Safehold Inc. (SAFE)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 GAAP revenue was $91.9M (–11% YoY) and EPS was $0.36; the YoY EPS decline was driven by a one-time $15.2M derivative hedge gain in Q4’23, while ex that item, Q4 EPS was roughly flat to slightly up YoY per management’s reconciliation commentary .
• Full-year 2024 GAAP revenue was $365.7M and EPS was $1.48; EPS excluding the year’s general provision adjustment on prior-period balances was $1.57 (vs $1.45 in FY’23), reflecting core earnings growth and lower G&A net of fees .
• Balance sheet/credit advances are notable: new $2.0B five‑year unsecured revolver, $700M of 10‑year notes in 2024, and ratings momentum (Fitch upgrade to A−, S&P initial BBB+ with Positive Outlook), supporting cost of capital and liquidity (~$1.3B at YE) .
• Capital allocation: Board authorized up to $50M share repurchase (targeted to be leverage‑neutral via asset sales/JVs/Caret actions); 2025 initiatives prioritize accelerating multifamily/affordable originations and unlocking broader investor access to Caret .

What Went Well and What Went Wrong

• What Went Well

  • Strong capital markets execution: $2.0B revolver, two 10‑year unsecured notes ($700M total, realized $43M hedge gains lowering effective yields), and a $750M CP program; ratings momentum (Fitch A−, S&P BBB+ Positive Outlook) enhances funding flexibility and spreads .
  • Portfolio resilience and diversification metrics steady: Rent Coverage 3.5x and GLTV 49% at YE; liquidity of ~$1.3B; WA debt maturity ~19.2 years and no corporate maturities until 2027 .
  • Focused growth vector: multifamily/affordable vertical ramped in 2024 (10 ground leases, 6 affordable); management intends to double affordable volume and expand to ≥2 new states in 2025 (“double down”) .

• What Went Wrong

  • Reported YoY declines reflect a high base in Q4’23 from a $15.2M derivative hedge gain; Q4’24 revenue down 11% YoY and EPS $0.36 vs $0.58 in Q4’23; equity method earnings also declined by ~$2.3M YoY in Q4 .
  • Persistent rate volatility continued to weigh on originations and valuation inputs (cap/discount rates), with management highlighting the macro headwind in Q4 commentary .
  • Provision dynamics: a non‑cash general provision methodology enhancement in 2H’24 drove additional expense for the year ($9.8M FY, of which $6.8M related to prior‑period balances), though Q4’24 itself did not include the catch‑up .

Financial Results

• GAAP results and per-share

• Non‑GAAP context (company‑defined):

  • Q3’24 EPS ex general provision on prior‑period balances: $0.37 (vs GAAP $0.27) .
  • FY’24 EPS ex general provision on prior‑period balances and NCI adjustments: $1.57 (vs GAAP $1.48) .

• Estimates vs Actuals (S&P Global consensus)

  • S&P Global Q4’24 EPS and revenue consensus were unavailable at the time of analysis due to API limits; therefore, we cannot assess beat/miss this quarter (S&P Global consensus data unavailable during this session).

• Originations and fundings

• Portfolio/KPIs snapshot (YE 2024 unless noted)

• Portfolio by property type (count, GLTV, Coverage)

Why the quarter looked like this: Management attributes the YoY declines in reported Q4 figures primarily to the absence of a $15.2M derivative hedge gain recognized in Q4’23; excluding that, Q4’24 saw a ~$3.9M net increase in asset‑related revenue vs interest expense, partially offset by a ~$1.0M general provision and ~$2.3M lower equity method earnings tied to leasehold loan activity .

Guidance Changes

Note: Management emphasized capital recycling to fund buybacks while remaining leverage‑neutral, and ongoing work to broaden investor access/liquidity for Caret in 2025 .

