Safehold Inc

Previous wording

On August 10, 2022, Safehold Inc. (“Old SAFE”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with iStar Inc. (“iStar”), and on March 31, 2023, in accordance with the terms of the Merger Agreement, Old SAFE merged with and into iStar, at which time Old SAFE ceased to exist, and iStar continued as the surviving corporation and changed its name to “Safehold Inc.” For accounting purposes, the Merger is treated as a “reverse acquisition” in which iStar is considered the legal acquirer and Old SAFE is considered the accounting acquirer. As a result, the historical financial statements of Old SAFE became the historical financial statements of Safehold Inc. Unless the context otherwise requires, references to “iStar” refer to iStar prior to the Merger, and references to “we,” “our” and “the Company” refer to the business and operations of Old SAFE and its consolidated subsidiaries prior to the Merger and to Safehold Inc. (formerly known as iStar Inc.) and its consolidated subsidiaries following the consummation of the Merger. Periods presented prior to the Merger date of March 31, 2023 reflect the operations of Old SAFE and periods presented as of June 30, 2024 represent the financial statements of the Company.

Current wording

On August 10, 2022, Safehold Inc. (“Old SAFE”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with iStar Inc. (“iStar”), and on March 31, 2023, in accordance with the terms of the Merger Agreement, Old SAFE merged with and into iStar, at which time Old SAFE ceased to exist, and iStar continued as the surviving corporation and changed its name to “Safehold Inc.” For accounting purposes, the Merger is treated as a “reverse acquisition” in which iStar is considered the legal acquirer and Old SAFE is considered the accounting acquirer. As a result, the historical financial statements of Old SAFE became the historical financial statements of Safehold Inc. Unless the context otherwise requires, references to “iStar” refer to iStar prior to the Merger, and references to “we,” “our” and “the Company” refer to the business and operations of Old SAFE and its consolidated subsidiaries prior to the Merger and to Safehold Inc. (formerly known as iStar Inc.) and its consolidated subsidiaries following the consummation of the Merger. Periods presented prior to the Merger date of March 31, 2023 reflect the operations of Old SAFE and periods presented subsequent to March 31, 2023 represent the financial statements of the Company.

Previous wording

We acquire, manage and capitalize Ground Leases and report our business as a single reportable segment. We believe owning a portfolio of Ground Leases affords our investors the opportunity for safe, growing income. Safety is derived from a Ground Lease’s senior position in the commercial real estate capital structure. Growth is realized through long-term leases with contractual periodic increases in rent. Capital appreciation is realized though appreciation in the value of the land over time and through our typical rights as landlord to acquire the commercial buildings on our land at the end of a Ground Lease, which may yield substantial value to us. As of June 30, 2024, the percentage breakdown of the gross book value of our portfolio was 41% office, 39% multi-family, 11% hotels, 6% life science and 3% mixed use and

Current wording

We acquire, manage and capitalize Ground Leases and report our business as a single reportable segment. We believe owning a portfolio of Ground Leases affords our investors the opportunity for safe, growing income. Safety is derived from a Ground Lease’s senior position in the commercial real estate capital structure. Growth is realized through long-term leases with contractual periodic increases in rent. Capital appreciation is realized though appreciation in the value of the land over time and through our typical rights as landlord to acquire the commercial buildings on our land at the end of a Ground Lease, which may yield substantial value to us. As of September 30, 2024, the percentage breakdown of the gross book value of our portfolio was 41% office, 39% multi-family, 11% hotels, 6% life science and 3% mixed use

Previous wording

other. The diversification by geographic location, property type and sponsor in our portfolio further reduces risk and enhances potential upside.

Current wording

and other. The diversification by geographic location, property type and sponsor in our portfolio further reduces risk and enhances potential upside.

Previous wording

Many of our Ground Leases have CPI lookbacks, generally starting between years 11 and 21 of the lease term, to mitigate the effects of inflation that are typically capped between 3.0% - 3.5%; however, in the event cumulative inflation growth for the lookback period exceeds the cap, these rent adjustments may not keep up fully with changes in inflation. In 2022, the Consumer Price Index (“CPI”) rose to its highest rate in over 40 years. Since then, the Federal Reserve has raised interest rates multiple times and has kept rates high. Any further increase in interest rates may result in a reduction in the availability or an increase in costs of leasehold financing, which is critical to the growth of a robust Ground Lease market. An increase in interest rates could also increase the leasehold financing costs of our Ground Lease tenants and their ability to obtain leasehold financing.

