Good afternoon, and welcome to Safehold's Third Quarter 2025 Earnings Conference Call. As a reminder, today's conference call is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Pearse Hoffmann, Senior Vice President, Head of Corporate Finance. Please go ahead, sir.

Good afternoon, everyone. Thank you for joining us today for Safehold's earnings call. On the call today, we have Jay Sugarman, Chairman and Chief Executive Officer; Brett Asnas, Chief Financial Officer; and Tim Doherty, Chief Investment Officer. This afternoon, we plan to walk through a presentation that details our third quarter 2025 results. The presentation can be found on our website at safeholdinc.com by clicking on the Investors link. There will be a replay of this conference call beginning at 8:00 p.m. Eastern Time today. The dial-in for the replay is (877) 481-4010 with a confirmation code of 53142. Before I turn the call over to Jay, I'd like to remind everyone that statements in this earnings call, which are not historical facts, may be forward-looking. Our actual results may differ materially from these forward-looking statements and the risk factors that could cause these differences are detailed in our SEC reports. Safehold disclaims any intent or obligation to update these forward-looking statements, except as expressly required by law. Now with that, I'd like to turn it over to Chairman and CEO, Jay Sugarman. Jay?

Thanks, Pearse, and thanks to all of you for joining us today. We saw steady activity in our ground lease business in the third quarter with the recent decline in rates and a somewhat less steep yield curve, helping to provide a more constructive backdrop. This was offset by deals needing longer time frames to close. And as a result, we expect more will likely close in the fourth quarter or first quarter of next year. The drop in rates has also helped boost the NAV of the existing portfolio and drive more activity in real estate markets more generally. In terms of sectors, our modern ground lease continues to help customers trying to meet affordable housing needs in heavily populated markets throughout the country. And while deal sizes are smaller, we like the repeat customer dynamics we are seeing in this area, and we are investing resources accordingly. Giving customers products that enable them to move quickly and adjust to market conditions remains a focus, and we will continue to innovate with ways to provide speed, certainty, and flexibility around our core ground lease solution. One-Stop Capital solutions, custom pricing solutions and other enhancements will continue to expand the ground lease market for new and existing relationships. And it's important that we find ways to generate attractive asset level returns for us while also meeting our customers' evolving needs. All right. Let's turn it over to Brett to review the quarter. Brett?

