Safehold 3 Aug 212021 Q2 Earnings call transcript

Good morning. And welcome to iStar's Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. At this time, for opening remarks and introduction, I would like to turn the conference over to Jason Fooks, Senior Vice President of Investor Relations and Marketing. Please go ahead sir.

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

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

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

Thanks, us today. all for joining Jason, you and thank

quarter reflected iStar. our see which value increase fully us to business, shares the value stated scale ground that on saw and continued enabled the and of more strategy, our Second of in progress lease

capital monetization strongly for together plans iStar investors This asset perform our our its us and During helped value-creating several benefited as of in Safehold's shares quarter. a strategies. the from during and of redeployment at highlight with share increasing Safehold the unique quarter, hundred our recognition our growing investment growing price and value progress helped legacy the increased million dollars iStar's origination value activity in

the in expect and in to lease shareholders. is have in iStar the should we to dividend strong externally share continue the platform. the ways We business, streamline to and the quarter asset while long-term has plan in internally, maximize believe portfolio begin further before the increased a to Based take exploring end momentum another Marcos positive our our flows another net potential seeking information process quite cash find for you any Our strategy market our monetization of decisions. in the to lease the to this the until scale have and attractive, Marcos? of look structure. quarter, step let's the likely own With on two-year continue accretive our of completed XX% quarter. year, And net capital to this also And to market we the to details. we through should position be end since platform that, represent our fourth and attractively to further our not led during the making don't capital be sometime capital track Safehold and meaningful record value strong with for but us deploy for

Thanks, Jay, and good morning, everyone.

on X. Let me begin slide

quarter, steady strategy, progress made of three-pronged we the beginning second the laid out During we the which at year. on our

At the it as expand we seeing products. the SAFE, activity, scales. while value the the same and suite our time, investment are ecosystem of community, First growing SAFE we the the investment with solid to market and ground to enterprise working foremost continue help scale understand of lease

have continue balance strategy. the a we so flexibility our on strong sheet to Second, maintain we strength to execute financial and

to outlook performance. X to explore the the in the recognized And the net Fitch gap our BB monetization value has their the S&P and a on quarter, raised provides interest assets; our process our legacy and stable. on the of shrink the business finally, we intent view upgraded trading. rating to dividend per SAFE's improvement common portfolio; our where to Slide been and and $X.XX of share, annualized with lease saw stock between began an intrinsic stock credit more During to upgraded by our momentum while simplify credit detail XX% all

of quarter for of the $XXX in its on Ground product XX for June the lease Plus, customers offering share launch of expanded in the innovative about was on in of Safehold cycle per unrealized moment. in our million which billion. Lease closed update its Safehold of we and an a its which Second a in SAFE. bond I'll $XXX million. life issued our quarter provides lease on market with plus earlier an We discuss offerings senior activity grew $X.X our more investment-grade legacy capital a new recently solid ground value also provide secured X.X% awarded to nearly notes based with $XXX utilized it of successful QX $X.X of ground price XXXX. capital on unrealized X, The investment suite million asset. to On ratings ground debut increased $XX.X closing our assets. SAFE gain billion bringing appreciation by slide due leases

quarter, assets the million proceeds, legacy During $XX we gain. generating million for $X.X a sold of

quarter net million explore announced subsequent In should second legacy addition, proceeds, you end quarter we the green of slide the can Eastdil see engaged assets which highlighted lease Jay as mentioned, during generate approximate market our third an for in Also, in sold portfolio. to to million we an we in gain quarter. $XX that interest on that the additional $XXX

total stages of for the million during quarter. activity early in second SAFE included quarter. open This quarter, loans, million a this as $XX invested the shares the buybacks. are process. plus. Also authorization million $XX We the during market net invested million CapEx $XXX summarizes $X on our Slide of X investment million to share has million buyback stock purchases, $XXX of stock iStar we very of our legacy iStar $XX in of ground and assets today. million Board lease The approved and lease of X.X or

the $XXX moment total Austin funding a would Texas. bit like lease lease an million conditional These of originated of million. detail. CBD plus I ground a on take to in describe ground $XXX two contain iStar first adjacent bringing to totaling concept more leases to in our ground ground parcels new also For land plus our the leases predevelopment transactions, additional $XX obligation million