Current wording

In 2022, the Consumer Price Index (“CPI”) rose to its highest rate in over 40 years. To combat the increase in inflation, the Federal Reserve raised interest rates and has kept interest rates generally high. This increase in interest rates has produced progress on inflation and in September 2024, the Federal Reserve reduced the federal funds rate by 50 basis points, which marked the first interest rate cut in four years. The Federal Reserve has indicated that it expects further interest rate cuts in the future; however, any future increase in interest rates may result in a reduction in the availability or an increase in costs of leasehold financing for Ground Lease tenants, which is critical to the growth of a robust Ground Lease market. Many of our Ground Leases have CPI lookbacks, generally starting between years 11 and 21 of the lease term, to mitigate the effects of inflation that are typically capped between 3.0% - 3.5%; however, in the event cumulative inflation growth for the lookback period exceeds the cap, these rent adjustments may not keep up fully with changes in inflation.

Previous wording

The COVID-19 pandemic is not currently materially impacting our new investment activity, but we continue to monitor its potential impact, which could slow new investment activity because of reduced levels of real estate transactions and constrained conditions for equity and debt financing for real estate transactions, including leasehold loans. In addition, following the onset of the COVID-19 pandemic, the U.S. office sector has been adversely affected by office vacancies, the rise in interest rates and a decline in market liquidity, all of which could negatively impact our tenants, Ground Rent Coverages and estimated Combined Property Values. Moreover, certain office assets currently have material vacancies. If our Ground Lease tenants at such assets fail to re-tenant the building such Ground Leases may default and we may suffer losses. The rise in interest rates and increased investment spreads to treasury bonds in the Ground Lease market may attract new competitors, which may result in higher costs for properties, lower returns and impact our ability to grow. See the "Risk Factors" section of our 2023 Annual Report for additional discussion of certain potential risks to our business arising from the COVID-19 pandemic and certain potential risks to our business related to competition and industry concentrations.

Current wording

The COVID-19 pandemic is not currently materially impacting our new investment activity, but we continue to monitor its potential impact, which could slow new investment activity because of reduced levels of real estate transactions and constrained conditions for equity and debt financing for real estate transactions, including leasehold loans. In addition, following the onset of the COVID-19 pandemic, the U.S. office sector has been adversely affected by office vacancies, the rise in interest rates and a decline in market liquidity, all of which could negatively impact our tenants, Ground Rent Coverages and estimated Combined Property Values. Moreover, certain office assets currently have material vacancies. If our Ground Lease tenants at such assets fail to re-tenant the building such Ground Leases may default and we may suffer losses. High interest rates and increased investment spreads to treasury bonds in the Ground Lease market may attract new competitors, which may result in higher costs for properties, lower returns and impact our ability to grow. See the "Risk Factors" section of our 2023 Annual Report for additional discussion of certain potential risks to our business arising from the COVID-19 pandemic and certain potential risks to our business related to competition and industry concentrations.

Previous wording

We generally target Ground Lease investments in which the initial cost of the Ground Lease represents 30% to 45% of the Combined Property Value as if the Ground Lease did not exist. If the initial cost of a Ground Lease is equal to 35% of the Combined Property Value, the remaining 65% of the Combined Property Value represents potential excess

Current wording

We generally target Ground Lease investments in which the initial cost of the Ground Lease represents 30% to 45% of the Combined Property Value as if the Ground Lease did not exist. If the initial cost of a Ground Lease is equal to

Previous wording

value over the amount of our investment that would be turned over to us upon the reversion of the property, assuming no intervening change in the Combined Property Value. In our view, there is a strong correlation between inflation and commercial real estate values over time, which supports our belief that the value of our owned residual portfolio should increase over time as inflation increases, although our ability to recognize value in certain cases may be limited by the rights of our tenants under some of our Ground Leases, including tenant rights to purchase our land in certain circumstances and the right of one tenant to demolish improvements prior to the expiration of the lease. See “Risk Factors” in our 2023 Annual Report for additional discussion of these tenant rights.