Thank you, Jay, and good afternoon, everyone. Let's begin on Slide 2. During the third quarter, we originated 4 multifamily ground leases for $42 million. In the fourth quarter to date, we have originated an additional 4 multifamily ground leases for $34 million. These combined 8 assets are all within our affordable housing subsegment and located in the Los Angeles and San Diego markets with credit metrics in line with portfolio targets and a weighted average economic yield of 7.3%. Six of these transactions were with a new customer added to our program, while the other 2 were with an existing customer who has now originated a total of 7 transactions with us since inception. We have additional LOIs signed with both customers for deals expected to close through year-end and into 2026. We're pleased to see growing product adoption and repeat business in this sector as we expect it to be a meaningful growth channel for Safehold. At quarter end, the total portfolio was $7 billion and UCA was estimated at $9.1 billion. GLTV was 52% and rent coverage was 3.4x. We ended the quarter with approximately $1.1 billion of liquidity, which is further supported by the potential available capacity in our joint venture. Slide 3 provides a snapshot of our portfolio growth. In the third quarter, we funded a total of $58 million, including $33 million of ground lease fundings on new originations that have a 7.4% economic yield, $15 million of ground lease fundings on pre-existing commitments that have a 7.5% economic yield and $10 million of existing leasehold loans that earn interest at an approximate rate of SOFR plus 499 basis points. At quarter end, our ground lease portfolio had 155 assets, including 92 multifamily properties and has grown 21x by both book value and estimated unrealized capital appreciation since our IPO. In total, the unrealized capital appreciation portfolio is comprised of approximately 37 million square feet of institutional quality commercial real estate, consisting of approximately 21,500 multifamily units, 12.6 million square feet of office, over 5,000 hotel keys and 2 million square feet of life science and other property types. Continuing on Slide 4, let me detail our quarterly earnings results. For the third quarter, GAAP revenue was $96.2 million, net income was $29.3 million and earnings per share was $0.41. The increase in GAAP earnings year-over-year was primarily due to a nonrecurring $6.8 million noncash general provision taken 1 year ago. Excluding nonrecurring items, Q3 earnings per share increased $0.04 year-over-year or approximately 12%, primarily driven by new investment activity. On Slide 5, we detail our portfolio's yields. For GAAP earnings, the portfolio currently earns a 3.8% cash yield, up slightly from last quarter due to organic growth, higher yields on new investments and a fair market value reset on one of our ground leases. Our annualized yield earns 5.4% and includes noncash adjustments within rent, depreciation and amortization, which is primarily from accounting methodology on IPO assets, but excludes all future contractual variable rent, such as fair market value resets, percentage rent or CPI-based escalators, which are all significant economic drivers. On an economic basis, the portfolio generates a 5.9% economic yield, which is an IRR-based calculation that conforms with how we've underwritten these investments. This economic yield has additional upside, including periodic CPI look backs, which we have in 81% of our ground leases. Using the Federal Reserve's current long-term breakeven inflation rate of 2.25%, the 5.9% economic yield increases to a 6.0% inflation-adjusted yield. That 6.0% inflation adjusted yield then increases to 7.5% after layering in an estimate for unrealized capital appreciation using Safehold's 84% ownership interest in CARET at its most recent $2 billion valuation. We believe unrealized capital appreciation in our assets to be a significant source of value for the company that remains largely unrecognized by the market today. Turning to Slide 6. We highlight the diversification of our portfolio by location and underlying property type. Our top 10 markets by gross book value are called out on the right, representing approximately 65% of the portfolio. We include key metrics such as rent coverage and GLTV for each of these markets, and we have additional detail at the bottom of the page by region and property type. Portfolio GLTV, which is based on annual asset appraisals from CBRE, remained flat quarter-over-quarter at 52%. Portfolio rent coverage declined very slightly quarter-over-quarter from rounding up to 3.5x previously to now rounding down to 3.4x. Lastly, on Slide 7, we provide an overview of our capital structure. At quarter end, we had approximately $4.8 billion of debt comprised of $2.2 billion of unsecured notes, $1.5 billion of nonrecourse secured debt, $881 million drawn on our unsecured revolver and $270 million of our pro-rata share of debt on ground leases, which we own in joint ventures. Our weighted average debt maturity is approximately 19 years, and we have no maturities due until 2027. At quarter end, we had approximately $1.1 billion of cash and credit facility availability. We are rated A3 stable outlook by Moody's, A- stable outlook by Fitch and BBB+ positive outlook by S&P. We have benefited from an active hedging strategy and remain well hedged on our limited floating rate borrowings. Of the $881 million revolver balance outstanding, $500 million is swapped to fixed SOFR at 3% through April 2028. We received swap payments on a current cash basis each month. And for the third quarter, that produced cash interest savings of approximately $1.7 million that flowed through the P&L. We also have $250 million of long-term treasury locks at a weighted average rate of approximately 4.0% and current gain position of approximately $29 million, which is currently recognized on the balance sheet, but not the P&L. We are levered 2.0x on a total debt-to-equity basis. The effective interest rate on permanent debt is 4.2%, and the portfolio's cash interest rate on permanent debt is 3.8%. So to conclude, we're encouraged by good traction in the affordable sector, which we believe will help buoy origination volume while other sectors work their way back into the pipeline, and we have a strong balance sheet and liquidity position that we'll look to take advantage of to be more offensive with our customers. And with that, let me turn it back to Jay.

