Q2 2024 Safehold Inc Earnings Call

Good morning and welcome to Safehold's second quarter 2024 earnings conference call.

Operator: 34 Earnings Conference Co. If you need any assistance during today's call, please press star zero on your phone. If you'd like to ask a question, please press star one. That's Star One to ask a question. As a reminder, today's conference is being recorded.

Speaker Change: If you need any assistance during today's call, please press star zero on your phone. If you'd like to ask a question, please press star one. That's star one to ask a question.

Pearse Hoffmann: At this time for opening remarks and introductions, I would like to turn the conference over to Pearse Hoffmann, Senior Vice President of Capital Markets on Investor Relations. Please go ahead, sir.

Speaker Change: As a reminder, today's conference is being recorded.

Operator: Your Earnings Conference Call. If you need any assistance during today's call, please press star zero on your phone. If you'd like to ask a question, please press star 1. That's star one to ask a question. 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 Pearse Hoffmann, Senior Vice President of Capital Markets and Investor Relations. Please go ahead.

Pearse Hoffmann: At this time, for opening remarks and introductions, I would like to turn the conference over to Pearse Hoffmann, Senior Vice President of Capital Markets and Investor Relations.

Pearse Hoffmann: Good morning everyone, and 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 morning, we plan to walk through a presentation that details our second quarter 2024 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 2 p.m. Eastern Time today. The dial-in number for the replay is 877-481-4010 with a confirmation code of 50921.

Jay Sugarman: Good morning, everyone, and thank you for joining us today for Safehold's earnings call.

Speaker Change: Please go ahead, sir.

Speaker Change: Good morning, everyone, and 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.

Jay Sugarman: On the call today, we have Jay Sugarman, Chairman and Chief Executive Officer; Rhett Asnas, Chief Financial Officer; and Tim D'Arty, Chief Investment Officer. This morning, we plan to walk through a presentation that details our second quarter of 2024 results. The presentation can be found on our website at safeholdinc.com by clicking on the Investors link.

Speaker Change: This morning, we plan to walk through a presentation that details our second quarter 2024 results.

Speaker Change: The presentation can be found on our website at safeholdinc.com by clicking on the investors link.

Operator: There will be a replay of this conference called beginning at 2 p.m. Eastern Time today. The dial-in for the replay is 877-481-4010 with a confirmation code of 509-21.

Speaker Change: There will be a replay of this conference call beginning at 2 p.m. Eastern Time today.

Speaker Change: The dial-in for the replay is 877-481-4010 with a confirmation code of 50921.

Pearse Hoffmann: In order to accommodate all those who want to ask questions, we ask the participants to limit themselves to two questions during Q&A. If you'd like to ask additional questions, you may re-enter the queue.

Speaker Change: In order to accommodate all those who want to ask questions, we ask that participants limit themselves to two questions during Q&A. If you'd like to ask additional questions, you may re-enter the queue.

Pearse Hoffmann: 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.

Speaker Change: 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.

Jay: 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.

Jay: Safehold disclaims any intent or obligation to update these forward-looking statements except as expressly required by law.

Jay Sugarman: Now, with that, I'd like to turn it over to Chairman and CEO Jay Sugarman. Thanks, Pearce, and thanks to all of you for joining us this morning. The second quarter was highlighted by solid earnings, attractive deals, and progress on G&A. New originations improved, but the smaller dollar size and allocation to our sovereign wealth partner under our existing JV limited the net origination number. That said, we were pleased to see activity pick up and with the overall level of customer engagement. Earnings were helped by further efforts to run the businesses as efficiently as possible. Not sure how much more we can do on that front, but we've made good progress against our targets so far.

Pearse Hoffmann: In order to accommodate all those who want to ask questions, we ask that participants limit themselves to two questions during Q&A. If you'd like to ask additional questions, you may re-enter the queue. Before I turn the call over to Jay, I'd like to remind everyone that statements in Jay's 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 report. Safehold disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. Now, with that said, I'd like to turn it over to Chairman and CEO, Jay Sugarman. Jay?

Jay: Now, with that, I'd like to turn it over to Chairman and CEO , Jay Sugarman. Jay?

Jay S. Sugarman: Thanks, Pierce, and thanks to all of you for joining us this morning. The second quarter was highlighted by solid earnings, attractive deals, and progress on G&A. New originations improved, but the smaller dollar size and allocations to our sovereign wealth partner under our existing JV limited the net origination number. That said, we were pleased to see activity pick up and with the overall level of customer engagement. Earnings were helped by further efforts to run the business as efficiently as possible.

Jay S. Sugarman: Thanks, Pearce, and thanks to all of you for joining us this morning.

