Q1 2021 Safehold Inc Earnings Call
[music].
Good morning, and welcome to safe hold first quarter 'twenty 'twenty, One earnings conference call if.
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As a reminder, today's conference is being recorded at this time for opening remarks, and introductions I would like to turn the conference over to Jason Fooks Senior Vice President of Investor Relations and marketing. Please go ahead Sir.
Good morning, everyone and thank you for joining us today for safe holds earnings call on the call today, we have Jay Sugarman, Chairman and Chief Executive Officer, Microsoft Dorado, President and Chief Investment Officer, and Jeremy Fox Green, Our Chief Financial Officer.
This morning, we plan to walk through a presentation that details our first quarter results presentation can be found on our website at Staples, Inc. Dot com and by clicking on the investors like there'll be a replay of this conference call beginning at one P. M. Eastern time today on the dial in for the replay is 86620710 for one well.
The confirmation code of 8307576.
Now before I turn the call over to Jay I'd like to remind everyone that statements on this earnings call, which are not historical facts may be forward looking our actual results may differ materially from these forward looking statements on the risk factors that could cause. These differences are detailed in our SEC reports.
<unk> disclaims any intent or obligation to update these forward looking statements, except as expressly expressly required by law.
Now with that I'd like to turn the call over to chairman and CEO Jay Sugarman Jay.
Thanks, Jason and thanks, everyone for joining us today.
Dan on 2021 with two main areas of focus for us.
We wanted to continue expanding the modern ground lease universe by providing low cost long term more efficient capital to unlock value for more building owners.
Achieving investment grade ratings during the quarter will be a powerful tool in helping us continue driving down our cost of capital and.
And should open up the market even further in terms of what we can do for customers.
Our goal is to double our portfolio over the next three years and with the economy picking up and deal flow, increasing we expect to see more transactions close and vaccination efforts return activity in commercial real estate to a steadier rhythm.
Second we want to make sure investors more fully understand the value of the platform. We've built and further expand our shareholder base as investors gravitate to safe holds combination of asset safety strong growth potential and significant intrinsic value upside.
With the increasing scale and diversity of our portfolio the full value of what we are building should become more clear.
And a key goal on 2021 is to share with investors, a simple and straightforward way the value of our company on each of its components.
We have been systematically proving out the growth and quality of our portfolio over the past four years and believe we have reached a scale, where we can demonstrate the underlying value of our portfolio. The large opportunity ahead of us and a compelling value proposition for investors.
So with that let's have Jeremy to take you through the quarter.
Jeremy.
Yeah.
Thank you Jay and good morning, everyone.
Let's begin on slide three with some highlights for the quarter.
We continue to make steady progress scaling our business by providing better more efficient capital to real estate owners.
And we remain focused on on a medium term target of growing our portfolio to at least $6 billion by the end of 2023.
During the quarter, we originated $166 million of ground lease investments at a five 3% effective yield.
We recast our revolver to a new more efficient 1 billion unsecured credit facility.
Which positions us with $717 million of liquidity at the end of the quarter to put to work for our customers.
Yeah.
Moving on to slide four for highlights of our results.
Okay.
Revenues were $43 5 million for the first quarter versus $40 $2 million for the same period last year.
Net income was $16 $9 million less is $17 $3 million in the prior year period and earnings per share was 32.
Buses 36 cents from the first quarter last year.
This quarter's results were notably impacted by the level of percentage rent receivable from our park hotels portfolio of ground leases.
As we've previously discussed the economic impact of COVID-19 on the hotel industry. During 2020 was severe.
As such we did not receive any percentage rent plus you went to this portfolio of ground leases in the first quarter.
These payments is a once a year percentage rent payment based upon the park hotels' revenues in the prior calendar year.
This compares to Q1 2020 in which we received $3 $6 million in percentage rents for the 2019 calendar year.
Representing seven cents per share.
The center rent from park hotels accounts for approximately 2% of our annualized in place GAAP rent.
I would also note that our standard lease for the newly created safe hold ground leases is based upon a fixed bump structure with CPI look backs and does not include percentage rent.