Thanks, Brett. I mentioned earlier our focus on finding ways to meet our customers' needs. Of course, it's also important for our customers to live up to their obligations. So let me provide a brief update on the Park Hotel master lease. We recently sent this tenant a lease termination notice for all 5 hotels governed by the master lease, and we'll be pursuing all our contractual rights under the lease. We believe the tenant has breached the master lease covenants and has not upheld their contractual obligations under the lease, which includes specific maintenance and operating standards. Because this is now active litigation, we are limited in what else we can say publicly. As I'm sure you understand, we can't provide assurance that we will prevail in litigation or that the future financial impacts will be positive. Okay. With that, let's go ahead and open it up for questions.

The first question comes from Ronald Kamdem with Morgan Stanley.

Great. Just 2 quick ones for me. Just starting with the originations, I think all multifamily looks like all on the West Coast, if I'm looking at this correctly. I did notice the rent coverage ticked down a little bit. I don't know sort of if you could talk through that. And maybe just while you're on that, just talk about sort of the appetite and the potential for more of these sort of affordable housing deals.

It's Tim Doherty. As Brett and Jay mentioned, we are experiencing significant traction in the affordable housing sector in California. The team is effectively expanding these efforts nationwide, which should yield results in the upcoming quarters. We have observed strong performance from some of our repeat sponsors in California. Regarding coverage, our transactions, especially in development, reflect our underwriting approach, which includes some adjustments to demonstrate coverage. The cash flows from sponsors align well with our metrics, and in many instances, exceed them. Without those adjustments, our underwriting would align more closely with expected returns. We are cautious with development deals, as they generally take longer to stabilize, and we aim to present them conservatively. On the topic of transactions and deal flow, we are seeing strong momentum, as evidenced by recent closings after the quarter ended, and we currently have additional transactions under letter of intent.

Great. That's really helpful. My second question is regarding the Park Hotel. I understand you can't comment on it, but could you provide any general insights on the typical timing for these matters to be resolved?

Ron, it's Jay. Yes. I think it's unfortunate when things end up in litigation, we try pretty hard to find the solutions where both sides can win. But when we can't, obviously, we need to enforce our contractual rights to protect shareholder value. And these things don't happen overnight. That's why we typically would try to avoid it. But in this case, we think it's the right thing to do for shareholder value protection, and it will play it out. It's going to take a little bit of time.

The next question comes from Anthony Paolone with JPMorgan.

Just trying to understand more just on Park Hotel, understanding the sensitivity. But what exactly did you claim was breached? I assume they're still paying rent? Or was there some change there?

It's not a rent issue, Anthony. It's a standard of care and maintenance. I can't really go into it, but we think the contract is clear and just couldn't find an agreement on that.

Okay. And then just more broadly on your deal pipeline and so forth. As we see like office, industrial and other types of transactions start to come back to the market, are you seeing more of that? And would you do more of those types of transactions if those opportunities come around?

Yes, we track the entire process from initial opportunities to closing. Looking at the last quarter, we have a well-diversified range of opportunities now, spreading across hospitality, retail, and office sectors, in addition to the traction we're experiencing in the affordable housing space and conventional multifamily construction and recapitalization. We're actively pursuing the right opportunities. The transaction flow has definitely picked up, as indicated by other announcements this quarter. The less steep yield curve is starting to facilitate more transactions, which is good for the market. It just takes some time to navigate those deals through the system before we can finalize some of them.

The next question comes from Kenneth Lee with RBC Capital Markets.

I think you mentioned that some of the economic yields ranged up to 7.5% on some of the more recent deals there. Wondering if you have any expectations for economic yields going forward? I know that in the past, you talked about long-term bonds plus anywhere from 75 to 85 basis points. Any change there? And more importantly, as potentially short-term rates move around, do you expect any kind of indirect impact to economic yields going forward?

