Safehold Upgraded, Liquidity Swells, But Office Uncertainty Lingers

Date of Call: Feb 12, 2026

Financials Results

• Revenue: Q4: $97.9M; Full Year: $385.6M
• EPS: Q4: $0.39 per share; Excluding loss: $0.42, up 15% YOY. Full Year: $1.59 per share; Excluding nonrecurring items: $1.65, up 5% YOY.

Business Commentary:

Origination Growth and Portfolio Expansion:

• Safehold closed on 10 transactions in Q4, including 9 ground leases and 1 leasehold loan, for an aggregate commitment of $167 million. For the full year, they closed 17 ground leases for $277 million and 4 leasehold loans for $152 million, totaling $429 million.
• The growth was driven by expansion into new states and sponsors, particularly within the affordable housing sector in Southern California, and a market rate multifamily development in Cambridge, Massachusetts.

Credit Rating Upgrade and Cost of Capital:

• Safehold received a credit rating upgrade from S&P to A- with a stable outlook, resulting in a lower effective interest rate on permanent debt of 4.3% and a cash interest rate of 3.9%.
• The upgrade was due to the high credit quality of their portfolio and balance sheet, which has positively influenced their cost of capital.

Liquidity and Debt Management:

• The company ended the year with approximately $1.2 billion of liquidity and closed a $400 million unsecured term loan, refinancing their nearest term maturity due in 2027.
• This refinancing increased liquidity and replaced secured debt with low-cost, freely prepayable unsecured debt, improving their overall debt maturity profile.

Earnings Performance:

• For Q4, GAAP revenue was $97.9 million, with net income of $27.9 million and earnings per share of $0.39. Excluding a nonrecurring loss, earnings per share were $0.42, up 15% year-over-year.
• The increase in earnings was primarily driven by net accretion on investment fundings, despite a decrease in management fee revenue.

Unfunded Commitments and Funding Strategy:

• Safehold has $140 million of ground lease unfunded commitments and $125 million on the loan side, with economic yields in the low 7s and around SOFR 300, respectively.
• The company is well-positioned to fund these commitments over the next 6-7 quarters, benefiting from favorable spreads and low credit spreads that allow for a reduced debt cost of capital.

Sentiment Analysis:

Overall Tone: Positive

• Progress on new investments, a rating upgrade, positive flow-through into cost of capital, strong pipeline for 2026, and confidence in business model and long-term value creation.

Q&A:

• Question from Mitch Germain (Citizens Bank): Any potential willingness to invest back into office at this point?
  Response: Management will look to expand asset classes but is more inclined to focus on other property types like multifamily and affordable housing, being particular about office deals.

• Question from Mitch Germain (Citizens Bank): Any sense that the worst is behind with regards to office downside in appraisals?
  Response: Management believes the first quarter has been a good starting point, with strengthening in core markets like New York, and CBRE has taken a good WACC in slower markets, though not certain if absolute bottom is reached.

• Question from Mitch Germain (Citizens Bank): You talked about getting the Carets recognized. Is it just outright sale of units or anything else?
  Response: Management believes Caret is a massive asset with significant unrealized value not being recognized, and they will continue to spotlight it through potential monetizations, sales, or other means, especially as the underlying portfolio grows.

• Question from Kenneth Lee (RBC Capital Markets): Would you still be dependent upon any pickup in activity before you could do anything with the Carets?
  Response: A stabilization in office values and growing underlying portfolio makes it easier for investors to understand Caret's value, which is a tailwind, but no specific dependency stated.

• Question from Kenneth Lee (RBC Capital Markets): Any way you could frame out potential levels or payout ratio for buybacks and how leverage considerations play in?
  Response: Management aims to execute buybacks in a leverage-neutral way, is evaluating capital recycling, and has runway as every $240M funded increases leverage by 1/10 of a turn, but wants to move forward with multiple strategic valves.

• Question from Harsh Hemnani (Green Street): How do you think through funding your 2026 origination pipeline and unfunded commitments?
  Response: Unfunded commitments have lower-yielding deals rolled off, with current unfunded commitments yielding low 7s for ground leases and SOFR+300 for loans, which are accretive vs. cost of debt; margin math is best it's been, and funding will occur over next 6-7 quarters.

• Question from Harsh Hemnani (Green Street): Does that change your math between raising more equity vs. tapping the unsecured bond market?
  Response: Near-term calculus does not change; management has leverage runway and will look to tap unsecured bond markets while credit spreads are tight to maintain liquidity for deployment.

• Question from Richard Anderson (Cantor Fitzgerald): Is it fair to say you could be killing 2 birds with 1 stone by selling assets, getting price discovery for Caret, and using proceeds for buybacks in a leverage-neutral way?
  Response: Yes, components of that are in the cards, and management aims to bridge the stock discount, create value, and grow the book accretively through capital recycling.