Jay S. Sugarman: The second quarter was highlighted by solid earnings, attractive deals, and progress on G&A.

Speaker Change: New originations improved, but the smaller dollar size and allocations to our sovereign wealth partner under our existing JV limited the net origination number. That said, we were pleased to see activity pick up and with the overall level of customer engagement.

Speaker Change: Earnings were helped by further efforts to run the business as efficiently as possible.

Jay S. Sugarman: I'm not sure how much more we can do on that front, but we've made good progress against our targets so far. In terms of the market environment, the potential for lower rates later this year should help overall real estate markets and transaction activity. The multifamily sector remains our focus, with opportunities and other asset types more limited. Lastly, valuations from CBRE for our UCA estimate were again impacted by higher cap rate assumptions and tougher office market fundamentals. However, somewhat offset by UCA additions from new originations, leaving overall UCA little change for the quarter. With that, let me turn it over to Brett to review the quarter in more detail.

Speaker Change: Not sure how much more we can do on that front, but we've made good progress against our targets so far.

Jay Sugarman: In terms of the market environment, the potential for lower rates later this year should help overall real-state markets and transaction activity. The multi-family sector remains our focus, with opportunities and other asset types more limited. Lastly, valuations from CBRE for our UCA estimate were again impacted by higher cap rate assumptions and tougher office market fundamentals. Someone offset by UCA additions from new originations, leaving overall UCA little change for the quarter.

Speaker Change: In terms of the market environment, the potential for lower rates later this year should help overall real estate markets and transaction activity.

Speaker Change: The multifamily sector remains our focus with opportunities and other asset types more limited.

Speaker Change: Lastly, valuations from CBRE for our UCA estimate were again impacted by higher cap rate assumptions and tougher office market fundamentals, somewhat offset by UCA additions from new originations, leaving overall UCA little change for the quarter.

Brett Asnas: With that, let me turn it over to Brett to review the quarter in more detail.

Speaker Change: With that, let me turn it over to Brett to review the quarter in more detail.

Brett Asnas: Thank you, Jay. Good morning, everyone.

Brett Asnas: Thank you, Jay. Good morning, everyone. Let's start with the summary of the quarter on slide two. During the quarter, we originated six multifamily ground leases for $98 million. Of the six new deals, five were in the portable housing space, and one with student housing, and they span across four markets and three sponsors. Credit metrics are in line with our portfolio targets, with the GLTV of 33%, run coverage of 2.8 times, and an economic yield of 7.5%. And what we believe are very attractive risk-adjusted returns. We are optimistic that a clearer path on interest rates, as well as increasing liquidity and price discovery in the market, will stimulate broader transaction volume in which we can participate.

Brett Asnas: Let's start with a summary of the quarter on slide two. During the quarter, we originated six multifamily ground leases for $98 million. Of the six new deals, five were in the affordable housing space and one was student housing, and they spanned across four markets and three sponsors. Credit metrics are in line with our portfolio targets, with a GLTV of 33%, rent coverage of 2.8 times, and an economic yield of 7.5%. We are pleased to have converted most of our previously announced LOIs into closings, particularly at what we believe are very attractive risk-adjusted returns. We are optimistic that a clearer path on interest rates, as well as increasing liquidity and price discovery in the market, will stimulate broader transaction volume in which we can participate.

Brett: Thank you, Jay, and good morning, everyone. Let's start with a summary of the quarter on slide two.

Brett: During the quarter, we originated six multi-family ground leases for $98 million. Of the six new deals, five were in the affordable housing space and one with student housing, and they spanned across four markets and three sponsors.

Brett: Credit metrics are in line with our portfolio targets, with a GLTB of 33%, rent coverage of 2.8 times, and an economic yield of 7.5%.

Brett: We are pleased to have converted most of our previously announced LOIs into closings, particularly at what we believe are very attractive risk-adjusted returns.

Brett: We are optimistic that a clearer path on interest rates, as well as increasing liquidity and price discovery in the market, will stimulate broader transaction volume in which we can participate.

Brett Asnas: On the capital front, we announced in April our new 2 billion unsecured revolving pred facility, which replaced and upsized our previous 1.85 billion aggregate facilities. This recapped several strong positive outcomes for the company, immediately increasing credit capacity, 150 million, lowering borrowing costs, extending our nearest term maturities with a fresh five year term, which includes two six month extension options, and further improving overall financial flexibility. In June, we closed on a new 750 million unsecured commercial paper program. We viewed commercial paper as a short-term funding alternative to our revolver and not incremental liquidity, as the program has a full dollar-for-dollar revolver backstop.