Current wording

35% of the Combined Property Value, the remaining 65% of the Combined Property Value represents potential excess value over the amount of our investment that would be turned over to us upon the reversion of the property, assuming no intervening change in the Combined Property Value. In our view, there is a strong correlation between inflation and commercial real estate values over time, which supports our belief that the value of our owned residual portfolio should increase over time as inflation increases, although our ability to recognize value in certain cases may be limited by the rights of our tenants under some of our Ground Leases, including tenant rights to purchase our land in certain circumstances and the right of one tenant to demolish improvements prior to the expiration of the lease. See “Risk Factors” in our 2023 Annual Report for additional discussion of these tenant rights.

Previous wording

Our portfolio of properties is diversified by property type and region. Our portfolio is comprised of Ground Leases and a master lease (relating to five hotel assets that we refer to as our “Park Hotels Portfolio”) that has many of the characteristics of a Ground Lease. As of June 30, 2024, our estimated portfolio Ground Rent Coverage was 3.6x (see “Risk Factors -Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect the full potential impact of the COVID-19 pandemic and may decline materially in future periods, -We rely on Property NOI as reported to us by our tenants, -Our estimates of Ground Rent Coverage for properties in development or transition, or for which we do not receive current tenant financial information, may prove to be incorrect” in our 2023 Annual Report for a discussion of our estimated Ground Rent Coverage).

Current wording

Our portfolio of properties is diversified by property type and region. Our portfolio is comprised of Ground Leases and a master lease (relating to five hotel assets that we refer to as our “Park Hotels Portfolio”) that has many of the characteristics of a Ground Lease. As of September 30, 2024, our estimated portfolio Ground Rent Coverage was 3.5x (see “Risk Factors -Our estimated UCA, Combined Property Value and Ground Rent Coverage, may not reflect the full potential impact of the COVID-19 pandemic or resulting shifts in the office sector and may decline materially in future periods, -We rely on Property NOI as reported to us by our tenants, -Our estimates of Ground Rent Coverage for properties in development or transition, or for which we do not receive current tenant financial information, may prove to be incorrect” in our 2023 Annual Report for a discussion of our estimated Ground Rent Coverage).

Previous wording

We have unfunded commitments to certain of our Ground Lease tenants related to leasehold improvement allowances that we expect to fund upon the completion of certain conditions. As of June 30, 2024, we had $50.6 million of such commitments, excluding commitments to be funded by noncontrolling interests.

Current wording

We have unfunded commitments to certain of our Ground Lease tenants related to leasehold improvement allowances that we expect to fund upon the completion of certain conditions. As of September 30, 2024, we had $70.6 million of such commitments, excluding commitments to be funded by noncontrolling interests.

Previous wording

We also have unfunded forward commitments related to agreements that we entered into for the acquisition of new Ground Leases or additions to existing Ground Leases if certain conditions are met (refer to Note 14 to the consolidated financial statements). These commitments may also include leasehold improvement allowances that will be funded to the Ground Lease tenants upon the completion of certain conditions. As of June 30, 2024, we had an aggregate

Current wording

We also have unfunded forward commitments related to agreements that we entered into for the acquisition of new Ground Leases or additions to existing Ground Leases if certain conditions are met (refer to Note 14 to the consolidated financial statements). These commitments may also include leasehold improvement allowances that will be funded to the Ground Lease tenants upon the completion of certain conditions. As of September 30, 2024, we had an

Previous wording

$150.4 million of such commitments. There can be no assurance that the conditions to closing for these transactions will be satisfied and that we will acquire the Ground Leases or fund the leasehold improvement allowances.

Current wording

aggregate $150.3 million of such commitments. There can be no assurance that the conditions to closing for these transactions will be satisfied and that we will acquire the Ground Leases or fund the leasehold improvement allowances.

Previous wording

Through the Leasehold Loan Fund, we also fund construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria. We refer to these arrangements as performance-based commitments. As of June 30, 2024, we had $103.3 million of such commitments.

Current wording

Through the Leasehold Loan Fund, we also fund construction and development loans and build-outs of space in real estate assets over a period of time if and when the borrowers and tenants meet established milestones and other performance criteria. We refer to these arrangements as performance-based commitments. As of September 30, 2024, we had $120.1 million of such commitments.