As such we would expect to see percentage rent continue to represent an ever smaller amount of our growing portfolio and revenue streams.
In addition, this quarter included $500000 on one time costs, consisting of $300000 associated with the termination.
The prior shelf registration as well as $200000 of losses on early extinguishment of debt, resulting from the recast of our revolving credit facility.
Slide five provides an overview of our portfolio expansion.
During the quarter, we originated three new ground leases totaling $166 million.
Of which we funded $71 million during the quarter with the remainder expected to be funded over the next few quarters.
These deals included multifamily properties in Washington D C in Nashville, and one hotel property in New York City.
The investment metrics associated with these deals are in line with our stated targets.
With a weighted average effective yield of five 3% ground lease to value of 36% and rent coverage of three seven times.
At the end of the quarter on aggregate portfolio totaled 77 ground leases instead of $3 $4 billion, representing over 10 times growth since our IPO nearly four years ago.
Okay.
Slide six presents key metrics from portfolio.
As of March 31st on in place portfolio generated an annualized yield of five 3% based on an annualized in place GAAP rent after depreciation and amortization of $175 million.
The portfolio's annualized cash yield was three 4% with annualized in price cash rent of $112 million.
The weighted average ground lease to value was 40% and.
And weighted average rent coverage was three three times.
Our portfolio consists of 55% office, 26% multifamily up from 17% this time last year and 18% hotel.
On a weighted average lease term is 88 years.
On the next slide you can see the geographic breakdown of our portfolio as we continue to diversify across the U S focused on the top 30 markets across the country.
Slide eight provides an update on our capital structure.
As we previously announced we are pleased to receive an investment grade credit ratings from both Moody's and be double a one and Fitch triple B plus earlier in the first quarter.
These ratings provide us increased financial flexibility broaden our access to.
Horses.
For efficient ground lease capital to our customers.
Our first step into the unsecured markets was to recast all.
Price $600 million secured revolving credit facility into a new an upsized $1 billion unsecured revolving credit facility, reducing our rate by 30 basis points from LIBOR, plus 130 day LIBOR plus 100.
Additionally, this quarter, we entered into an at the market equity offering plan to sell up to $250 million of stock.
We intend to use on a T M judiciously.
During the quarter, we sold 13000 shares for net proceeds of $1 million.
At the end of the quarter, we had a total of $2 billion of debt.
Comprised of one $7 billion of long term debt and $255 million drawn on our revolver. We have conservatively 1.4 times Levered on a book basis, and 0.5 times on a debt to equity market capitalization basis.
Our long term debt has a weighted average maturity of 30 years.
And a weighted average effective interest rate of 4%.
Which is a 137 basis points spread to the five 3% yield on our portfolio.
At the end of the quarter, we had $717 million of liquidity comprised of $745 million of revolver availability and $25 million of cash on hand.
Moving on to slide nine at the end of the first quarter net unrealized capital appreciation in our portfolio stood at $5.6 billion, representing a 97% compound annual growth rate since our IPO.
As we mentioned last quarter. We believe all you see a has reached scale and diversity and we have proven our ability to grow it on a sustained basis.
As such we plan to continue to spend more time discussing U C. A N a framework for its valuation.
We believe it is an important component of our value.
Yet fully understood well recognized by investors.
Okay.
In conclusion, we continued to make steady progress towards our goal of doubling the portfolio over three years.
We continue to expect volatility on a quarter to quarter acquisitions volume. However, we remain encouraged by our pipeline and our confidence in attaining on medium term goal.
In addition, we took a number of important capital market actions this quarter that should drive additional efficiencies and give us new competitive advantage.
With that let me turn it back to Jay.
Thanks, Jeremy.
So our goals are clear.
Let me kind of reiterate them once more growing our portfolio and highlighting the components of value on our business, particularly the value of our growing capital appreciation answer.
It will enable us to expand both our business on our shareholder base.
And we look forward to success on both fronts to enable us to continue delivering strong returns to continue growing the modern ground lease industry.