Brett Asnas: On the capital front, we announced in April our new $2 billion unsecured revolving print facility, which replaced and upsized our previous $1.85 billion aggregate facility. This recast had several strong positive outcomes for the company, immediately increasing credit capacity by $150 million, and lowering borrowing costs. Extending our nearest term maturities with a fresh five-year term, which includes two six-month extension options, and further improving overall financial flexibility. In June, we closed on a new $750 million unsecured commercial paper program.

Brett: On the capital front, we announced in April our new $2 billion unsecured revolving cred facility, which replaced and upsized our previous $1.85 billion aggregate facilities.

Brett: This recast had several strong positive outcomes for the company. Immediately increasing credit capacity, $150 million, lowering borrowing costs.

Brett: Extending our nearest term maturities with a fresh five-year term, which includes two six-month extension options, and further improving overall financial flexibility.

Brett: In June , we closed on a new $750 million unsecured commercial paper program. We view commercial paper as a short-term funding alternative to our revolver, and not incremental liquidity, as the program has a full dollar-for-dollar revolver backstop.

Brett Asnas: We view commercial paper as a short-term funding alternative to our revolver and not as incremental liquidity, as the program has a full dollar-for-dollar revolver backstop. We have not yet utilized the program, but may do so in the near term, which would help us recognize interest savings versus the revolver on amounts issued.

Brett Asnas: We have not yet utilized the program, but made you so in the near term, which would help us recognize interest savings versus the revolver on a mass issue. We continue to benefit from an active hedging strategy. The company has 500 million of silver slops in place until April 2028, at a rate of approximately 3%, saving approximately 3 million of cash interest per quarter at current rates. Additionally, we have 350 million of long term treasury locks in place at a current mark to market gain position of approximately 37 million, which is expected to provide a benefit to the true economic cost of future long term financing.

Brett: We have not yet utilized the program, but may do so in the near term, which would help us recognize interest savings versus the revolver on amounts issued.

Brett Asnas: We continue to benefit from an active hedging strategy. The company has 500 million SOFR swaps in place until April 2028 at a rate of approximately 3%, saving approximately $3 million of cash interest per quarter at current rates. Additionally, we have $350 million of long-term Treasury locks in place at a current mark-to-market gain position of approximately $37 million, which is expected to provide a benefit to the true economic cost of future long-term financing.

Brett: We continue to benefit from an active hedging strategy. The company has 500 million of SOFR swaps in place until April 2028 at a rate of approximately 3%, saving approximately $3 million of cash interest per quarter at current rates.

Brett: Additionally, we have $350 million of long-term treasury locks in place at a current mark-to-market gain position of approximately $37 million, which is expected to provide a benefit to the true economic cost of future long-term financings.

Brett Asnas: At quarter end, the total portfolio was 6.5 billion. UCLA was estimated at $9.1 billion. GLTV was 48%, and rent coverage was 3.6 times. We ended the quarter with approximately 1.1 billion of liquidity, which is further enhanced by the potential available capacity in our joint venture.

Brett Asnas: At quarter end, the total portfolio was $6.5 billion, UCA was estimated at $9.1 billion, GLTV was 48%, and rent coverage was 3.6 times. We ended the quarter with approximately $1.1 billion of liquidity, which is further enhanced by the potential available capacity in our joint venture.

Brett: At quarter end, the total portfolio was $6.5 billion, UCA was estimated at $9.1 billion, GLTV was 48%, and rent coverage was 3.6 times.

Brett: We ended the quarter with approximately $1.1 billion of liquidity, which is further enhanced by the potential available capacity in our joint venture.

Brett Asnas: Slide three provides a snapshot of our portfolio growth. In the second quarter, we funded a total of 78 million, including 37 million of new Q2 originations that have a 7.5% economic yield and 41 million of groundless funding on pre-existing commitments that have a 6.4% economic yield. Of the six new groundless originations in Q2, 5 closed into our joint venture. Safeholds commitment is $59 million and our JV partners' commitment is $39 million. Our groundless portfolio has 143 assets and has grown 19 times since our IPO, while the estimated unrealized capital appreciation sitting above our groundless has grown 21 times.

Brett Asnas: Slide three provides a snapshot of our portfolio growth. In the second quarter, we funded a total of $78 million, including $37 million of new Q2 originations that have a 7.5% economic yield and $41 million of ground lease funding on pre-existing commitments that have a 6.4% economic yield. Of the six new ground lease originations in Q2, five closed into our joint venture.

Brett: Slide three provides a snapshot of our portfolio growth.