Previous wording

Interest income from sales-type leases increased to $65.2 million for the three months ended June 30, 2024 from $58.2 million for the same period in 2023. The increase was due primarily to acquisitions of Ground Leases and additional fundings on existing Ground Leases classified as sales-type leases and Ground Lease receivables.

Current wording

Interest income from sales-type leases increased to $67.1 million for the three months ended September 30, 2024 from $59.1 million for the same period in 2023. The increase was due primarily to acquisitions of Ground Leases and additional fundings on existing Ground Leases classified as sales-type leases and Ground Lease receivables.

Previous wording

Operating lease income was $37.7 million during both the six months ended June 30, 2024 and 2023. Operating lease income consists of rent from our operating leases and percentage rent from certain properties, including our Park Hotels Portfolio.

Current wording

Operating lease income was $16.7 million during both the three months ended September 30, 2024 and 2023. Operating lease income consists of rent from our operating leases and percentage rent from certain properties, including our Park Hotels Portfolio.

Previous wording

Other income for the three months ended June 30, 2024 and 2023 includes $4.4 million and $7.2 million, respectively, of management fees from Star Holdings. In addition, other income for both the three months ended June 30, 2024 and 2023 includes $0.1 million of other income relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease. Other income for both the three months ended June 30, 2024 and 2023 also includes $1.1 million of other ancillary income from our investments. Other ancillary income primarily includes sublease income earned in periods subsequent to the Merger, recoverable expenses and interest income earned on our cash balances.

Current wording

Other income for the three months ended September 30, 2024 and 2023 includes $3.7 million and $6.0 million, respectively, of management fees from Star Holdings. In addition, other income for both the three months ended September 30, 2024 and 2023 includes $0.1 million of other income relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease. Other income for the three months ended September 30, 2024 and 2023 also includes $0.8 million and 1.2 million, respectively, of other ancillary income from our investments. Other ancillary income primarily includes sublease income, recoverable expenses and interest income earned on our cash balances.

Previous wording

During the three months ended June 30, 2024 and 2023, we incurred interest expense from our debt obligations of $49.1 million and $46.1 million, respectively. The increase in 2024 was primarily the result of increased indebtedness to fund acquisition activity and higher interest rates.

Current wording

During the three months ended September 30, 2024 and 2023, we incurred interest expense from our debt obligations of $50.0 million and $46.6 million, respectively. The increase in 2024 was primarily the result of increased indebtedness to fund acquisition activity and higher interest rates.

Previous wording

Real estate expense was $1.0 million during both the three months ended June 30, 2024 and 2023, which consisted primarily of the amortization of an operating lease right-of-use asset, legal fees, property taxes and insurance expense. In addition, during both the three months ended June 30, 2024 and 2023, we also recorded $0.1 million of real estate expense relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease.

Current wording

During both the three months ended September 30, 2024 and 2023 we incurred real estate expense of $1.1 million, which consisted primarily of the amortization of an operating lease right-of-use asset, legal fees, property taxes and insurance expense. In addition, during both the three months ended September 30, 2024 and 2023, we also recorded $0.1 million of real estate expense relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease.

Previous wording

During the three months ended June 30, 2024, we recorded a provision for credit losses of $0.6 million. The provision was primarily the result of current market conditions, including an increase in our Ground Lease cost to value ratios on our Ground Lease portfolio. During the three months ended June 30, 2023, we recorded a provision for credit losses of $0.1 million. The provision was primarily the result of a declining macroeconomic forecast on commercial real estate markets since March 31, 2023.

Current wording

During the three months ended September 30, 2024, we recorded a provision for credit losses of $7.1 million. The provision for credit losses for the three months ended September 30, 2024 was due primarily to elective enhancements to our general provision for credit loss methodology (refer to Note 3 to the consolidated financial statements), current market conditions and growth in the portfolio during the period. During the three months ended September 30, 2023, we recorded a provision for credit losses of $0.3 million. The provision was primarily the result of a declining macroeconomic forecast on commercial real estate markets since June 30, 2023.

Previous wording

During the three months ended June 30, 2024, other expense consists primarily of costs related to our debt obligations. During the three months ended June 30, 2023, other expense consists primarily of legal and consulting costs and costs incurred from the formation of a venture.

