy. us negative our has shareholdings of we're offset more than growing and creating pleased XXXX Safehold of the the parts

price. As the value current embedded the numbers above stock continue to is iStar's well show

success significant So while with entry attractive a investors upside. more an lease value proposition our in we'll the has show point and of created to compelling ground iStar work strategy

up go Okay it let's operator, open for Q&A.

go ahead. comes question Instructions] KBW. [Operator from first with Our you. Thank Rahmani Please Jade

I'm very you just Thank at statement. the income much. looking

sharply up to $XX.X drove and from $XX.X color a give $XX.X what last on was line million any million. million income other year increase? you Can The quarter's ago that

in to We recognize. had a were Sure. of we one its cold of in pop nice that storage value assets able our actually terms

that So it. was of most

that income recurring that Is one-time a or was item?

preferred have a interest we of the small it our done company that that and position and came great. we has acquired that that it's now portfolio out Well in sold a freezer

contractual is we have like and position position they value been to there. upside but of able can't the the our increase recurring more think a there but occurring say consistently So it's I really

maybe the some terms you position in other quantify or Could of book metric? that of size value

right $XX Yes. It's now. around range the right in million

you NPL you expect in Okay. loss because I any retail time what you're loan for principal Great. you horizon would senior don't entertainment expect and mortgage the recovery The on position. believe said

Well, we're COVID during temporary to the talking say primary it hit. of the temporary, these expect open what asset and restricted would is a is what be from about but think is I negotiations this we cause I

course side but where the put think capital I it situation right I have equity on thought its we runway the want runs they was to mentioned of to more a it and sort that's up need the create to need in COVID out think they the next that set as until you we clean how through runway to and that subordinated NPL. and months, XX the decide think exactly get it's if period I So other

million $XXX is about Any other loan is concerns $XXX hotel of is million the in loans? of land There million There of loans. There book? $XX condo.

Yes.

the think of I doing the and feel actually would So so are outsized the place typical say than about one certainly been realm downs. and loan better we the book impact hotels that COVID again the that. thought has ups is I outside good we

about we comes okay the that passed longer assets COVID are I quarter but last those feeling more again variability I projections. it So COVID because solid good when into think our said is think the goes

the support right through stand of in COVID we're timing how little taken we sponsors just hard make think now haven't assets of any reserves. to it both XX pretty of of and a So out these there right our but additional can there to anticipating now and wherewithal out these so have in conditions kind long hands and X continue we still terms sponsors months our bit to but

good keep on I think certainly hospitality still but would in side. shape eyes our, we're we our So keeping the we're

on Okay. commercial there any interested to med Are saw to in hotel million that a mortgage be that the I sell. net, alert York July there was think around I was reported $XX totaling in Brooklyn loan might New a iStar looking in looking loans you monetize? that

in but thing places at we plenty take money. even Yes. which into it's our it certainly put Again is that net trade calibrated in book we continually We and from lot one something price and kind of of capital there are more finance but here our and list another the our all to like better. make get and book to fairly positions one most of can a explore sector

think bought we said reinvested areas net ground some reinvesting we're Jeremy a our business is lease asset as We lease mostly think into we but that fantastic. stock. I of in

pressure real to but get will out very-very urgency slowly them do and no to of surely rid we've liability nicely. no So into ground moved and but we're, do that, of a lease lot we legacy try reinvest have this think the ecosystem to that we assets I structure our

that decisions like and purely if So we'll are we we'll get we prices play that and almost these don't make if we on. all discretionary trade

position cash to with about new you million just million And are the thinking how $XXX of $XX liquidity, capital about make and iStar's of investments? thinking over capacity

invested Yes. put to We to there think and over to time. it the we work certainly be a capital plan is have

we also that. could significant rest do the capital capital incremental If balance create see wanted sheet. We we flexibility of in the to

closely So our fit now we that capital that the are goal plan for laying beneficial we're XXXX our shareholders put right that for and to we in to strategy is think speak. and most work areas out most as

the to credit in draw able you to Safe? are on And investments facility additional fund

credit is but fungible us that full. are line now available to Dollars right Yes. in

the multi-family would you give SafeStar XXX of nature million in question last of it deal any transactions but the on core [plus] kind mentioned seeing you color be you're traction if also on? Okay. And what the could Maybe Seattle? just

