Safehold's $400 Million Loan: A Strategic Move to Bolster Balance Sheet and Fuel Growth

Safehold Inc.'s recent $400 million unsecured term loan, announced on November 25, 2025, represents a pivotal step in the company's strategy to strengthen its balance sheet while positioning itself for long-term growth. The financing, which extends to 2030 with two 12-month extension options, is structured at SOFR plus 90 basis points, reflecting Safehold's current credit ratings of A3/A-/A-. By securing this unsecured debt, Safehold not only addresses near-term liquidity needs but also repositions its capital structure to reduce reliance on secured borrowing, a move that could enhance flexibility in a challenging commercial real estate market.

Balance Sheet Strength: Liquidity and Debt Management

The loan's immediate impact is a surge in Safehold's liquidity to $1.3 billion, a critical buffer in an environment where capital discipline is paramount. A key use of proceeds-repaying $227 million of secured debt due in 2027-demonstrates the company's proactive approach to managing maturity walls. By unencumbering 12 ground lease assets, previously used as collateral, Safehold unlocks valuable assets that can be redeployed for future investments or refinanced on more favorable terms.

This debt restructuring also aligns with Safehold's strong credit profile. S&P Global Ratings upgraded the company to 'A-' from 'BBB+' in 2025, citing its "strong asset quality and steady rent collections" as key drivers. The company's debt-to-equity ratio of 2.0x, as reported in Q3 2025, remains within conservative limits, suggesting capacity for further leverage without compromising financial stability. The SOFR swap at 3.0% through April 2028 further mitigates interest rate risk, locking in predictable costs for a portion of the loan.

Growth Potential: Portfolio Expansion and Strategic Discipline

Safehold's growth strategy hinges on disciplined capital deployment, particularly in long-term ground leases where initial costs represent 30% to 45% of combined property value. This approach ensures robust ground rent coverage ratios (2.0x to 4.5x), a metric critical to maintaining investment-grade ratings as detailed in the SEC 10-Q report. The company's Q3 2025 results underscore its execution capability: total revenues rose to $96.2 million, with net investment in sales-type leases reaching $3.5 billion and ground lease receivables at $1.96 billion according to the official results.

The $400 million loan provides additional firepower for Safehold's origination pipeline, which includes over $300 million in transactions under Letter of Intent. This momentum is particularly notable given the broader commercial real estate sector's challenges, where many peers face valuation pressures. By focusing on long-dated, inflation-protected cash flows from ground leases, Safehold differentiates itself as a counter-cyclical player according to market analysis.

Risks and Considerations

While the loan strengthens Safehold's balance sheet, investors should monitor post-2028 interest rate exposure. The SOFR swap only covers costs through April 2028, leaving the remaining term of the loan vulnerable to rate hikes. Additionally, the company's leverage metrics-though currently healthy-could tighten if it aggressively pursues new acquisitions. Safehold's CFO, Brett Asnas, emphasized the loan's role in "addressing near-term maturity with flexible unsecured capital," but long-term success will depend on maintaining disciplined underwriting.

Conclusion

Safehold's $400 million unsecured term loan is a strategic win, combining liquidity enhancement, debt optimization, and asset flexibility. By reducing secured debt and unencumbering high-quality ground leases, the company fortifies its balance sheet while preserving capital for growth. With a stable credit outlook, a robust pipeline, and a disciplined approach to risk, Safehold is well-positioned to capitalize on its unique value proposition in the ground lease sector.