Current wording

During the three months ended September 30, 2024, other expense consists primarily of costs related to our debt obligations. During the three months ended September 30, 2023, other expense consists primarily of $1.9 million from the derecognition of previously-capitalized deal structuring costs and also includes legal and consulting costs.

Previous wording

During the three months ended June 30, 2024, earnings from equity method investments (refer to Note 7 to the consolidated financial statements) resulted from our $0.9 million share of income from our 425 Park Avenue venture, our $1.4 million share of income from our 32 Old Slip venture, our $0.5 million share of income from the Ground Lease Plus Fund and our $3.7 million share of income from the Leasehold Loan Fund. During the three months ended June 30, 2023, earnings from equity method investments resulted from our $0.9 million pro rata share of income from our 425 Park Avenue venture, our $1.4 million pro rata share of income from our 32 Old Slip venture, our $1.7 million pro rata share of income from the Ground Lease Plus Fund and our $2.8 million pro rata share of income from the Leasehold Loan Fund.

Current wording

During the three months ended September 30, 2024, earnings from equity method investments (refer to Note 7 to the consolidated financial statements) resulted from our $0.7 million share of income from our 425 Park Avenue venture, our $1.4 million share of income from our 32 Old Slip venture, our $0.5 million share of income from the Ground Lease Plus Fund and our $2.2 million share of income from the Leasehold Loan Fund. During the three months ended September 30, 2023, earnings from equity method investments resulted from our $0.9 million pro rata share of income from our 425 Park Avenue venture, our $1.4 million pro rata share of income from our 32 Old Slip venture, our $1.8 million pro rata share of income from the Ground Lease Plus Fund and our $3.3 million pro rata share of income from the Leasehold Loan Fund.

Previous wording

During the six months ended June 30, 2024, we recorded consolidated income tax expense of $1.4 million, of which $1.3 million was attributable to our TRS. Included in our consolidated income tax expense for the six months ended June 30, 2024, our TRS recorded a deferred tax expense in the amount of $1.0 million. The net deferred tax expense relates primarily to equity-based compensation expense and utilization of net operating loss carryovers to which our TRS is a successor. During the six months ended June 30, 2023, we recorded income tax expense of $0.5 million. The income tax expense was primarily the result of our taxable REIT subsidiary recording a current and deferred income tax expense of $0.4 million and $0.1 million respectively.

Current wording

During the three months ended September 30, 2024, we recorded consolidated income tax expense of $0.7 million, which was attributable to our taxable REIT subsidiary (“TRS”). Included in our consolidated income tax expense, our TRS recorded current tax expense of $0.8 million and a deferred benefit of $0.1 million. The deferred tax expense relates primarily to equity-based compensation expense and utilization of net operating loss carryovers to which our TRS is a successor. During the three months ended September 30, 2023, we recorded income tax expense of $0.1 million. Our TRS recorded aggregate current federal and state income tax expense of $1.0 million for the three months ended September 30, 2023. In addition, during the three months ended September 30, 2023, our TRS recorded a deferred tax benefit in the amount of $0.9 million. The net deferred tax benefit relates primarily to equity-based compensation expense and net operating loss carryovers to which our TRS is a successor and which were finalized upon filing tax returns for periods prior to the Merger.

Previous wording

Interest income from sales-type leases increased to $128.5 million for the six months ended June 30, 2024 from $115.2 million for the same period in 2023. The increase was due primarily to the origination of new Ground Leases in 2023 and additional fundings on existing Ground Leases classified as sales-type leases and Ground Lease receivables.

Current wording

Interest income from sales-type leases increased to $195.6 million for the nine months ended September 30, 2024 from $174.4 million for the same period in 2023. The increase was due primarily to the origination of new Ground Leases and additional fundings on existing Ground Leases classified as sales-type leases and Ground Lease receivables.

Previous wording

Operating lease income was $16.7 million during the three months ended June 30, 2024 compared to $16.8 million for the same period in 2023. Operating lease income consists of rent from our operating leases and percentage rent from certain properties, including our Park Hotels Portfolio.

Current wording

Operating lease income was $54.3 million during the nine months ended September 30, 2024 and $54.4 million for the same period in 2023. Operating lease income consists of rent from our operating leases and percentage rent from certain properties, including our Park Hotels Portfolio.