And with that let's go ahead and open it up for questions operator.
Thank you today's question and answer session will be conducted over the phone to ask a question. Please press one zero at this time.
We will take as many questions as time permits.
Once again press one zero to ask a question.
We will pause a moment to assemble the roster.
Our first question comes from Nate Crossett with Bahrenburg. Please go ahead.
Oh, Hey, good morning, guys.
I was wondering if you could give us some color on what the current pipeline looks like today.
How much do you guys have under LOI.
And I know the goal is to double the portfolio on three years, but is there any visibility you can kind of give us for the next three to six months.
Sure Nate.
Flipped out the markups, but let me just.
Tell you my own view is you know.
Feels like the markets are beginning to you now.
At least transaction activities continuing to.
Pick up I can just see it from the.
The busyness of our teams all over the country and so I guess, what I would tell you is it feels like at some point, there's got to be a big quarter, but it's just hard to predict when a lot of deals in process a lot of conversations on progress but.
Mark as you go on and give a little more color on what you're seeing.
Hey, Nate how are you yeah, I Echo what Jay said, you know you're seeing some of that kind of episodic slow in our business our engagement.
With the brokerage community and engagement with our clients has never been stronger.
The amount of transactions, we're reviewing on a weekly basis has never been larger.
So I think.
As the markets open up.
People make decisions.
You know in the coming months year were gonna see some of that a dam break open.
On our end and we remain extremely confident in hitting our targets.
Okay. That's helpful. What what are you guys seeing just in terms of.
Pricing has there been any notable change in the last three months just given.
The interest rate moves and I guess how.
How are clients thinking about that.
How are they thinking about inflation and maybe you can remind us what you guys have built in your contracts for inflation protection.
You know I cannot give you a quick overview of the market is controlling for the details, but you know our.
Our goal has always been make this a mainstream product.
Making it the most efficient low cost longer term capital available. So we're going to use our.
Investment grade ratings to continue to be more efficient on our side.
That's going to allow us to p<expletive> on savings on to the customers.
All of us to continue to have those hundred hundred and 25 basis point spread.
Our cost of funds are all hard debt cost so as the markets move we will move with them, but you know that target is still low when we shoot for and I. You know I think our customers. Appreciate the fact that we've created a really the gold standard in the ground lease worlds.
It's simple it's clear yeah.
For the next hundred years, you know, what's gonna happen on what you know how to operate your business.
There's not a lot of bells, and whistles and things you have to worry about or be concerned about so I think we've created the the right product for them.
The industry as Mark has said the brokerage community shows that started to really adopt it as a key facilitator for transactions.
Anywhere from you know new builds to refinancings to sales so.
I think the interest rates will go up and down, but so the validity and credibility of the modern ground lease continues to grow.
Yeah.
The origination team we price our.
Product over 30 year Treasury, but as Jay mentioned mentioned as our cost of capital continues to go down and we pass that onto our customer continuing to maintain kind of net spread.
In our business and to directly answer your inflation question, our standard form lesions.
Have an inflation protection, where we.
We look back at the past 10 years of inflation and catch up and that can be cap that are somewhere in the three to three and a half per cent range.
Okay. That's helpful. Thank you.
Our next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.
Hi, Good morning, I was wondering if you could go through on the <unk> investment activity that you quoted of 166 million does include the forward commitment. So I was wondering if you could go through when net 95 million is expected to close and for the 71 million net did close during the quarter on what was the timing of that.
Marcus you want to take that or Jeremy.
Sure I'll take that the forward Committee is expected to close in the next month to two months.
And then just on the activity from the first quarter, we thought she'd be mid quarter or beginning range.
Jeremy I don't have the exact timing on that I think it's mid quarter.
Mid quarter would be a good assumption.
Okay, and then just on the financing side on.
That was exciting and interesting that you said day you set up the ATM. So I was just wondering if you could go through on your expectations for issuing equity at 'twenty 'twenty. One goes on do you expect to exclusively use the ATM or what metrics do you think youll be looking at to decide when the right time to raise equity either via the ATM or otherwise.