As assets, that ground for continued we the while recognize investment ground that benefit enters iStar designed same efficient into capital was would solutions void. those two predevelopment plus Safehold's not ground from arrangements. lease their modern our customers The the evolve space, assets to lease investment, lease have meet product to lease fill ground criteria. do In we generally

origination a second ground future with the obligation lease to an provides upside Safehold additional The first third-party lease a the with customer; ground our that iStar ground for an ground date. a investment for at from purchase provide construction is funds The is the agreement That of to the lease and investment initial of to tenant, vertical and being obligation to from milestones upon serves and construction. upside proposed within achievement shovel-ready our the lease is ground also achieving frame, development customer The trigger qualify milestones as certain a defined purchase for for development. those conditioned we refer Safehold's which obligation to time iStar. development Safehold's asset the acquire

lease lease win-win-win. to plus believe the ground creates ecosystem product we Our and further iStar's a evidences commitment ground

our Safehold; and risk-adjusted most iStar our ground criteria. a a their First, a lease assets. its investment to pipeline second, life attractive of the high-quality benefit through ground the SAFE efficient able an customers asset leases And earlier return capital to finally, gain importantly, obtains that XX-year of rent and ground from is on cycle of selling generate in meets combination

X billion. total shows the to portfolio $X.X portfolio. end slide our second quarter, Turning of stood the at our makeup At of the

per $X.X $XX.X of represents a financing of $XXX loss quarter share, X% estate of real during our compared last $X.XX monetize earnings by pro same $X.XX Adjusted a result. our or to net the the $XX.X million asset completed for or which is share of share to year an were in portfolio. the We share our or or continue per end million $X.XX improvement $XX sales of we for period $X.XX loss legacy year. the a per quarter, period. net X% prior loss balance million a $XX We and million or is the from loss loss the million of earnings per million our net in quarter of a X our to portfolio. details now And Slide approximately of down subsequent forma the reported

Lastly, slide per quarter and the CECL share value Including illustrates financial reported for as our $XX.XX mark-to-market value in shows at the when and adjusted recognized per of not the per $XX.XX amortization of the value and end our statement. our value X per stood but book created book share at at allowance. depreciation, XX, through SAFE's share Safehold, June share

innovation trading is believe we intrinsic we the to are value. also asset investment the me this a do gap with where stock Jay. back between In pleased we momentum at continued SAFE stock turn our to recognize let work monetization. have to legacy still we and that, represented year-to-date, quarter While on remains and conclusion strategy there as solid And it see progress and encouraging with activity

Great. Thanks, Marcos.

go I think it up can and the it just Operator? like ahead with sounds questions. we details open that for backdrop,

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

in you seeing end that you monetization terms you Thank timing and were those Has of where the post assets as do the think in assets? are you to there? Can quarter at is which the outlook traction all? much. disclosed? very quarter sold legacy you talk accelerated And What of most of

of been working on pretty Actually sale. getting short-term trying we've through sold of assets. a sold quarter. the management ones to post we've Yeah, the a that resources lot couple in diligently Jade, a think A of quarter, the I lot prepared work couple for spent and time some

So see land, operating small some those parcels got we're go. of delighted properties. to We

the in long-term long-term of see larger assets. deck, You – the one

that. progress It's fronts a across So process. all making we're on time-consuming good been

those only at more end think So is We but to continues Asbury Green Magnolia the two-year our plan, Really and we a day us. of got two still for sells the relevant work go to assets. good on are each one team that assets. the

Asbury Magnolia had another quarter. another quarter. good had good

to tracking. time schedule. they're So monetization now happen a be longer on lead just They

next a assets And us Asbury months. longer of lot think Magnolia you'll put good and have I those in move through work to same XX term. we'll So then done on see track continue at the to short-term those the

asset – Vista, that… of one what larger that which said progress was that was was Was some on. Grand assets, or the so third there you the And long-term

yes. Yes,

So that's been sold?