Brett: In the second quarter, we funded a total of $78 million, including $37 million of new Q2 originations that have a 7.5% economic yield, and $41 million of ground lease fundings on pre-existing commitments that have a 6.4% economic yield.

Brett: Of the six new ground lease originations in Q2, five closed into our joint venture.

Brett Asnas: Safehold's commitment is $59 million, and our JV Partners commitment is $39 million. Our ground lease portfolio has 143 assets and has grown 19 times since our IPO, while the estimated unrealized capital appreciation sitting above our ground leases has grown 21 times. We continue to emphasize ground leases under multi-family assets and have increased our exposure from 8% of the portfolio by count at IPO to 57% today. In total, the unrealized capital appreciation portfolio is comprised of approximately 35 million square feet of institutional quality commercial real estate, consisting of approximately 19,200 multifamily units, 12.5 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 four, let me detail our quarterly earnings results. For the second quarter, revenue was $89.9 million, net income was $29.7 million, and earnings per share was $0.42.

Brett: Safehold's commitment is $59 million, and our JV Partners commitment is $39 million.

Brett: Our ground lease portfolio has 143 assets and has grown 19 times since our IPO, while the estimated unrealized capital appreciation sitting above our ground leases has grown 21 times.

Brett Asnas: We continue to emphasize groundless under multi-family assets and have increased our exposure from 8% of the portfolio by count at IPO to 57% today. Slide three provides a 3.5% economic yield and 41 million of groundless funding on pre-existing commitments that have a 7.5% economic yield and 41 million of groundless funding on pre-existing commitments that have a 7.5% economic yield and 41 million of groundless funding on pre-existing commitments that have a 7.5% economic yield and 41 million. In total, the unrealized capital appreciation portfolio is comprised of approximately 35 million square feet of institutional quality commercial real estate consisting of approximately 19,200 multi-family units, 12.5 million square feet of office, over 5,000 hotel keys, and 2 million square feet of life science and other property types.

Brett: We continue to emphasize ground leases under multi-family assets.

Brett: and have increased our exposure from 8% of the portfolio by count at IPO to 57% today.

Brett: In total, the unrealized capital appreciation portfolio is comprised of approximately 35 million square feet of institutional quality commercial real estate, consisting of approximately 19,200 multifamily units, 12.5 million square feet of office,

Brett: over 5,000 hotel keys, and 2 million square feet of life signs and other property types.

Brett Asnas: Continuing on slide four, let me detail our quarterly earnings results. For the second quarter, revenue was 89.9 million, net income was 29.7 million, and earnings per share was 42 cents. EPS was up 7 cents year over year, driven by approximately 7 million increase in asset related revenue from new investments and rent growth, as well as approximately 3.8 million savings in G&A, net of Star Holdings management fee, offset by approximately 3.1 million of additional interest expense. The second quarter's G&A savings were results of reorganizing our legal team structure to better fit what our business has seasoned into.

Brett Asnas: EPS was up 7 cents year-over-year, driven by approximately $7 million increase in asset-related revenue from new investments and rent growth, as well as approximately $3.8 million savings in G&A Net-of-Star Holdings Management Fee, offset by approximately $3.1 million of additional interest expenses. The second quarter's G&A savings were a result of reorganizing our legal team structure to better fit what our business has seasoned into. Certain members of the legal team transitioned from in-house to external counsel, where the same firm and team will continue to provide asset and corporate legal services to Safehold, but in a more flexible and cost-effective manner.

Brett: Continuing on slide four, let me detail our quarterly earnings results.

Brett: For the second quarter, revenue was $89.9 million, net income was $29.7 million, and earnings per share was $0.42.

Brett: EPS was up $0.07 year-over-year, driven by approximately $7 million increase in asset-related revenue from new investments and rent growth.

Brett: as well as approximately $3.8 million savings in G&A, net of Star Holdings management fee, offset by approximately $3.1 million of additional interest expense.

Brett: The second quarter's G&A savings were a result of reorganizing our legal team structure to better fit what our business has seasoned into.

Brett Asnas: Certain members of the legal team transitioned from in house to external counsel, where the same firm and team will continue to provide asset and corporate legal services to safe hold, but in a more flexible and cost-effective manner. On last quarter's call, we said that the annualized net G&A target for 2024 was approximately $40 million. As a result of this legal transition, we're now revising this expectation to 38 million. We've made great progress recently in finding efficiencies and will continue to be thoughtful in aligning our cost structure to the business environment.

Brett: Certain members of the legal team transitioned from in-house to external counsel, where the same firm and team will continue to provide asset and corporate legal services to Safehold, but in a more flexible and cost-effective manner.