Sure, Kenneth. The yields depend on the timing of closings. We're referencing the 30-year treasury, which had variable rates higher at the start of the quarter and lower towards the end. Some closings occurred earlier while others happened later, including those that closed last month. We anticipate that there's a spread to the long-term bond, and currently, treasury yields are consistently in the high 6s to low 7s range. The deals in our pipeline fall within this range.

Got you. And one follow-up, if I may. You touched upon within the prepared remarks, seeing some extended time frames, it sounds like to close some of the deals going to fourth quarter or even the first quarter. Any particular factors driving the extended out time frames?

The extended time frame, a lot of these deals are development deals. So those do take a little bit more time to close. I think in the affordable space, a lot of those are development deals. Most of those are development deals on the conventional side, we closed a few in that space versus a recap that could take 4 weeks to 8 weeks to close. So nothing abnormal in the market for those to take a little bit more time, but we're seeing good momentum on that front and pretty consistent deal flow and LOIs being signed.

The next question comes from Harsh Hemnani with Green Street.

Maybe just a clarification. Did I hear correctly that for the Park litigation, it's against all 5 of the hotels in the master lease? Or is it just against the 2 that they plan on not renewing? And then second part is, what's the sort of near-term financial impact of this? Is Park going to continue to pay rent during the period of time the legal battle goes on in the background? Or is there going to be some near-term impact from that?

The litigation involves all five hotels, not just one, and we are working to ensure the hotel's operations continue as smoothly as possible. I don't have additional details to share at this time, but that is certainly our objective.

Okay. So I guess, is the goal here to try to treat the master lease as a package, all or nothing?

Yes, it is a master lease and the provisions are backed by a corporate entity. So we certainly treat it as a master lease.

Got it. Okay. Last one for me. I guess, maybe higher level on the transaction side. As you mentioned, sort of broader real estate transaction activities are broadly in line with, call it, pre-'21 levels. And at the same time, rates haven't necessarily gone back to what it was in '21 and '22, but we've stabilized. Volatility has come down. We're in the low 4s almost consistently. Did those bigger check size transactions start to come back? Are you seeing more of those? Or is it still smaller check size multifamily?

I agree with you about the consistency factor. This seems to be driving part of the market right now, as there is greater visibility. As a result, transactions are happening. When it comes to size, affordable deals are generally smaller. The transactions that closed in the third quarter, as well as those that closed year-to-date, were primarily affordable and on the smaller side. In fact, they are even smaller than typical affordable deals. We are now starting to see more trades occurring in the larger deal sector. Our pipeline includes some larger transactions in addition to these affordable deals. However, multifamily transactions on the conventional side typically range between $40 million and around $85 million in total value. You can estimate the size of our ground leases from that. Office and hospitality assets generally tend to be a bit larger. Overall, this aligns with what we have seen in previous quarters, particularly compared to 2021.

The next question is from Rich Anderson with Cantor Fitzgerald.

Have you stated what this sort of forward pipeline looks like in dollar terms? You mentioned activity got pushed out, but I don't believe you sort of put a number on what the pipeline looks like on a go-forward basis, if you were willing to share.

Yes, we wouldn't disclose the exact number, but to give you an idea of our current commitments that are set to close in the upcoming quarters, I would estimate there are more than 15 deals totaling over $300 million. This includes a mixture of affordable and conventional multifamily transactions.

Okay, great. I’m not going to ask specifically about Park, as I understand you can't discuss that. But just to clarify, a lease termination that is successfully completed means you get the keys back, which is one possible outcome. Is that correct?

That's correct, Chris.

The next question comes from Ravi Vaidya with Mizuho.

Just wanted to ask another follow-up on the Park Hotel litigation here. Does this impact your potential interest in maybe pursuing hotel originations going forward? And is there any additional corporate costs that we should be considering for the model, more G&A, legal fees or any other onetimers as should we think about Q4 and '26?