Yeah, let me kick that one day, Jeremy I'll, just say Caitlin that.
Really.
I think it's.
And interesting product when we're in a.
The pipeline really starts cranking that also give us some additional flexibility on the.
And the funding side of the business.
Really we just tested it out this quarter just to make sure.
From the dynamics, where it was all set up or didn't really touch it much this quarter.
Got plenty of availability is Jeremy went through so.
Is that something that down the road, we think just gives us another.
Arrow in the quiver I think our goal and I keep saying this because we feel like there's a large proportion of investors.
Who would be very interested.
Interest and say fold them, we wanted to build our scale really sink the story.
You know over the past couple of years, so that we can really expand our shareholder base. We think you know the growth elements of the value elements.
On the long term safety and compounding returns would be attractive to a very wide range of investors.
And we haven't really you put our full shoulder to that yeah, I think you'll see in 2021.
Oh, it does become a little more aggressive about really explaining all of its business to a wider range of investors. So a T M investment grade ratings.
More investors now all part of the bigger puzzle to turn this into a very large mainstream part of the commercial real estate and investment world.
You may have more specifics on the actual Atms on them.
Thank you Jay I'll, just add briefly we've always said, we want to broaden our access to capital pools and have the most efficient capital availability. So we can provide the most efficient and well priced capital to our customers.
As you think about our business going forward and all growth targets and hopefully beyond that we are we want to and will become effectively a programmatic issuer. That's an equity capital we have a target leverage ratio of two times. We've said, we will to the medium term always be more conservative.
The 11th the net and as Jay said, we have significant liquidity on hand to put to work from our customers as we continue to grow you could expect us to.
On build out our balance sheet within that framework.
That makes sense. Thanks.
Our next question comes from Stephen Laws with Raymond James. Please go ahead.
Hi, good morning.
Jay can you touch a little bit on the the net percentage rent and as we look at <unk> next year I know, it's a small number but I think one of the assets maybe a double trigger from airport hotel on Seattle now how do we think about the reopening and how what we need to see from them.
Our revenue level for those <expletive>ets are or what we should be watching to see if that kicks in for a year from now.
Sure Steven.
The hotel industry, obviously took a pretty big hit during Covid, what we've seen so far is true.
Transient customers starting to come back.
So we're actually seeing some.
'twenty one over 19 comparisons that are quite favorable on transient.
So that story is not yet playing out on the business on group side.
So assets like our airport hotel or are still lagging there won't be the first ones to recover.
So there's more work to do there you know I think as Jeremy said.
Percentage rent was a legacy anomaly from a net.
So we went on for a long long time. It was one of the initial IPO <expletive>ets, that's definitely not the structure, we prefer for exactly these reasons, but it's going to be less and less part of the portfolio going forward.
Ultimately as you guys know the.
On.
Park Hotel portfolio was one of the shorter la Diocese. So there's certainly an opportunity on the future potentially.
Potentially to.
Do something a little bit different on that one.
We just think there will be uncertainty around percentage rent is one of those ambiguity on uncertainties that we would like to get out of the ground lease business.
Great I appreciate the color there Jay following up on the Nate asks about the pipeline origination you can can you talk about any seasonality you think you'd see on a normal year on me I think we all agree that 2020, it wasn't a normal year, but is there any seasonality we need to think about either late summer around the holidays at year end or how do we think about.
The build on the the originations as we kind of roll forward next six to eight quarters.
Yeah.
My viewpoint, which as you know we closed a record number of deals on the fourth quarter it sort of.
Everybody took a pause and had to reengage on the next round of transactions. So typically I think the first quarter is a little bit tricky to get deals closed them on.
People coming back from different vacations.
And so just from a timing standpoint, as I think Mark I saw that I said you know we feel like this is gonna be a good year, we're not going to predict it down to the week of the quarter, but we feel really strongly in terms of annual performance.
And the dynamics in the business are all pointing in the right direction.
We feel like there's a you know a.
Wave coming we just can't predict exactly when it'll Oh you know.