Earnings Call Themes & Trends

Management Commentary

• Strategy and 2025 initiatives (CEO): “Two specific initiatives in 2025… continuing our momentum… in the Multifamily market, particularly the affordable sector… [and]… take advantage of what we view as significant undervaluation of our shares… Board has approved a new share buyback authorization up to $50 million… goal is to be leverage neutral… we’ll also focus on… Caret become more accessible to third‑party investors.”
• Capital markets execution and ratings (CFO): “Closing a new five‑year $2 billion revolver in addition to two 10‑year unsecured notes offerings totaling $700 million… $43 million of cash hedge gains… commercial paper program saving ~60 bps… S&P… BBB+ and positive outlook… Fitch… upgrade… A-… Our credit profile is one of the highest rated in all of real estate and specialty finance” .
• Portfolio economics (CFO): Portfolio earns 3.7% cash yield, 5.3% annualized yield, 5.8% economic yield; with 2.35% long-term inflation, rises to ~6.0%, and to ~7.5% including illustrative Caret adjustment .

Q&A Highlights

• Pipeline and affordable housing: Front‑end funnel “quite good”; strong activity in multifamily (market‑rate and affordable) with sponsors re‑engaging in supply‑constrained markets (NYC, Boston, CA) .
• Share buyback funding/leverage: Authorization reflects perceived undervaluation; aim to fund repurchases via asset sales/JVs/Caret monetization while maintaining leverage neutrality .
• Caret access/liquidity: Working with Caret Advisory Board on structures to enhance long‑term liquidity; engaging likely investor base (family offices, etc.); expect progress in 2025 .
• Overhead and dividend coverage: Net G&A targeted in low‑$40M range in 2025 (vs ~$37–38M in 2024, reflecting lower management fee); objective is to cover the dividend with operating cash flow as capital costs are optimized .
• Portfolio concentration and leases: Comfortable increasing multifamily exposure given fundamentals; Park master lease discussions ongoing without a finalized outcome .

Estimates Context

• S&P Global consensus EPS and revenue for Q4’24 could not be retrieved during this session due to an API limit, so we cannot state beat/miss versus consensus. Analysts may revisit forward models to incorporate: (i) leverage‑neutral capital returns (buyback), (ii) mixed but constructive origination outlook (affordable/multifamily), (iii) lower funding costs from ratings momentum/hedge gains, and (iv) provision methodology changes recognized in 2H’24 .

Key Takeaways for Investors

• The YoY compares are distorted by Q4’23’s $15.2M derivative hedge gain; excluding that, core earnings showed modest improvement, supported by asset‑related revenue growth net of interest expense .
• SAFE’s funding platform improved materially (revolver, notes, CP, ratings), positioning the company to capture spread opportunities while maintaining long‑duration, largely fixed‑rate liabilities .
• Management is prioritizing 2025 growth in the affordable multifamily vertical, citing stable demand/occupancy and strong sponsor interest; near‑term originations should remain focused here .
• New $50M share repurchase authorization could be a stock catalyst as the company recycles capital; execution will be measured by accretion and leverage neutrality .
• Caret remains a potentially meaningful long‑term value lever; steps to broaden investor access/liquidity could help close the valuation gap to underlying economics .
• Portfolio risk metrics remain solid (3.5x Rent Coverage; 49% GLTV) with liquidity of ~$1.3B and no corporate maturities until 2027, providing flexibility against macro rate volatility .
• Dividend held at $0.177/share for Q4’24; management targets paying out operating cash flow over time as funding costs decline and the business normalizes post‑internalization .

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Supporting detail and source citations:

• Q4’24 8‑K and earnings deck: revenues, EPS, income statement, portfolio and capital structure metrics, and reconciliations .
• Q4’24 press release: headline results, non‑GAAP reconciliations, and new $50M buyback authorization .
• Q4’24 earnings call: 2025 initiatives, capital markets details, pipeline commentary, Caret liquidity plans, G&A outlook, and dividend coverage path .
• Prior quarters (trend): Q2’24 press release (revolver/CP, EPS/revenue); Q3’24 press release (originations, JV buyout, EPS ex provision) .
• Ratings actions: Fitch upgrade to A−; S&P initial BBB+ with Positive Outlook .