Yes.

guess value think days about increased? right believe I the dividend that legacy And you you is the looking even the for discounted do the company of has model, the iStar in that valuation guys earlier UCA the overall, iStar's the today? of think talk a way to of what assets do in you of at looking you terms proponent at of I Thank value that. the Okay. terms and lot post-COVID

the that in And couple our obviously Jade, out still Yes. put think there's force of for has creation. are years relevant. driving market ground the But lease game. we're Look, this early upside. the in in enormous last we think markers we the We been investment

I we've good around opportunity look what and think what very as white and Marcos sectors so space be. the ahead can are, in size-wise of have noted, but far very we we companies us. in we've that high all estate dominant business got aspirations When a for see of the well real done lot

contract. So assets grow our value are That's in our non-core the shareholding maximize enormous management legacy given going at to arise really as time the and And assets. we opportunities see mandates our same value, position our create business. that to and our

we post-COVID think assets don't They're pre-COVID, said, would not. So per the se event. are have or even main I legacy

done asset get there'll me those event. winners, say that's over many be gains through teams management redeploy great generate a really there'll job main the We'll the it in our you've but we're and years, be have to money we'll out, fortunate heard losers. working Our cases and

lease And even that the coming of build that's driver just of frankly more going success because the of out ground having to gives business more we're we're on forward much and the the pleased runway us real some so business the fuel by business. the assets, ecosystem legacy

partner. our a out with net We lease, period investment The our JV see think bit it's runs different. I later this year. with little

built time we're So a But in up. the event. strong bid and a any kind seeing of we've natural very for this was record assets the also track

there's is. the on part a terms interest where of natural to see value in our So market just maximizing

very some sense curve the developing very we anyway kind on the we're our assets a tenant We've good attractive market lease net point that own. for So Bowlero. of some potentially had news seeing but made along largest

customers book then all is there. a sort the And So their has the maybe those more. financing own. where explore, came make thing, as of to things low-priced possible assets be post-COVID at off their decision lot capital. pretty taking rebound our markets do more to And advantage make what the on might the that's it a know worth together to of that area of some liquid you are customers loan its one least easy see our made and Continue running of

So that the of real we there have result have pay-offs markets. reopening a the estate finance really some seen been of

equity is early happen, year get in or a with does question do side, combination accelerate sale investors, did XXXX? still if it potential this to And in on a the process? very expect you that the from I it exploratory And happen, a lot a SAFE

there. good questions of lot A in Yes.

is this First an exploration.

action. committed not course have specific any We to of do

what piece can do how made fashion. to we're total it just or take goes, that pieces we'll or We in it will see other we structured makes but one more no decisions at sense whether the in think things time. like until some to them show in be going a So market

the externally within going the capital conversation time is with going how to thoughtful information plan period be good table, iStar and guys the let's to to we'll might have plan. to We then we're play north let This think the out opportunities to allocation. architecturally think step scale best at happening how that with way. value so larger a see one is and of right help you'll really Star. $X in right put of lots opportunities plays smart to both should and take capital structure lots a do impact, of we a billion marker. little bit how what internally, to Jade, do SAFE out. then we're them on, some own going but its lot there in of our things now. maximize going see it us remaining in leases to So turn of And Safehold on that between two-year get learned that what out of our attention said from a options And there's we we We use, our needs to We've SAFE to we're that in back. of very you terms do come We've ground a have It scale. and

one down the things nicely field can't or the these all other. moving but rush So are

market think all lease we're So them piece us net scaling but a SAFE gives big we letting develop also piece the as big opportunities. is the And is a piece.

the taking for Thanks questions.

ahead. Our next question comes from Matthew Howlett with B.Riley. Please go

Thanks deployment for priority capital Jay, just my question. the taking allocation. capital on and on

with What's the lot the in in capital more then in year. of at do how stock the program you a have say You potentially half are ground lease could -- of -- you plus about and what SAFE the do it? investments you the allocation be obviously, you're repurchasing thinking back now there half year? How prioritize kicking back --

We know any to strong let's the the And we is sheet. that want way opportunity. last balance company. of always thing there corridor do things really happening in build are in we with a started jeopardize Yes good

strong. So started the with premise of we balance really the keep sheet

Asbury that I things things And some go-forward we think we've on and portfolio working recognized to agencies. businesses non-core. is that mentioned we're to have peak deemphasize the are look things been the sometime on Marcos reached been year. that opportunities. focus that across Two, by We've of trying are the of think last

providing same Green seeing in is we're soon. capital. So loan relatively of that. Magnolia out see We'll come capital The the book thing

we are And lease are we look trading; trading; in reemphasizing externally, create to right and iStar at comes where ground do right you're where capital keep across So opportunities. of as structure; can different accretive parts massive that is where then the value; we we the what this look a where is money Matt, Safehold exactly now is clearly, opportunity. the

to lot that have creating more industry good modern are but a legs think basically, ground a We job done this there lease story. we

when them yet the available working we played customers to others yet capital comes the about plus. You to it not fully out. buildings. is fully are one and best us the recognized heard on of thinking And with marketplace, think land ground about that story longest-term I not in are There make under lease