Create a lot of closings, but nothing's.
Nothing's changed in our mind in terms of the overall direction of the business.
Great and then one last question Jay on the effective yield you know five three up a lot.
Sequentially, you know rates move during the quarter.
And I know you talked about spreads I think in your prepared remarks, but can you provide a little more color I mean, if you're trying to hold rates apples to apples you know how much of that increase was driven by the move on underlying rates.
Now what was offset by lower financing costs was it any shift in mix of properties, either smaller properties or something where those had slightly higher yields relative to past comparable period. When we think about that five three versus.
Some high fours in previous quarters.
Yeah, I you know, there's some true video.
Video sing Craddock are you know situations.
Situations in certain deals, where we can either get lower.
Or higher our returns I would tell you overall again, a good number to focus on is about 100 and 125 over our cost of funds.
You know investment grade is going to give us the power to go back to customers, who maybe looked at a ground lease versus a free financing and said yeah. It's good but it's just not quite good enough for me.
I think we're gonna be able to go back to them with an even more powerful proposition now.
Show them that are you know.
This is when some of the most efficient capital. They can access we do think it will increase their returns lower their risk.
And as long as we're making our our Bogies are you know whether it's high fours low fives, that's not really the metric we focus on we look at where we can finance things, we looked at our cost of capital.
What we want to do is every time, we do a deal feel like we've created enormous value.
And the accretive nature of our side of the coin allows us to continue to drive down cost for our customers, which should open up the market even further so yeah.
Three maybe a little bit of an anomaly.
Small small number of deals I think longer term, it's about 100 to 125 over our.
Our cost of funds, that's the more relevant number.
Great I appreciate the comments this morning, Jay Thank you. Thank you.
Our next question comes from Handel St. John with me small. Please go ahead.
Hey, good morning.
Morning.
So Jay I guess.
It's been about four years since the IPO, the stock's done really well here more than triple the ideal price.
Free scale proven out the ground lease model I guess I'm curious what the current view from I Star is on the involvement and safety you have typically sponsors on forever investors. So I'm curious what your current view is are hearing on their thoughts on maintaining their 60% ish level of ownership and what's the right way and time frame to think about safety.
One company with no I start involvement.
Sure. Thanks for the question so yeah.
I Star has been no on a huge believer in what we're building has been an important part of helping us get to that scale that you talked about low from an investment standpoint, we think there's.
Still a very large embedded <expletive>et, let's say full but the market hasn't yet recognized or we don't believe is reflected in our share price. So at least from a valuation standpoint. This is still on undervalued situation on them.
I think you'd still see I star be a buyer Oh you know.
When things are trading at 50 cents on the dollar historically you know on.
Theres been pretty aggressive about acquiring things like that so yeah right now I think the Gulf War straight forward is to continue to educate and get the market to reflect the value on what we have said is once that value fully reflected once.
Once we've scaled the portfolio.
Like you know closer to that $5 billion of ground lease number there's a conversation that you know should and very likely will be had between our star and safe hold about okay. We've got a great five year run we've built a big scale business. We've educated the market the market.
It was everything we know.
You know what is the right path forward and you know, that's an opportunity where the alignment between star and faithful to really come on.
In the play because as the largest shareholder our star. Once this starts to do is cause as well as it can.
So we may look at the architecture between the two companies and say yeah, there's a better path forward and we'd like to have a more broadly distributed shareholder base. We say hey, you know external management may not be the perfect solution all of those things will be on the table as my guess or first.
Step, though towards that day is to get those shares fully valued and fairly valued and.
And we think there's a big component of value as you know, but we're just starting to talk about the most of the market doesn't really know about or you know it doesn't have the tools you have to understand why it's so valuable so more work to do on our side in terms of say fold on expanding.
Expanding our shareholder base and helping them see the full value.
And then that will naturally lead I think into a conversation with all this talk about the go forward strategy, what's the way to maximize value for the sake of whole chairs and it still feels like that so.
You know sort of end of 'twenty, two before we'll get to the sort of magic.
Size scale.
