Safehold Inc (NYSE:SAFE) reported significant progress during the fourth quarter of fiscal 2025, highlighting a series of strategic priorities aimed at enhancing shareholder value in 2026. The company’s leadership, led by Chairman and CEO Jay Sugarman, emphasized the commitment to increasing origination volume, improving visibility into Caret’s valuation, and initiating a share repurchase program when market conditions permit.
During the earnings call, Sugarman acknowledged ongoing challenges but expressed optimism about the momentum building as the company concludes 2025. He introduced Michael Trachtenberg as the new president of the company and discussed the expansion of Safehold’s affordable housing platform. Sugarman reiterated management’s goals for 2026, which include increasing ground lease volume and recognizing the value of Caret more explicitly.
In the fourth quarter, Safehold executed 10 transactions, including nine ground leases and one leasehold loan, totaling an aggregate commitment of $167 million. Chief Financial Officer Brett Asnas described the quarter as “productive,” with most transactions focused on affordable housing in Southern California and a notable deal in Cambridge, Massachusetts that combined a ground lease with a leasehold loan.
Notably, Safehold received a credit ratings upgrade from S&P Global, elevating its rating to A- with a stable outlook. Asnas highlighted that this upgrade positively impacted the company’s cost of capital. Additionally, Safehold secured a $400 million unsecured term loan, which allows for increased liquidity and refinances upcoming debt maturities.
As for the full fiscal year, Safehold achieved total originations of $429 million, consisting of 17 ground leases worth $277 million and four leasehold loans totaling $152 million. The company reported a total portfolio value of $7.1 billion at year-end, with an estimated unrealized capital appreciation of $9.3 billion, reflecting growth of approximately $200 million from the previous quarter.
The portfolio’s metrics remained strong, with a ground lease-to-value ratio of 34% and a rent coverage ratio of 3.2x. Asnas noted that the portfolio currently generates a 3.8% cash yield and a 5.4% annualized yield for GAAP earnings, with the economic yield estimated at 5.9%. On adjusting for inflation, this yield could rise to 6.1%.
During the question-and-answer session, Sugarman elaborated on the value of Caret, asserting that it represents a significant asset not fully acknowledged by the market. He pointed out the challenge of investor perceptions tied to long-term asset valuations and affirmed the company’s commitment to exploring options for enhancing Caret’s recognition, including liquidity measures and monetization strategies.
Looking forward, Safehold plans to initiate a share repurchase program in 2026, balancing its leverage discipline. Asnas stated the company aims to maintain a debt-to-equity ratio around 2.0x or lower, indicating a strategic approach to fund repurchases without significantly increasing leverage.
In terms of funding, Safehold currently holds approximately $140 million in ground lease unfunded commitments and $125 million on the loan side. The company is also examining opportunities to expand its affordable housing initiatives beyond California, with management indicating ongoing discussions on transactions in various states.
Finally, executives addressed inquiries related to Park Hotels, indicating limited disclosures due to ongoing litigation. Sugarman mentioned a court date set for the first quarter of 2027, with expectations of legal costs reaching “several million.”
Safehold Inc continues to redefine land ownership within commercial real estate, acquiring perpetual ground leases and facilitating long-term leaseback arrangements. By separating land ownership from building ownership, Safehold provides an innovative financing alternative for property owners, thereby enhancing value while maintaining operational control.
