Safehold 4 Aug 222022 Q2 Earnings call transcript

Good morning, and welcome to iStar Second Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Jason Fooks, Senior Vice President of Investor Relations and Marketing. Please go ahead, sir.

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

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

recently XXD proceeding committee in of negotiate to with of Board iStar potential definitive discussions special highlight a Lastly, committee transaction to a of that corporate Safehold and and Directors of strategic Directors an respect the disclosing filed that the are I of special advanced that of wanted iStar they are amended agreements. Board to

been call. this no won't on be we executed, and However, discuss assurance agreements there potential agreements yet transaction because be will that executed able have definitive can definitive be no the to

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

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

strengthening scaling iStar, execute quarter, stated second of our Safehold. the simplifying sheet the continued balance to and on During we strategies

adjacent make we a and ground per XX% a going moment. The in has monetize us, nearing expect over lease continue you with up lease value proceeds earnings over transactions adding somewhat more and business year. and $X Safehold assets our that With to the of volatility UCA through lines or XX% net portfolio lease behind the ground quarter make half with engagement to related lease non-ground into to portfolio recycle ecosystem on good, strong nearing the sale our pay very had was count, And P&L, also quarter. a $X.X of we impact debt. into a up will owners balances. strongly part to had the building Brett level shares conversion of likely convertible September that notes in the market second is walk and billion $XX in also been go-forward equity retiring due of and material Partially our the billion. portfolio off share big was the assets mark-to-market in difficult is up over billion. now the share

Safehold as and Jason mentioned, future the Lastly, iStar regarding conversations significantly. progressed between

so discussions Safehold, again, do to As in recent won't you of share or on able be XXD our advanced do with to to saw we future. in call. the details We hope so near able conversations be those in this

let’s turn Marcos. to over Brett Marcos? Okay, it and

morning, good Jay, Thanks, and everyone.

Let's quarter's discuss this on begin to three results. slide

meaningful continue our three-part progress make strategy. We to on

Safehold quarter scale our of on lease solid during and concurrent activity expand investment and land. to ecosystem, First continue the sitting top the the and of foremost, we appreciation capital growth ground unrealized the seeing

slight stock in the strengthened exchanging bonds to sheet market to we notes balance some open repurchased by convertible discount and Second, balance for a our the we par. increase cash at

evolve four our further company. monetization lease of large into as end ground the allowing of results. the position cash net to the details sale quarter. assets continue And portfolio predominantly finally, lease our earnings we following continue us maintain business simplify at Slide saw focused the a non-ground to first We of lease we our a to

the adjusted And primarily on a common impacted our of Of loss convertible our loss net quarter income million $XXX statement. was this common quarter, a $X.XX which a loss $X.XX share. diluted income income was net of note, $XXX.X a share. per $XX.X or million loss were the note million million non-cash per earnings in of loss of exchange, $XXX or by a For predominantly resulted diluted

However, that for transaction total, $X.XX additional shares, transaction $XXX increase the equity per common in XX.XX by per was share. in offset equity million million to million. in $XXX a reduction In resulting of net share a this equity increase resulted

our value simplified in we shows and of quarter, five sheet. the our ground Slide of investments million of end cash billion overview $X.X $X.X related over of of carrying the just balance the non-core to of At our an as ecosystem second $XXX had business presentation of billion lease assets.

had right liabilities. the with our of iPIP $X we the obligations, of other of of payable the billion $X.X end million of of net associated to at accrued liabilities side and quarter, debt sheet, accounts the billion balance million expenses $XX of and comprised $XX total Turning plan,

for have preferred is at end our safe to adjust When for or approximately result equity equity. estimate distributions, was also billion marking $X.X per and iPIP $XX.XX of $XXX common share. unaccrued million we We market quarter our investment diluted

with Let's slide six. beginning portfolio's our Safehold walk on through businesses

of at As approximately of $X.X billion. a Safehold end we second with announced million market yesterday the owned the XX.X quarter, shares value

$XXX on progress underlying last leases during seven to second quarter Although continues and ground from year, is business closed Safe stock solid make for million. new down considerably Safehold's the

during company of earnings pipeline. year. per to expanding Additionally, the raised of quarter, the liquidity its grew debt, million fresh a share total XX-year period with which to XX%, $XXX Safehold's last fund the Safe left million compared unsecured same $XXX

ground ground balance. holds leasehold by the the of detail interest funds focused approximately our iStar Additionally, billion. and lease lease we the owns two fund. ground at now additional seven, increased opportunities, consisting each slide investments adjacent the funds lease XX% ground pool and plus dedicated these on a fund and the To lease third-party ecosystem. of investor the in of investing loan has a in in ecosystem, capture the value On $X.X estimated $XXX stands iStar UCA million

carrying million Our totals investments $XXX targeted X% of comprised these eight value with net assets and is to returns between for XX%.

investments. associated remains assets. which million end commitments of portfolio estate quarter million of outstanding these real Slide finance $XXX $XXX down loans, of from have first consisted At lease related what remaining lease with ground the unfunded approximately million of the end, non-ground our quarter. is the highlights we of at eight $XXX Additionally,

strategic expecting. quarter. regard During proceeds to agreement, $XX a with receive opportunity we in provision the by we we connection our than the balance this the million other to quarter. we took reduced the assets legacy In what of net the a years loan With had restructure order quarter, during to our were during one net earlier assets, million $XX and

million, of the We second assets legacy lease Magnolia portfolio Asbury totaling $XXX had and have million, of ecosystem nine cash. total well related and the which Park ground $X.X quarter, comprised XX% XX Slide assets, Green. end remaining details as long-term At makeup billion of the totaling short-term of $XXX of the portfolio. assets two to our as is