Evaluation worried about is gonna be a good conversation.
Got it got it thank you for that Oh, and one more if I may just wanted to follow up on the conversation around the investment grade you've talked about the immediate benefit for the balance sheet, but I'm curious if there's any examples on how that's benefited you on the investment side has.
Has that opens you up to more counterparties.
On your investment capabilities anyway, anything you could point out there I know, it's a bit soon but just curious thanks.
Yeah, probably a you know a little soon to see that reflected in our actual transactions closing, but we can tell you just you know from past practice.
You know just our legal team beginning to spool up it gives us the flexibility that gives us a tool that yeah.
Candidly, just makes us faster and better.
And it also allows us to continue to lower our cost of capital, which again, because we were spread focus we can p<expletive> onto our customers so well.
It's a it's a really important thing it's a powerful competitive advantage.
But you really won't see the full impact for you know probably another 369 months, where we really start to figure out how to give our.
<unk> the benefit of the flexibility that it creates for us.
You've got to see where the market.
You know price it was our liabilities so we can.
You don't really tell the market, where we can price and still make our return profiles. So more work to do there, but definitely definitely an important milestone.
I will definitely pay some big dividends.
Through the business to the investment side, but can't point right now to the specific impact.
Gotcha Gotcha, and if I may I was intrigued by the hotel transaction this past quarter and got me thinking retail is there any scenario are you reviewing any retail or is that.
Still off the table is there any scenario in which you would consider doing retail based transactions.
Yeah, I'll, let markers on you know what.
We're not big fans of retail, but we're big fans of great land. So let me kick that over to him.
Let him walk you through how we're thinking about it.
Yeah, I would say, we're it's not a red line against retail, but Jay hit it on the head. So you you would should think of that as if we're going to do retail urban.
Street corner high traffic can be repurposed into something else.
You know at some point in the future.
Your strip Center mall.
In a regular way Middle America is probably not going to be a part of our core portfolio.
I can <expletive>ume there's nothing under LOI from a retail perspective.
There is not.
Thank you.
Our next question comes from Rich Anderson with F. N B C. Please go ahead.
Hey, Thanks, good morning, everyone.
So I'd be a spread that you've talked about the 125 has you know some non cash components to it both on the on the debt and the AR and the investment side.
What is that spread if you were to think about how you customize your debt with them you know the going in cash yield of of a deal is is it still net 120 range or where is it today.
Yeah, I mean look we we've used different the tools depending on the maturities are anywhere from 30 to 50 years that have been you know.
A good way to continue to keep the.
The growth spread up and 925 range, but also create a positive spread on the cash side.
We love reinvesting our earnings into above market opportunities, which is effectively what's happening in our portfolio.
So we're a little less focused on the cash spread and more focused on the overall economic spread and.
So basically we get them.
335% on cash and the other 2% on the return is actually right now.
Yield to maturity works is you basically reinvesting it up that same yield to maturity.
Which you know we believe is well above market. So I think the number we really do focus on is on hundreds of 125 on the economic return.
And we'd obviously like to see our you know the cash return pay all our bills and pay a nice dividend that can grow over time.
Got you and then on the U C a slash carrot.
So it seems to me like there's there the reality of the situation is it's not going to be so linear like that all right. So you get this you get the <expletive>et when the when the lease expires, but as the lease gets closer to exploration you know, they're there there could be some some some lack.
Lack of linearity is the only word I can come up with about how the value of the of the leasehold stays intact. So my thinking is maybe the way that that gets monetized isn't so much.
So well wait until the lease expires, but.
It becomes a negotiating tool. So if let's say you have one <expletive>et at 555 $6 billion and then it's now 20 years out you renegotiating that five six goes to 10 or something and then you reset the the the ground lease off of that 10 isn't that the probably the more likely way that this this all.
As out over the very long period of time or or my barking up the wrong tree.
Well I think for the long term dynamic. He was one you know we we look at it as a opportunity to have all the smart people on this commercial real estate World, We're working very hard to create incremental value on their buildings.
And ultimately that is building up value for us on our shareholders.