Yes, I'll take the first part, and maybe Brett can take the second part. Look, this is an anomalous outcome. It's not what we expected. This is a master lease form that we didn't create 30 years ago when it was put in place. And I don't think it impacts our view on any part of the ground lease ecosystem that we're working in. So we'll get through it. And I don't think you should think of this as an indicator of anything or a precedent for anything.

Yes. On the economic side or for the profit and loss statement, it's too early to determine the direction this will take. We made this decision with our shareholders in mind, ensuring we protect value. In the next quarter, we expect to have clearer insights and will update the market accordingly. For now, we believe we are in a good position regarding the consistency of our performance. As we move forward, we will provide the market with better visibility regarding any costs associated with the termination mentioned. However, it is still quite early to make definitive statements.

Got it. I appreciate the color there. Just one more. How do you guys think about the recent New York City Mayor win yesterday and the impact surrounding rent stabilization and maybe broadly how this could impact affordable housing? You guys have done a lot of deals with affordable housing and just wanted to see how this type of news and this type of language impacts underwriting those deals.

Look, I think we fundamentally follow supply and demand wherever it goes. And obviously, if you reduce the incentives to create supply, you're going to choke off supply, which is in many cases, just leads to even tighter market conditions. We're seeing that more generally across the market. Those areas that didn't have supply are starting to recover, and there's not a lot of supply in the pipeline. And you see what happens, rent starts to move. So I'm not sure how the administration is thinking about that, but it's certainly our belief that the way to keep rents down is to have supply meet demand. So I'm not sure exactly how this is all going to play out, to be honest. We believe we have a solution for the affordable housing problems in this country that's very powerful. We'd like to deploy it in more places. I will tell you a lot of the friction costs are created by government regulations that we would just assume help solve the problems quicker, faster and better, but we're kind of being held back a little bit by the nature of government regulations in that area. So we're hopeful that people recognize this is a problem that ground leases can be a major part of the solution and creating new supply is long term, in my mind, a better solution for most municipalities than trying to arbitrarily decide where rent should be. That just sounds like a tough long-term economic solution.

The next question comes from John Petersen with Jefferies.

Can you remind us how much of your multifamily portfolio is affordable housing today? I know it's 41% of gross book value. And then do you guys have a long-term target or cap of where you'd want that number to be as a percent of your portfolio?

John, we'll follow up with a more definite number, but it's currently quite low. The business really started about 18 months ago, with the team focused on it and beginning to close deals after learning about the space beforehand. The team is clearly gaining great momentum moving forward. Regarding our target size, we are building a substantial portfolio, and while I can't provide a specific dollar figure, we aim to make it very large. As for the percentage, it varies over time as different asset classes become active, so it’s challenging to specify. However, you can observe that the housing sector is a significant portion of our portfolio, which is why we categorize it under all and multifamily, and we expect this trend to continue in terms of housing's share of our portfolio.

Up next is Chris Muller with Citizens Capital Markets.

So I guess following up on that prior line of questioning. Is any of your New York City multifamily exposure to rent stabilized units? And if so, how would a rent freeze even play out given your contractual CPI escalators? Would that burden just solely fall on the sponsors?

We haven't really cracked the New York nut yet, and that you're asking one of the questions that we would have to grapple with. The goal, as always, is to put ourselves in a very safe position where we don't have to worry too much about the last dollar risk or even the middle of the capital stack. So that's what we love about the business is the safety and the predictability about it. We have not seen that opportunity present itself across the New York market. But look, there's got to be a solution. We think additional supply is going to be needed. And ultimately, we don't want to play in the equity part of that solution. We want to play in the land part of that solution, which we think goes a long way to helping stretch the subsidy dollars that are available. This is a big opportunity for efficiency to come to the fore, and we think ground leases are can be a big part of that.