So think We lot there's upside we that. to think many, We We us you'll still undervalued SAFE there. a is of see capital that on think continue to undervalued. metrics commit iStar's look at. still many

good allocation. we the with thoughtful capital lots right iStar us or we to is where this to for of, may choices and and but we gave be each we out the what's journey. lease want attractive ball set one of continue of for parts turn really in set capital think to clear the all is lease been maximization terms So -- be the can have Different moves now them how places ecosystem are time Ground we have focus experimenting value streamline it; to balance of We of have have But so has biggest that the directions years. so couple out -- make want the that is ourselves deploy ground decision, the going where put years. really to two we'll and capital sheet, impact. we story for been last deploy the furthest to simple that scale now XXXX Safehold; this right up I

mandate see We're six two that. you've a us value the let's recognized. creating gave years months seven Board Our into in been

got to we've story. do lot a work more to opportunities finish but more that good lot so far So and a

those I the about the paid on sale sheet. Just debt. And think then unsecured with the is debt it a do I of a When year. lot assuming cash? the mean debt to Part with of most gap and of follow-up balance net up down being of you a down lease balance two people think iStar's you think the I going different I'm streamlining sale, I convert sheet? paying do as of get you that both that could look mentioned. coming have iStar items, are lot off really that close next

debt the pay for cadence talk downs Just XXXX. about into heading

Yes. in liquid. our care to accelerate of We're process. by transaction that need Look, be certainly a part would taken net on I terms lease And debt path will you're think the assets strong. the of. of We're right secured

legacy transactions continued I lease book. think that net liquidity. only you're to of out that add liquidity Any see going coming to would

So to but fourth only be side. to balance to and certainly forward some asset the liability the But push any do is lever opportunities streamline a continue side looking these in little one. quarter the having net thought think and of it's right will go clarity. we premature lease is those of But not yet. us more for down the of there We're processes levers just sheet, the to coming to the a a back moment this big on little

Thanks Great. Jay.

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

Hi. Good morning.

Good morning.

follow-up to wanted the earlier. use from I on of question Jay capital

buyback, if you the in increase in than seems the should we've where repurchase stays authorization. we the see or higher couple announced more it that also the quarters, widening shares stock level to an of like coincidental, of kind seen it Is last expect of the On is. a and gap just given

anything strong a for a X company. over No, us to We of we thoughtful about bite prudent lot keep been we has crazy. our one and it. key prices you've consistent sheet. We're balance It's a We buyer seen the the million -- the sense thought at solid made Yes. shares not of think a pillars. be years want

But balance can as As number debt, been several pay we've on little right path we strength the a we steady build build move down same around now on we're that sheet we certainly for as bit. years. liquidity,

until we think that's so path And change kind I to stay want of factors the on.

with should up? And ground held on Great. held iStar, we we will a going it for you think in that price, the or carried that? go on investment modeling sales? forecasted some about is give think be going modeling for sale us balance And can lease you that And plus, iStar be growth at sheet? into big accrete insight about cash so to gain sale some plus should since how on the grounds should flow Is into the to income it how

Yes.

of lease I of events. the think of Safehold number ground is purchase that a conditioned potential because on

XXX% You probability. to assume can't it's going happen with

I those triggered, there are coming met until transaction the think other tenant. see the you'll conditions than and in rent underlying a is anything So from don't

will it you'll the So tenant. yes, the strong where building happens get it a all He's of lot on full dirt, to position end working it very and high-quality pickup at it a at very lease there iStar. owns then great flow a And when be through. has now to piece happens, you'll a the transaction see ground But got is a once Safehold's into impact very of risk, money fits see economic hard parameters. a that

What's going what kind it's those XX point? ground in do that this months start gains see typical investments? first or or should plus to we to XX time think lease that months, reach the from about roll to those Is when of start we year need to season how

you think each unique, transaction lease but assume XX I for months. purposes will can XX to modeling plus between somewhere be ground

going think go month Jay. impact through there your so just was may that that Can some Great. on you I that Bowlero look here investment's that? on and how to has reopening? And what SPAC is they question earlier any a in if this public Last whether touch news investment?