Previous wording

Interest income – related party was $4.7 million and $2.4 million, respectively, for the six months ended June 30, 2024 and 2023 and relates to the Star Holdings Term Loan Facility.

Current wording

Interest income – related party was $7.1 million and $4.8 million, respectively, for the nine months ended September 30, 2024 and 2023 and relates to the Star Holdings Term Loan Facility.

Previous wording

Other income for the six months ended June 30, 2024 and 2023 primarily includes $9.9 million and $7.2 million, respectively, of management fees from Star Holdings. In addition, other income for the six months ended June 30, 2024 and 2023 includes $0.3 million and $0.3 million, respectively, of other income relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease. Other income for the six months ended June 30, 2024 and 2023 also includes $2.0 million and $1.2 million, respectively, of other ancillary income from our investments. The increase in other ancillary income in 2024 as compared to 2023 was primarily due to sublease income earned in periods subsequent to the Merger, interest income on our cash balances and management and other fees earned from the ventures that we manage.

Current wording

Other income for the nine months ended September 30, 2024 and 2023 primarily includes $13.6 million and $13.2 million, respectively, of management fees from Star Holdings. In addition, other income for both the nine months ended September 30, 2024 and 2023 includes $0.4 million of other income relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease. Other income for the nine months ended September 30, 2024 and 2023 also includes $2.8 million and $2.5 million, respectively, of other ancillary income from our investments. The increase in other ancillary income in 2024 as compared to 2023 was primarily due to sublease income earned in periods subsequent to the Merger, interest income on our cash balances and management and other fees earned from the ventures that we manage.

Previous wording

During the six months ended June 30, 2024 and 2023, we incurred interest expense from our debt obligations of $97.7 million and $86.9 million, respectively. The increase in 2024 was primarily the result of additional borrowings on our revolvers, which also accrued interest at higher rates in 2024 due to an increase in base interest rates, and interest expense on our trust preferred securities and our 6.10% Notes.

Current wording

During the nine months ended September 30, 2024 and 2023, we incurred interest expense from our debt obligations of $147.7 million and $133.5 million, respectively. The increase in 2024 was primarily the result of additional borrowings on our revolvers, which also accrued interest at higher rates in 2024 due to an increase in base interest rates, and interest expense on our trust preferred securities and our 6.10% Notes.

Previous wording

Real estate expense was $2.1 million and $2.2 million during the six months ended June 30, 2024 and 2023, respectively, which consisted primarily of the amortization of an operating lease right-of-use asset, legal fees, property taxes and insurance expense. In addition, during both the six months ended June 30, 2024 and 2023, we also recorded $0.3 million of real estate expense relating to a Ground Lease in which we are the lessee but our tenant at the property pays this

Current wording

Real estate expense was $3.2 million during both the nine months ended September 30, 2024 and 2023, which consisted primarily of the amortization of an operating lease right-of-use asset, legal fees, property taxes and insurance expense. In addition, during both the nine months ended September 30, 2024 and 2023, we also recorded $0.4 million of real estate expense relating to a Ground Lease in which we are the lessee but our tenant at the property pays this expense directly under the terms of a master lease.

Previous wording

Depreciation and amortization was $5.0 million and $4.9 million during the six months ended June 30, 2024 and 2023, respectively, and primarily relates to our ownership of the Park Hotels Portfolio and a multi-family property, the amortization of in-place lease assets, and beginning in the second quarter of 2023, depreciation on our corporate fixed assets.

Current wording

Depreciation and amortization was $7.5 million and $7.4 million, respectively, during the nine months ended September 30, 2024 and 2023, and primarily relates to our ownership of the Park Hotels Portfolio and a multi-family property, the amortization of in-place lease assets and depreciation on our corporate fixed assets.