a Marcos pipeline. about and to want you talk Seattle bit little the

Jay. Hey

So a the was as loan constructed Seattle the class high to capital transaction where quality we able one-stop and assets were asset a solution super offer sponsor newly matured. A

to unlevered Start. asset as lease XX% to little strong assets so so a bit from surprising for so create actually for a the and the and up high performance XXX%, a great Safe occupancy, was it's quality at is Safe is it asset return this environment Facebook, we but in street that and stabilized able adds a So the volatile Apple located plus for across high collections were where why ground

product side transactions. to lot values Primarily call, a over a sales close has pipeline traction the COVID mostly repeat country we the On of lot surprisingly last of scaled across and pre- new two they're safe said our with the as We're on Safe pretty positive new and dramatically. the seeing pretty multi-family clients both months.

forward Safe. we're for So excited about prospects the going

you. Thank

with ahead. question next Stephen go Raymond comes Laws Our from Please James.

press the deck Hi Jay, you repurchase good you your a on value on can you touch getting the market the buybacks. know to cheaper bought value you company a you and a year half participants talked market I guys at recognize last that X% last to stock today had and that release of year pretty I cited market a to X% to think market first basis guess the substantially. I guys signal increase Star the wanted of in morning. the platform to then, in looks basis about there? mark but the about in like on back appetite comment stock's declined numbers about more to the talk It the leverage I

you investment So can how potential between and Star of you back look about talk the at maybe increases use Safe from in capital dividend? buying

where the it's components unlock getting we're the I we of here, this go the out how but think stock. to to the strong seen COVID we think put hasn't of to a we'd need understand simpler we've different created but pretty make simpler, in seen capture you two tale pretty had it's investors over headed, very and the done is where that's undervalued every we know. this of can a tell this simple some what of that's good go marketplace but stepped one One gets to Sure try and the to the is worth you've frankly really in than investment telling think last positive value between be to things in capturing a Stephen. itself if It's of buyer even that really in think out people probably way we've and now balance really buying story as trade people price value believe that to simply a that remaining had years even iStar to story trading and the I stock things. an we're on significantly I two there been not buy really and going you and some consistent sheet there shareholders what more get story more We we day some look we've moved just where at get we're excellent more get it's if understand Safehold allowed and is I going a delta probably the exist discount think more value really gap used that what mentioned buying shouldn't and have do executed stock to consistently and to people that consistently. real we really you'll big see for We've in getting for always and It's excited. why important we're really that now

concentrated So we've base be do more the there's front. they got that at iStar story. a interested if work relatively and would lot think on There is to we shareholder understood who a people

So come think of once said lots but in, we really of upside I that a think started I it's understand beyond certainly all even lot lease when kinds a only the this story compelling to think there's to we're I ground translates tell leader strong out back out and value that understand but can in proposition here, I have are will black too. see you where you'll at that and today not of of different reinvention have Star position that as investors a a we become we Safehold

we a between way. securities but silver in buying mispriced in simpler So story cleaner no the think one bullet and telling

we'll on, gap. As time will goes that narrow definitely

resolutions months we Can everything talk think reset for passed. legacy update Great, curious get clearly $XXX about legacy and get now Jay. to and the an Well, seven that, the comments switching on asset now I expectations around million. of resolutions on maybe short-term COVID timing thanks there, six And everyone assets, short-term a around the to extended monetization's that portfolio? for for the

days and some they're good they a lot even of going sell just have And did probing about days those under lower COVIDs assets too it are did they fall out. to price a whether Yes. some it are see because they long some people and It’s concerns because how or contract go. We've had frustrating. we'll at did to

can on a continue traction and good that seen these. some needs put doing are that are team in a have the our of number government in extended what we've These a onto from great municipality. we've We on they of in is assets them really closing that And them progress to job pool make to through go assets to something but market, slowed anything where short-term market, down timeframes a position channels. terms getting of COVID seen has is we go conditioned

they or then even it For weren't meetings a used feels get they Zoom started two while to get down meeting. three meetings it like to go meeting, but takes one in done what to to Zoom council

ready So, market push we I some are almost think to or a either most assets. those them. we months got in of But those a to them of as few be getting go to closing again back time couple trying all be think on to expensive of market. on XX of It's XX just as to some and pretty timeframe the will much

Asbury, continues things good. what team a would top has the stuff, Magnolia I tell our have and climb you So, of out pretty the And in there. we're is that to pleased quite be market. where say would actually seller on doing like been sales I shaken long-term