Got it. And then I guess changing gears a little bit. The 30-year treasury rate increased from a recent low of 4.55% to current 4.75%-ish. There was a similar 20 basis point drop in rates during the third quarter. So my question is how sensitive is your guys' pipeline to these types of moves? Do you see a material change in demand from those 2 examples? And then just a follow-up on that is what level of the 30-year do you think would really get things moving for your business?

Yes, it's a situation reminiscent of last year when the treasury dipped around September and October and then rebounded in November. Recently, there has been a similar pattern. With rates going down, there was noticeable market activity with many deals attempting to close quickly, as many anticipate that rates will remain elevated for an extended period. So when rates dip, there's a rush to make transactions. While the chatter about deals became more intense, it's important to remember that closing these deals can take weeks or even months. We are closely observing this year's trends with the 10-year treasury approaching 4% and the 30-year falling below 4.50%. This has led to an increase in transactions, although we're still not seeing a comprehensive increase in acquisition activity across the market. Our focus remains on this aspect, not just on recapitalizations, since refinancing is crucial, but the uptick in acquisition flow would indicate a healthier market. When rates hit those lower levels, we began noticing more discussions surrounding sales and acquisitions.

I mean this is a longer-term perspective, when we started this business in 2017, we said the sweet spot is sort of 3% to 5%. We've been at the lows. We've seen the highs. If you wanted a true middle of the road, I think 4% on the 30-year is a great place for both sides to feel good about. I think this is as much about psychology as anything else. When the market thinks rates are topping and headed back down, it's harder to want to lock in 99-year capital if you have that belief. We think we've got some flexibility in terms of when customers can lock rates that could be a useful tool for them to maybe open that door a little wider for them to make a good decision, both in the near term and the long term. So it's one of the things we're watching very carefully. I think Tim said, uncertainty is the worst thing of all. And when markets don't know which direction things are headed, that tends to put a freeze on things. What we're hoping for is a little more stability in '26, a little bit lower rates, a little bit less steep yield curve. Those are all positive factors for us.

We have a follow-up coming from Rich Anderson with Cantor Fitzgerald.

I feel like I missed an opportunity, so I want to ask Jay about a common criticism of ground leases. While there are benefits to them, as the lease term approaches its end, it can be argued that the leasehold owner's motivation to invest in capital maintenance decreases because they are aware that the end is near. One of two things will happen: the lease will expire and they will hand back the keys, or they will renew the lease and face higher rent. How do you view this criticism of ground leases in terms of the leasehold owner's reduced incentive to invest as the lease nears its conclusion? I'm interested in your thoughts on this.

I believe the misconception here is that we are continually searching for solutions that create value. The market reflects the worth of various assets, and determining the value of an extension is relatively straightforward. If you appreciate the assets you manage, pursuing extensions is generally a favorable option. Long-term ground lease solutions tend to be rewarded in the market, benefiting both leaseholders and landowners, and can lead to agreements that last another 99 years. We often see extensions as a likely resolution. Competent operators who fulfill their lease terms can readily find beneficial arrangements. We maintain maintenance standards in our agreements, but our focus is on conducting smart business. Our goal is to build long-term relationships with customers, and we believe there are many viable solutions for them. As I mentioned before, I don't think our current situation sets any kind of precedent; we've encountered various scenarios that didn’t conclude in this manner. I remain confident that effectively managing a property will always outweigh the concerns you've raised.

If it's not a good property, they might choose to walk away from it. That's the point I'm making. I understand your perspective. However, if they have lost interest in what they're managing, that could be significant, but we can discuss that another time.

Mr. Hoffmann, we have no further questions.

Thanks, everybody, for joining us today. If there are any additional questions on the release, please feel free to contact me directly. Operator, would you please give the conference call replay instructions once again? Thank you.

Absolutely. Thank you. There will be a replay of this conference call beginning at 8:00 p.m. Eastern Time today. The dial-in for the replay is (877) 481-4010 with the confirmation code of 53142. This concludes today's call, and you may disconnect your lines at this time. Thank you for your participation.