Safehold Inc
NYSE:SAFE
Safehold Inc
Safehold Inc. emerged as a unique player in the real estate world by reinventing a centuries-old concept: the ground lease. Founded in 2017 and publicly traded as SAFE, the company has taken the traditional practice of leasing land to building owners and transformed it into a modern, scalable business. Unlike typical real estate investment trusts, Safehold doesn’t invest in buildings. Instead, it focuses on acquiring and creating ground leases, offering an innovative way for property owners to unlock capital. This strategy provides building owners with the flexibility to separate the ownership of the building from the land it sits on, allowing them to access funds tied up in the land while retaining control over the operations of their properties.
Safehold’s business model is built on stability and long-term growth. By owning the land under high-quality commercial properties, the company secures a stable stream of rental income over incredibly long terms, often 99 years. This creates a predictable revenue flow that is less volatile than typical real estate operations. The ground leases are triple-net, meaning the lessees cover expenses like taxes, maintenance, and insurance, further insulating Safehold from financial risks associated with property management. Such a model not only offers a steady, inflation-protected income stream but also potentially substantial appreciation value over time as the land beneath thriving urban centers increases in worth. Safehold effectively taps into the often-overlooked value of land, positioning itself as a partner to commercial property owners seeking to maximize financial flexibility, thereby creating a niche yet growing market for its services.
Safehold Inc. emerged as a unique player in the real estate world by reinventing a centuries-old concept: the ground lease. Founded in 2017 and publicly traded as SAFE, the company has taken the traditional practice of leasing land to building owners and transformed it into a modern, scalable business. Unlike typical real estate investment trusts, Safehold doesn’t invest in buildings. Instead, it focuses on acquiring and creating ground leases, offering an innovative way for property owners to unlock capital. This strategy provides building owners with the flexibility to separate the ownership of the building from the land it sits on, allowing them to access funds tied up in the land while retaining control over the operations of their properties.
Safehold’s business model is built on stability and long-term growth. By owning the land under high-quality commercial properties, the company secures a stable stream of rental income over incredibly long terms, often 99 years. This creates a predictable revenue flow that is less volatile than typical real estate operations. The ground leases are triple-net, meaning the lessees cover expenses like taxes, maintenance, and insurance, further insulating Safehold from financial risks associated with property management. Such a model not only offers a steady, inflation-protected income stream but also potentially substantial appreciation value over time as the land beneath thriving urban centers increases in worth. Safehold effectively taps into the often-overlooked value of land, positioning itself as a partner to commercial property owners seeking to maximize financial flexibility, thereby creating a niche yet growing market for its services.
Originations Momentum: Safehold originated $42 million of multifamily ground leases in Q3 and $34 million more in Q4 to date, all in the affordable housing segment and mainly in California, showing strong traction in this area.
Portfolio Growth: The total ground lease portfolio stands at $7 billion, with 155 assets and significant expansion since IPO.
Earnings & Revenue: Q3 GAAP revenue was $96.2 million, net income was $29.3 million, and EPS was $0.41, with EPS up $0.04 year-over-year (12%) excluding nonrecurring items.
Balance Sheet Strength: Safehold ended the quarter with $1.1 billion in liquidity, $4.8 billion of debt, no maturities until 2027, and maintains strong investment-grade ratings.
Yield & Returns: Portfolio economic yield is 5.9%, rising to 6.0% inflation-adjusted and 7.5% when including unrealized capital appreciation.
Litigation Update: Safehold has initiated litigation and sent a lease termination notice for all 5 hotels under the Park Hotel master lease due to alleged maintenance and operating covenant breaches. Impact is uncertain.
Deal Pipeline: Over 15 deals and more than $300 million are under letter of intent, expected to close in coming quarters, split between affordable and conventional multifamily.