But the of fraction was their I which ran good summer year. it end is think although had in good weekends there six hotels a numbers really summer very in a towards sold the our October muted, for of units we couple of typical Asbury us. we

a or terms competitive a of a Ocean Club's parcels for bit all little muted pretty of and headed sale a bag bidding. a couple think actually are So, land in but have mixed really summer well that across of Asbury of doing we Asbury the we

a just done. this So, I can't thing business harder. COVID little we cap we think want a and -- put that's it bit of of can psychologically get that make does the on future how problem solve term, XXXX, by kind under And this again forward. how get It really of moving But really tell until we're much you much use can control. the ground thinking budgeting if we December about we I to our if can

but talk finance in you the hotel you and about any you're updates And Asbury there the portfolio, what on with seeing Great. touched there investments? exposure can those

a falling almost in is was We're dual lot coming tough. supply is in A pipeline off. are market the still demand those of and online. which squeeze Well, is

forward. to again is -- issues of a bread to of recovery. get is we more is good probably term near Zoomification in of we the I to it cases a an And and before on see world period on they in back. and can't going see there's most are the going there kind dependents so business then that's of have the is that's have starting who years they sectors not pain to here or for But I period our the four, back And this for quickest get about think think easy the through. rely get basis hospitality And our side, quite but typically to think still three, dire something function and we So, levels. of and one be supply in pipeline capitalized and XXXX well we they're ours feel I we're the call hotels which long stop and particular the We to road stand butter can the five, demand a side coming stuff sponsors both.

other because think the help through And so, and will. get trying side we our just of them get we're most on hanging with sponsors this to them to

on new along property in Can Jay, regions any STAR certainly pipeline head lastly year? close we let's guess the not's any strength or into of say to combined on certain our the deals expect we that you financing. seasonality seeing on as a tax want and about safe end And outlook originations in go kind talk of or side, growth now whether Should that. more budgeting before kind is positive I or there reasons And or simply building next annual of are any Great. or investments, into also issues? the year-end you there that year, is how critical

put put say, I'll push continued think we a really on have we we if I And felt but to to a real multifamily it of them Labor to again Marcos lot a more on to Day. try post customers. solution We had good press for folks. we back like more places for

the business solution think for and be to looks that's years one ability win-win us. buildings. it an find I that's with ownership alliance are kind you of area of these is coming, and then for a the than this we're really need us now story cap we're our we've for doing so to do of that them able what about is for because post that I good people And what actually solutions done this the one entirely equals good really to why sit to then And think for excited more three XXXX is them to providing customers like new two.

Marcos, color So, overall market for real-estate more don’t I ultimately win. we win the think have you if they know I and win any But Steve.

to over Jay. what back Yes, said, you

their you're we can routes. and right all it pipeline, is we the demos. pretty to business majority urban selective cover at got multifamily urban, look would ugly. friendly see and And are entire sub-urban same I markets store the of on the save call public you what the And that and numbers year-over-year growth that If very

difficulty urban capital these in So, capital of I there you're a across market the or providing equity think around markets. is this some whether ground

more success seen some growth, stable of higher we've in the markets. So,

see lease to On cold investment side, made side in continuing an on the there. net the storage

made space, life pipeline. We also seeing an that in the science's the in we're investment quarter past in the

of lot life on a side. lease the net science logistics So,

thanks much appreciate it. comments. Marcos, Great, I Jay, very your for

Thanks, Steve.

question next from Rahmani ahead. KBW. with Our go Please comes Jade

office and I around Safe's New Thank just New XX%. bigger a for the ask you. question I to bigger to York is a general, sector. York picture In question, portfolio, wanted close believe yes about

you are look you at deals, underwrite office deals. you how office Now changing how

in decisions he strategies we think are Jay differing there know typical quarter that lot reduction lease think I and a announced last XX% companies wanted on companies a the I for has if day-to-day time. of areas, their how is offices. And you are I that are suburban to changing deals. hear New state what office with footprint market your their supplementing underwrite York thoughts and example you're satellite attract for in markets. evaluating And