balance presents of other X%, X%, of operating ten debt. estate represents the the and X% development Slide X%, investments. land and portfolio, property an and overview For strategic our real corporate is in finance is

the holders our mature through in a debt purchases quarter, notes, exchange transactions, entered the exchange million our privately of convertible XXXX which and million million bonds. the of common aggregate we negotiated issued iStar $XXX volatility a exchanges the stock In of senior to newly sheet, this principal of the of extinguished shares During open as and reduce notes September balance into million and with the of purpose The approach convertible amount simplify $XXX with or of of XX.XX to total deleverage certain market agreements money. $XX maturity in we of significantly was cash. stock exchange

or reduce debt. of us as the able And subsequent common well we stock notes and to additional on million have X of $XX $XX of shares we to as million transaction exchange the million quarter, outstanding cash. $XX of outstanding. end to cash Importantly, convertible million enables of Today, an were convertible hand, preserve the notes

during gain. second end, years. notes, approximately At to of a average of repurchased quarter, billion maturity weighted had addition a quarter unsecured in of $XX we the debt exchanges, $X these In with resulting million our outstanding million other convertible $X.XX we X.X

fronts larger possible. With consistent strategic let as as me to Jay. progress of all a we it soon strategy that, and So update to hope back turn our provide on conclusion,

Thanks, iStar But operator? point. up Safehold, Brett. the can't we Again, but I conversations, about ahead ask this know you hope and questions will for many want to I and understand, anything at you of let's say open go

Jade question first from comes of line ahead. KBW. the Thank Please Instructions] go Rahmani, you. Our [Operator

very you Thank much.

also or to whether has you how investment? as anything the are to year. that's played structures strategies investment has or your duration picture pursue variable this anything of other views lease more And ground perhaps know, of revisit out you're a seen with any of Just change the pursuing played assumptions macro expectations? Is your respect caused or that there component? with looking You you've this opportunities rate might there any there's caused evolving you curious has prior at if less you that to year out

think we traction. call is continuing gain look, No, Hy, Safehold to core the the Jade. I product, modern lease what ground

XX think types, high-end we've XX a sharpshooters, lenders on we've with. that customers, Safehold at covering now institutional over point -- we're listened multiple you this top in If I the all call, got it product country, local leasehold cities worked

quarter. every is product very I powerful and So has core improving that think been the

see markets. right the in part can think it core that. mainstream I varying do that don't is ground we need changing the our really real we We haven't a now are do us really we're in other and estate this there focus whole So really on a much too the ecosystem lease of capitalization that product, But to making pursue. seen opportunities

set. are selling we we've difficult. of transactions macro but happen is want a I We play role to is need kind to to has us say that part buying transactions, for assets from what of So a people perspective solution, and capital well piece the pretty gotten play. will seen more

right of clearly seen year a out to this in rates, sharp things, So cap buyers adjust saw seen rates, some price the sellers the of we've first half time high markets bit for takes et on we the and before. It to struggle cetera. interest to for and figure volatility we changes have what's pretty little

still expect green be to commercial in done. new starting real starting stability, are. people it transactions, Safehold, in figure half year the will But of longer levels means to see probably we we're deals where slowdown of which a out a second little the estate So get for the to price are shoots

missing in be era, what Thank you. you of And caused to potential assess lot to to magnitude floating scope waves this playing debt, rate out. as debt, the ‘XX at leveraged system, we defaults look cycle. seems of change cycle, that we be of had lot this ‘XX correction at this which a the How the over securitized was a that of a very of seems do

On the get had have magnitude at positive looking other estate, which been of How are cycle hand, real inflation, higher rents. somewhat you high you we and downtime? dynamics do the the potential of to because a

about where parts we struggling other trends outside seen We're dangerous positive what up time. parts a Other X% inflation bit. we've more the it's of commercial takes is pretty back do inflation -- think be to replacement despite has continue the always do to long-term doing it see pushes looking right very it and see of talked the make at cost. office in of inflation now. long real could been past. It's time are little market consistent the look estate X% There'll for and and between when the But adapt, over estate, multifamily world to a periods headwinds. we're We certainly that norms not again strong, past grounding we because Obviously, to historically century. be we've the we moment over some the sleeping and time of anticipating generalizations, long-term real challenges the a historically,

will periods inflation think eventually. flow our so that's rate things is business basis we Interestingly, how increase in above long on at of And X% our time. cash Safehold It's where long-term. I settle a returns out over model

something environment real need certainly in from we tips a about, in the are like we macro macro I standpoint than through see we for. geopolitically. But maybe the pockets, nature certain more an again, think Jade, process. give think challenges going dynamics We a credit overall, to now strength see some and right that's it’s adjustment talk people in

guess we're where business So tomorrow. in a to not have going we where all that's

know, If had we view you you out us, I think pretty to constant. there. think some there's ask our But challenges remains long-term

portfolio Granted, haircut sales on side progress carrying make on there side? the on continued legacy take to potential asset any to the Thank company the Either you. the thinking that And you may a legacy value. just about? there. assets or lastly need loan bulk Are to is

lot Safehold growth However, cash value the unrealized liquidity the very there of been position growth has book a company's and position value There's over strong. period. and is in the

wondering So you're if contemplating such transactions?

they looking the the sheet balance have position We're most to possible. flexibility

we So that when can quarter. sense a asset we have most think did on decisions or an that where see we the of. this We uncertainty rid long-term it made makes we get

some those continue there towards But in may I think near-term. to to biggest in sell projects, Park an successful segmented sales. to be that'll move an accelerate don't terms to thing think as be opportunities Magnolia of sort of I the approach. ones, and parcels, we well opportunity whole conclusion the the very a track two there's Asbury of the opportunity There a are

you. Thank

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