And so you know we're not going on.
Predetermine, how that value is captured whether it's through the rent whether it's through you know on extension a conversation I think all of those will be on the table.
The most important thing rich, though is you don't have to wait this.
This is we've created a public company.
We've created a dynamic where that value is you should be able to see it today you can use the same tool. We all used to look at the future and bring bring it back to today and figure out what its net present value as we do that with every other company. We invest in we look out into the future we figure out a discount rate, we figure out the growth rates and we'd come on.
Well the value today.
And in the breakthrough here as.
Investors have never been able to buy into this <expletive>et cl<expletive>. It's an <expletive>et cl<expletive>. That's made incredible fortunes for a handful of people on a handful of institutions churches universities with now shareholders have a chance to buy in and express their beliefs. Every day. If you think we're gonna grow fast.
I mean, maybe dramatically undervalued you can bias. If you think of our growth is going to slow or value is going to diminish you can do the opposite.
Well this is a different you know.
Asset cl<expletive> than say I'd put it in a draw on let's see what happens I have to figure out what's going to happen way out in the future. This is now on <expletive>et that you can look at creating value today, and see where we're trading and go should I buy it or should I sell it.
And that's really the breakthrough here as we've reached the scale we've reached a liquidity.
We're an investment grade company, where we really want people to start doing is value. It's like any other company they value.
Look at our prospects look at our growth rates apply the appropriate discount rates to our underlying <expletive>ets.
And decide whether we're trading cheap or expensive with an understanding that no matter what happens there was value building up.
The recapture it through increased rents.
Extension payments or ultimately just taking control.
And owning lease holds or if there's anything that's sitting on top of our land that to me is the easy part that values being created we can track of every single quarter.
So how we captured is probably less interesting to us than getting people to see that it is being captured on.
But it is yours you own it it's building up for you as a shareholder and boy. It's now over $5 billion. We think it's one of the most exciting pieces of the puzzle and we don't really see it reflected yet in any material way on our share price. So I think our challenge right now is less.
To talk about what's going to happen that way down the road. It's just to make people understand this dynamic that has created already a very very valuable <expletive>et.
And one that I think again, if you look back historically boy, if we could have all around the growing ground lease portfolio across the top 30 cities in America.
50, <unk> hundred 20 years ago.
We don't think it's one of the best <expletive>ets, we'd ever Investor day. So our job right now is to get people to see what it is and then where you know we will definitely.
Engage with you.
You and others on the different methods that we can capture that value down the road, but the most important thing is you are getting that value. Today you can see if you can touch it you can feel it and we think the share price should reflect it.
Good enough and then real quick last day on on Park on the Park a master lease.
Is that the magic number 18, 19 years and could you comment where the where the rent is versus market today, I mean or is that something you know you don't want to.
Kind of get out growth.
Worried about 100000, a key in <expletive>ets in downtown Salt Lake and the airport at Seattle in Mission Valley in San Diego.
We think these are really strong <expletive>ets. So the question you know has always been what you know what what would the customer likes to do here.
And you know to date for the.
Yeah, you know conversations have been polite, but we haven't really found something it unlocks value for both of us. So.
So we'll.
We'll continue the dialogue.
Our our viewpoint is if you look at that basis. When you think about the value on replacement cost of those <expletive>ets.
We think it's a very valuable <expletive>et.
But you know this has been a tough 12 months no.
The <expletive>ets were.
You know running at almost zero occupancy now they're open they're starting to recover.
But I think it'll it'll take time to transient customers back.
On probably probably faster than we thought and the business traveler is not backing you know probably will come back slower than we thought so it's a mix of news it doesn't change our viewpoint that of young really good <expletive>ets in markets with those basis, while there's lots of value.
But we certainly want you park them.
On double Trillium Hilton too.
You see that same future and so we'll continue to think about ways to unlock value for both sides.
Sounds good thanks, everybody. Thanks, Jeff.
Thanks.
Our next question comes from Keybanc, Kim with true. It. Please go ahead.
Thanks, Dan and good morning.