Let living has high markets about suburban on it's But really specific many living me for time. say can between urban the some and going talk level long viewpoints. tension than been New It comes we're of bit in are location on in unfortunately little of a available. York vibrant benefits the where clearly cycle walkable like a active cycles, that not in living a

we know in suddenly instruments. we if ask you in country the are whether other now. And But cities has will if you we business that decades. major think XX-year view Jade, So, definitely our pendulum about way see a on little changed that. the as swing obsolete, believe right of our bit These becoming

in these will happening San really at for live. lots and think still we're as and some of reflect going capital stack, love city seeing a we a the are to New hoping cycles business. call this Francisco, as on the short that's But while make Top through step much would right capable the go call LA urban as in as don’t never have York. to And as abandoning But certainly with will well this make we're New to we'll of abandon we certainly quality the in leaders to of coming can population percent not near-term to environment suburbs. long-term shine. policies so, out kind impact and in will super well. large seeing through pain a cities We're low really at this make on limit and help where of lease because people what's And as not the Good want go York's possible. providing tends that leadership pain thesis COVID today. quite COVID. to have have to tomorrow, And and And are make senior a the we of and terms living

lots living think in in way. of environment. systemic changed any don’t an urban love people I think And that's I necessarily

going some we our tell we I markets But we underwriting, to, also the quarters. long-term in I think not is our head a want do change have on again go how little what's I --. the want to have to and to sand. to a it's you Marcos, on recognize pick those trying slued we are couple detail and do in can And of more certainly of underwriting give mean impacts. decisions to next so make our trying process you happen and the

think sorry Jade. -- No, I your and

I high of time-to-time another markets. thesis rise we're making feds year opened think not because good decisions level three this has in

I And as to sponsor the those not bucket basis. recover. still markets quality. mark-to-market it Jade, basis individual in in approach. lender versus you a its So, effective can we're underwriting certainly depend think don’t of approaches, is who the the our XX% a has believers bucket major net our in location rents And depending it doesn’t more of know not granular an mean in I bit down ultimately office markets. each be of XX% underwriting and on call has office that the would market, in our that asset was relates assets mark-to-market that to we And taking in and It a and sort the like on it quality is rents asset will

and been know I abiding or the more don’t background into productive. Labor I'll productive feels So, personal there Day our you more since and somebody, is to not hall around with the distancing kind pop more in tell just down much tid office that we running are can efficient. But the and the much one lot and if social to is in just I a it We've talk calculus. I it of regulations able us kids believers much the being just bit. feel back goes add

three take down be purchase to similar if York office to in XX% What that five down XX% it a years And in to price the impact period. the it ground get prior Is and that magnitude? to to talk the lease, you back their were would would going rents be ground by lease? City New

are assets Yes, the the and necessarily. there's capital Because still here people there's we not yield of invest and in high chasing the yield across component pretty hardly the in quality that cost world world. no

lower actioned some Japan, So, yields for is down and in of Europe federal a in are spending one level. given the in occur we've U.S. the in argue what's rates cycle real-estate potentially going similar at potentially could market. cap And seen trends similar its on of sort the overall that

percentage they were going different. to CPD, every it's you So, hard asset know, Jade probably things, I this same of coverage, XX% value, But say the is these land tell orient XX% be a would comment, general few are is the around before. because asset it's we are cost, proceeds will down replacement ourselves more on a I to of around

I to changing companies duration, world big a with hyper for lease enabled light lease average office tech a signing the XX years the growing years the that in thought leases net of nature to in commitment market you is make. think if brought we And a anachronistic to work some something XX was Okay. ever

you the to year impact previously, average going your years be that XX would how lease ration to to was the If down thought from eight five underwriting? into range

you're reference you're don’t a renewal your if you a demand why see Today a Which company Hey where they making is no in necessarily impact I they think the shift. never preserving that they to to does bargain, a as can can a much gotten could is point is kind optionality demand obviously supply to and decision. know, short-term it People before it just there me building have lease also get not of into there get happening. from waiting your is into. and

go of to longer, a that the see you demand see. think I being you'll cyclicality this landlords I your that at see a back is to natural going back. expect So, when going rent lower. period lease favor, But beginning it's you come terms and could And long comes free of back that take in CPIs the And recover. to we're and low, the demand time

appreciate that. Thank your you. on thoughts I

further moment wait further Instructions] questions. for we [Operator no you. we One -- have Mr. Thank question. Fooks, while

you. Tiffany, with free thanks. instructions give thank please please call if once great, again, And the today's contact on me Okay the release, any else feel earnings to directly. call additional would the anyone should questions have you conference

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