Previous wording

Subsequent to the Merger closing on March 31, 2023, general and administrative expenses primarily includes public company costs such as compensation (including equity-based compensation), occupancy and other costs. Prior to the Merger closing, general and administrative expenses included management fees, an allocation of expenses to us from our Former Manager, costs of operating as a public company and stock-based compensation (primarily to our non-management directors). The following table presents our general and administrative expenses for the six months ended June 30, 2024 and 2023 ($ in thousands):

Current wording

Subsequent to the Merger closing on March 31, 2023, general and administrative expenses primarily includes public company costs such as compensation (including equity-based compensation), occupancy and other costs. Prior to the Merger closing, general and administrative expenses included management fees, an allocation of expenses to us from our Former Manager, costs of operating as a public company and stock-based compensation (primarily to our non-management directors). The following table presents our general and administrative expenses for the nine months ended September 30, 2024 and 2023 ($ in thousands):

Previous wording

During the six months ended June 30, 2024, other expense consists primarily of costs related to our debt obligations. During the six months ended June 30, 2023, other expense consists primarily of legal and consulting costs and transfer taxes associated with the Merger (refer to Note 1 to the consolidated financial statements).

Current wording

During the nine months ended September 30, 2024, other expense consists primarily of costs related to our debt obligations. During the nine months ended September 30, 2023, other expense consists primarily of legal and consulting costs, transfer taxes associated with the Merger (refer to Note 1 to the consolidated financial statements) and $1.9 million from the derecognition of previously-capitalized deal structuring costs.

Previous wording

During the six months ended June 30, 2024, earnings from equity method investments resulted from our $1.7 million pro rata share of income from our 425 Park Avenue venture, our $2.8 million pro rata share of income from our 32 Old Slip venture, our $1.4 million pro rata share of income from the Ground Lease Plus Fund and our $7.5 million pro rata share of income from the Leasehold Loan Fund. During the six months ended June 30, 2023, earnings from equity method investments resulted from our $1.7 million pro rata share of income from our 425 Park Avenue venture, our $2.8 million pro rata share of income from our 32 Old Slip venture, our $1.7 million pro rata share of income from the Ground Lease Plus Fund and our $2.8 million pro rata share of income from the Leasehold Loan Fund.

Current wording

During the nine months ended September 30, 2024, earnings from equity method investments resulted from our $2.4 million pro rata share of income from our 425 Park Avenue venture, our $4.2 million pro rata share of income from our 32 Old Slip venture, our $1.8 million pro rata share of income from the Ground Lease Plus Fund and our $9.6 million pro rata share of income from the Leasehold Loan Fund. During the nine months ended September 30, 2023, earnings from equity method investments resulted from our $2.6 million pro rata share of income from our 425 Park Avenue venture, our $4.3 million pro rata share of income from our 32 Old Slip venture, our $3.5 million pro rata share of income from the Ground Lease Plus Fund and our $6.1 million pro rata share of income from the Leasehold Loan Fund.

Previous wording

During the three months ended June 30, 2024, we recorded consolidated income tax expense of $0.9 million, which was attributable to our taxable REIT subsidiary (“TRS”). Included in our consolidated income tax expense, our TRS recorded current and deferred tax expense in the amounts of $0.7 million and $0.2 million, respectively. The deferred tax expense relates primarily to equity-based compensation expense and utilization of net operating loss carryovers to which our TRS is a successor. During the three months ended June 30, 2023, we recorded income tax expense of $0.5 million. The income tax expense was primarily the result of our taxable REIT subsidiary recording a current and deferred income tax expense of $0.4 million and $0.1 million respectively.

Current wording

During the nine months ended September 30, 2024, we recorded consolidated income tax expense of $2.0 million, which was attributable to our TRS. Included in our consolidated income tax expense for the nine months ended September 30, 2024, our TRS recorded deferred tax expense in the amount of $0.9 million. The net deferred tax expense relates primarily to equity-based compensation expense and utilization net operating loss carryovers to which our TRS is a successor. The net deferred tax expense relates primarily to equity-based compensation expense and utilization of net operating loss carryovers to which our TRS is a successor. During the nine months ended September 30, 2023, we recorded income tax expense of $0.6 million. The income tax expense was primarily the result of current federal and state income tax expense in the amount of $1.4 million, which was partially offset by a deferred tax benefit in the amount of $0.9 million with respect to our TRS. In addition, the Company recorded other state and local income taxes in the amount of $0.1 million during the nine months ended September 30, 2023.