• Question from Richard Anderson (Cantor Fitzgerald): Could you entertain more JV capital as another equity option?
  Response: Yes, especially with partners seeking duration and inflation-protected cash flow; solutions like previous sovereign wealth fund ventures are being considered for better cost of capital.

• Question from Richard Anderson (Cantor Fitzgerald): Can you provide net G&A guidance for 2026?
  Response: Net G&A is expected to increase by about $5M, from low $40M in 2025 to high $40s in 2026, with management fee income still to go.

• Question from Richard Anderson (Cantor Fitzgerald): Are you sensing more demand for leasehold loans, and how do you describe their competitiveness?
  Response: Leasehold loans are typically 3-year terms; as a one-stop shop blended with ground leases, pricing is considered below market, making it an attractive cost of capital for customers.

• Question from Ronald Kamdem (Morgan Stanley): What are the sticking points for replicating origination success outside of California?
  Response: Progress is being made on other states, with several transactions under LOI; it takes time to study state-specific mechanics and build pipeline, but closings are expected over coming quarters.

• Question from Ronald Kamdem (Morgan Stanley): Any update on timing for resolution of Park Hotels?
  Response: Park Hotels has a port date in Q1 2027, with a $7M cost to get there; litigation will dictate final decisions on assets.

• Question from Kyle Bansi (Truist Securities): For the 2 assets that did not renew in Park Hotels, do you expect to continue to operate, re-lease or sell these?
  Response: Hilton is staying in place; litigation will dictate timing for decisions; not the long-term goal to run assets, but need to let process play out.

Contradiction Point 1

Office Market Outlook and Investment Appetite

Shift from actively tracking office deals to being very particular and less inclined, impacting investment strategy and deal pipeline characterization.

What are your thoughts on Mitch Germain's comments from Citizens Bank? - Mitch Germain (Citizens Bank)

20260212-2025 Q4: The company is open to expanding into other asset classes, including office, but will be very particular and more inclined to look at other opportunities. - Michael Trachtenberg(CEO)

Are there plans to reinvest in the office now? - Anthony Paolone (JPMorgan Chase & Co)

2025Q3: The deal pipeline is now well-diversified, including... office, in addition to affordable housing and conventional multifamily. The company is actively tracking opportunities across sectors... - Timothy Doherty(CFO)

Contradiction Point 2

Park Hotel Litigation Resolution Timeline

Shift from describing the process as lengthy and uncertain to providing a specific court date and cost, affecting expectations for asset resolution and financial impact.

What was the question from Ronald Kamdem of Morgan Stanley? - Ronald Kamdem (Morgan Stanley)

20260212-2025 Q4: The Park Hotels portfolio resolution is limited by litigation, with a potential court date in the first quarter of 2027. It will cost $7 million to reach that point... - Jay Sugarman(CFO)

Can you provide an update on the timeline for resolving the Park Hotels situation? - Ronald Kamdem (Morgan Stanley)

2025Q3: Litigation does not resolve quickly... It is a lengthy process, and outcomes are uncertain. - Jay Sugarman(CFO)

Contradiction Point 3

Strategy and Timeline for Capital Recycling and Buybacks

Contradiction on whether capital recycling is a current priority or a future consideration, influencing strategy for shareholder value creation.

What are your thoughts on Richard Anderson (Cantor Fitzgerald)? - Richard Anderson (Cantor Fitzgerald)

20260212-2025 Q4: Components of this strategy are in the cards. The company aims to create shareholder value by recycling capital (selling assets), which can provide price discovery for Caret and fund buybacks while growing the book accretively. - Brett Asnas(CFO)

Could selling assets to drive Caret price discovery and using proceeds for stock buybacks in a leverage-neutral manner be a potential 2026 strategy? - Jonathan Michael Petersen (Jefferies LLC)

2025Q2: The company is always evaluating the portfolio for capital recycling. - Jay S. Sugarman(CEO)

Contradiction Point 4

Joint Venture Appetite

Shift from focusing on keeping deals for the company to entertaining partnerships, changing the approach to capital deployment and deal sourcing.

Can you discuss your company's recent financial results and future outlook? - Richard Anderson (Cantor Fitzgerald)

20260212-2025 Q4: Yes, partnerships (like with sovereign wealth funds) are entertaining, especially given the demand for long-duration, inflation-protected cash flow. - Brett Asnas(CFO)

Are you considering other forms of equity capital, including more joint venture (JV) capital? - Haendel St. Juste (Mizuho)

2025Q1: The primary goal is to scale the business. Currently, due to a scarcity of deals, the focus is on keeping deals for the company. However, as deal flow ramps up and if the cost of capital is unfavorable, new joint ventures are considered. - Jay Sugarman(CEO) & Brett Asnas(CFO)