The -- felt business first one added took bonus. lease is a the certainly done several that of six It's transaction of of events has snapped portfolio so. that is months we the very year. with an our positive the in SPAC Yes. back. long-term, one It comfortable which net place over That

We gives bottom estate well underlying those they're one for we've now. long, that. currency experiential there know owned decade. companies strong. business the the business assets time, getting certainly, is, is plan. top continue benefit And very it out the long real think a to over their are a They the But a a for I line of from us

benefits as well-constructed our as very they I a of we're the are And in to people like think of But seeing what reopening, asset. see there. it's the I really that. lease they're dig So more when part net portfolio, markets think importantly, long-term, going very

the Jay. Great. for I comments appreciate Thanks me.

Please We ahead. Instructions] have follow-up Jade [Operator from go KBW. a with question Rahmani

very much. Thank you

broader around Just in in if changed macro market participate Curious at York your inclined thoughts such New at the you Are question. your a thoughts New market? the office What have deals? York deals Are are looking you to all. office there?

Yes, Jade. I'll start focus with the they premise as of we foremost market. locations whether a on love office and otherwise. New are We or York first

be we in New York. So continue to long-term believers

want effectively in. We have coming invest is to We've or New York that either experience. leadership think adjust New good. start city a to rough We this almost ahead We hybrid We'll But York still Day workplace. Certainly, dynamics vaccination in our the now. pretty it. flexible New know how We how a long-term post we new companies the in continues dynamics. to see can't year a short-term predict of for been more in. office road are goes. really is places like see Labor think back of from to office when we'll

we far the in office, We to can afford flexible. be productive more but are

to need So it. and But offices will would make Companies creative. bet flexibility be is attached where will still congregate think people they'll can I we But the there'll be space adapt. that's adapt. a high-quality that

the landlords post-COVID think, era. to the figure of I to needs out start top the how near-term, will So accommodate

that's relevant. -- it's less us For

we buildings better under want We you to we land great for to solution. far have unlock you value can other If than any think talk you.

you from away of shy Jade, land. kind great those wouldn't but we starts So have transactions with it

some it ago last probably was company, lease bifurcate quarters a out through Vornado to separate couple of talked ground to think, about I land And, the a maybe quarter their REIT. potential

company's - genesis any the the interesting potential know side transactions? transactions I for Safehold were iStar's there M&A growth. in M&A You that some on the anticipate accelerated

that billion guys I might Lazard's business trajectory that accelerate out? $X put one on side think think SAFE at gross Anything do asset you toward number the point. you M&A bought Mezzanine you

to We over to to think forward thinking talking business. work significant always I a portfolio. new value way come thinker owners, shareholders. new unlock think take building going be forward-thinking a really institutional international. all are opportunities this kind to love their a private/public, way there We is with It's folks. to But a to with It's kinds will that, of It for entire do to think. of,

makes talk more us about than we it the lot sale-leaseback And think like operators customers' great more eventually sense of think all business which a how more can equals world one They best operating to separate this I one the that. just will look ton and top real we heard Jade You've where are plus use two. markets highest these what the at constantly in corporate about a needs. estate meet see

owners modern think out I and customers lease a dynamic need. of do we're be then kind to ground you'll that we is I our that them meet thinking to asset is We possible. And that Every provide we And on in we else ground think love market what in the at some wants customer plus trying everybody point needs first business. that right that we're a this hospitality And will or the asset's expand and they Everything value. as seems think figure every a follow. same go unlocks to lease same need as forward-thinkers whether see what its letter will fast now. with to the Vornado talked about building want a asset. because lot and these

will tuned much. stay very of for kind Thanks developments. those Okay. I

Thanks, Jade.

Fooks, [Operator we questions. have Instructions] further Mr. no

instructions me free Tiffany, release you. Thank give If replay to on contact Okay. earnings the conference anyone call directly. please would should have additional you feel Thanks. questions today's please again?

replay gentlemen, X:XX Thank this Eastern you. through conference Time p.m. at today Ladies August will XX after available midnight. for and be

the and That now participation replay code entering today. may You are X-XXX-XXX-XXXX any code Thank executive time dialing X-XXX-XXX-XXXX again disconnect. the with Those numbers our for and may the XXXXXXX. access access your for access at you by you conclude system XXXXXXX. does conference