Previous wording

In April 2024, we closed on a new $2.0 billion unsecured revolving credit facility (the “2024 Unsecured Revolver”), which replaces our 2021 Unsecured Revolver and 2023 Unsecured Revolver (refer to Note 9 to the consolidated financial statements), each of which were terminated. At the time of termination, $916 million was drawn on the 2021 Unsecured Revolver, all of which rolled over into the 2024 Unsecured Revolver. The 2024 Unsecured Revolver has a borrowing rate of Adjusted SOFR, as defined in the applicable agreement, plus 0.85%, subject to our credit ratings, with an extended maturity date of May 1, 2029, which includes two six-month extension options. The 2024 Unsecured Revolver replaced our nearest term maturities, reduces the overall facility cost and increased our liquidity by $150 million. Additionally, we gained greater financial flexibility through changes to certain financial covenants. As of June 30, 2024, there was $1.0 billion of undrawn capacity on the 2024 Unsecured Revolver.

Current wording

has a borrowing rate of Adjusted SOFR, as defined in the applicable agreement, plus 0.85%, subject to our credit ratings, with an extended maturity date of May 1, 2029, which includes two six-month extension options. The 2024 Unsecured Revolver replaced our nearest term maturities, reduces the overall facility cost and increased our liquidity by $150 million. Additionally, we gained greater financial flexibility through changes to certain financial covenants. As of September 30, 2024, there was $939 million of undrawn capacity on the 2024 Unsecured Revolver.

Previous wording

As of June 30, 2024, we had $13 million of unrestricted cash. We also have an aggregate $1.0 billion of undrawn capacity on our new 2024 Unsecured Revolver (refer to Note 9 to the consolidated financial statements). We refer to this unrestricted cash and additional borrowing capacity on our 2024 Unsecured Revolver as our “equity” liquidity which can be used for general corporate purposes or leveraged to acquire or originate new Ground Lease assets. Our primary sources of cash to date have been proceeds from equity offerings and private placements, proceeds from our initial capitalization

Current wording

As of September 30, 2024, we had $16 million of unrestricted cash. We also have an aggregate $939 million of undrawn capacity on our new 2024 Unsecured Revolver (refer to Note 9 to the consolidated financial statements). We refer to this unrestricted cash and additional borrowing capacity on our 2024 Unsecured Revolver as our “equity” liquidity which can be used for general corporate purposes or leveraged to acquire or originate new Ground Lease assets. Our primary sources of cash to date have been proceeds from equity offerings and private placements, proceeds from our initial capitalization by iStar and two institutional investors and borrowings from our debt facilities, unsecured notes, Commercial Paper Program and mortgages. Our primary uses of cash to date have been the acquisition/origination of Ground Leases, repayments on our debt facilities and distributions to our shareholders.

Previous wording

The following table outlines our cash flows provided by (used in) operating activities, cash flows used in investing activities and cash flows provided by financing activities for the six months ended June 30, 2024 and 2023 ($ in thousands):

Current wording

The following table outlines our cash flows provided by (used in) operating activities, cash flows used in investing activities and cash flows provided by financing activities for the nine months ended September 30, 2024 and 2023 ($ in thousands):

Previous wording

The increase in cash flows provided by operating activities during 2024 was due primarily to an increase in distributions received from equity method investments in 2024 and the payment of Merger expenses during the six months ended June 30, 2023, which was partially offset by the payment of annual performance awards during the six months ended June 30, 2024. The decrease in cash flows used in investing activities during 2024 was due primarily to the origination of the Star Holdings Term Loan Facility in 2023, consideration paid in connection with the Merger in 2023 and an increase in net distributions received from equity method investments in 2024, which was partially offset by an increase in the funding of Ground Leases in 2024. The decrease in cash flows provided by financing activities during 2024 was due primarily to a decrease in net borrowings on debt obligations.

Current wording

The increase in cash flows provided by operating activities during 2024 was due primarily to an increase in distributions received from equity method investments in 2024 and the payment of Merger expenses during the nine months ended September 30, 2023, which was partially offset by the payment of annual performance awards during the nine months ended September 30, 2024. The decrease in cash flows used in investing activities during 2024 was due primarily to the origination of the Star Holdings Term Loan Facility in 2023, consideration paid in connection with the Merger in 2023 and an increase in net distributions received from equity method investments in 2024, which was partially offset by an increase in the funding of Ground Leases in 2024. The decrease in cash flows provided by financing activities during 2024 was due primarily to a decrease in net borrowings on debt obligations.