So Jay does not get triggered quite tricky question to answer, but when you look at the addressable universe of commercial real estate owners that are institutional cl<expletive> in nature.
How do they how much what percentage of them do you think are aware of your company's offerings.
Okay.
Well ill start with the.
Denominator, we think it's 7 billion or seven Trillium that comes from some may read studies done on the top 30 markets. So.
We have a pretty good handle on what the denominator is the numerator you.
You know again.
You bet I think the brokerage community has gotten more and more familiar.
It feels pretty good at least in the key markets that we've sized up but there's still markets, where we're still educating the ecosystem hasn't really been built the legal community hasn't really done one hasn't done a modern ground lease. So we know there's more work to do but.
What do you think do you think a $25 50% of the market has has thought about it and 5% is actually run the numbers on it.
Yeah, it wouldn't be more than that.
Educated estimation, even I I would say.
The brokerage side is probably closer to about 50% and the client side, it's probably closer to 25%.
On an awareness level is my estimation.
Yeah. That's helpful. I, just wanted to kind of grasp how much more runway you guys can have a with some time in education and that was on.
On your question. Thank you.
I guess, one on one thing that strikes us because having done it for.
Four years and I have to craving a lot of this from scratch, what we've seen is once a market.
Actually you can see a tangible transaction gets done you just go into a different phase.
I think lots of people probably have heard of safe Holden.
This new ground lease thing, they're trying to create.
But that doesn't really get us very far what we need to do is be able to sit down with somebody show them side by side the benefits of the modern ground lease the differences between you.
The old ground leases that you know most people and real estate have a horror story they can talk about.
So in terms of breaking into the ecosystem the numbers are definitely lower than what we'd like them.
General awareness that there is a new tool out there.
Others are using it.
Starting to seep into the market, but that doesn't do a lot force, we actually have to get transactions done in property types with customers in markets and then you'd see a different dialogue and that's again part of the exercise we've been going through them.
We'll see that dialogue continue to grow.
That's still why do we feel like we're in the beginning we're still in the beginning of creating a mainstream product.
But it's nice that at least from an awareness standpoint people kind of going on here about this new tool.
Probably at least understand what they're doing.
Got it thank you.
Thank you before our next question on if he would like to ask a question. Please press one zero at this time.
Our next question comes from Anthony P alone with J P. Morgan. Please go ahead.
Hi, Thanks, I have would be quick here with just a couple of Ah I may have missed this but the level of forward activity that you did in the first quarter was that was that.
Because the development or something else the impetus there just that again I'm, sorry, if I missed it.
Yeah, the forward commitments as part of a newbuild.
Okay, and should we think of that as being something that's more prevalent in the deal flow going forward I guess as development or I don't know if you're part of a take out financing on stabilization or what is that something that'll be a bigger part of what you do.
It's certainly our goal to cover the entire map Anthony from you now.
Somebody's Somebody's got a newbuild all the way through recapitalization to I'm Gonna Sylvia also so we want to be there wherever they need us and you know we have seen.
Pretty big slowdown in activity over the last 12 months from now people are starting to come back out and.
Project past Covid and see opportunities in some really good markets and we definitely want to be there for them and we think we've got the tools to help them and to create very good investments for on Saiful, but.
Probably too early to tell exactly what that mix will feel like post COVID-19.
Okay, and then just a detail item maybe for Jeremy the.
Any color on on maybe what G&A is going to look like for the full year outside of say the management fee interest there.
You know just the other cost that you're responsible for.
Jeremy on stupid.
Barring the net borrowing the management fee.
And barring any other.
Unforeseen circumstances and taking into account on director fees, which are paid on the second quarter it would be.
You could make a reasonable <expletive>umption that the current quarters G&A is a good run rate for the year.
Okay, So current quarter plus.
Plus the director fees and <unk>.
That's the level to think about ex the management fees.
And then maybe other unforeseen things that we cant control and then obviously management fees, if and when we raise additional equity.
Sure Okay. Thank you.
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Mr Fu because we have no further questions.
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