Brett Asnas: On last quarter's call, we said that the annualized net GNA target for 2024 was approximately $40 million. As a result of this legal transition, we're now revising this expectation to $38 million. We've made great progress recently in finding efficiencies, and we'll continue to be thoughtful in aligning our cost structure to the business environment. On slide five, we detail our portfolio's yields. For GAAP earnings, the portfolio currently earns a 3.6% cash yield and a 5.3% annualized yield.

Brett: On last quarter's call, we said that the annualized net GNA target for 2024 was approximately $40 million.

Brett: As a result of this legal transition, we're now revising this expectation to $38 million.

Brett: We've made great progress recently in finding efficiencies and will continue to be thoughtful in aligning our cost structure to the business environment.

Brett Asnas: On slide five, we detail our portfolios' yields. For gap earnings, the portfolio currently earns a 3.6% cash yield and a 5.3% annualized yield. Annualized yield includes non-cash adjustments within rent, depreciation, and memorization, which is primarily from accounting methodology and 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 5.8% 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 lookbacks, which we have an 83% of our ground leases.

Brett: On slide 5, we detail our portfolio's yields.

Brett: For GAAP earnings, the portfolio currently earns a 3.6% cash yield.

Brett Asnas: Annualized yield includes non-cash adjustments within rent, depreciation, and amortization, which is primarily from accounting methodology and 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.

Brett: and a 5.3% annualized yield.

Brett: Annualized yield includes non-cash adjustments within rent, depreciation and amortization, which is primarily from accounting methodology and IPO assets.

Brett: 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.

Brett Asnas: On an economic basis, the portfolio generates a 5.8% 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 lookbacks, which we have in 83% of our groundleaf, using the Federal Reserve's current long-term break-even inflation rate of 2.27%. The 5.8% economic yield increases to a 5.9% inflation-adjusted yield.

Brett: On an economic basis, the portfolio generates a 5.8% economic yield, which is an IRR-based calculation that conforms with how we've underwritten these investments.

Brett: This economic yield has additional upside, including periodic CPI lookbacks, which we have in 83% of our ground leases.

Brett Asnas: Using the Federal Reserve's current long-term break-even inflation rate of 2.27%, the 5.8% economic yield increases to a 5.9% inflation-adjusted yield. That 5.9% inflation-adjusted yield then increases to 7.5% after layering in an estimate for unrealized capital appreciation using Safel's 84% ownership interest in Carrot 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.

Brett: Using the Federal Reserve's current long-term break-even inflation rate of 2.27%.

Brett: The 5.8% economic yield increases to a 5.9% inflation-adjusted yield.

Brett Asnas: That 5.9% inflation-adjusted yield then increases to 7.5% after layering in an estimate for unrealized capital appreciation using Safehold's 84% ownership interest in Carrot 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 six, we highlight the diversification of our portfolio by location and underlying property type.

Brett: That 5.9% inflation adjusted yield then increases to 7.5% after layering in an estimate for unrealized capital appreciation using Safehold's 84% ownership interest in Carrot at its most recent $2 billion valuation.

Brett: 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.

Brett Asnas: 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 70% 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 debt. Portfolio GLTV, which is based on annual asset appraisals from CBRE, stabilized in the second quarter after several quarters of increases. Rent coverage on the portfolio also remains stable quarter of a quarter at 3.6 times.

Brett: Turning to slide 6, we highlight the diversification of our portfolio by location and underlying property type.

Brett Asnas: Our top 10 markets by gross book value are called out on the right, representing approximately 70% 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.

Brett: Our top 10 markets by gross book value are called out on the right, representing approximately 70% of the portfolio.

Brett: 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.

Brett Asnas: Portfolio GLTV, which is based on annual asset appraisals from CBRE, stabilized in the second quarter after several quarters of increase. Rent coverage on the portfolio also remains stable quarter over quarter at 3.6 times. We continue to believe that investing in well-located, institutional-quality ground leases in the top 30 markets that have attractive risk-adjusted returns will benefit the company and its stakeholders over long periods of time. Lastly, on slide seven, we provide an overview of our capital structure.

Brett: Portfolio GLTV, which is based on annual asset appraisals from CBRE, stabilized in the second quarter after several quarters of increases.

Brett: Rent coverage on the portfolio also remains stable quarter-over-quarter at 3.6 times.

Brett Asnas: We continue to believe that investing in well-located, institutional quality ground leases. In the top 30 markets that have attractive risk-adjusted returns, will benefit the company and its stakeholders over long periods of time.

Brett: We continue to believe that investing in well-located, institutional-quality ground leases in the top 30 markets that have attractive risk-adjusted returns will benefit the company and its stakeholders over long periods of time.

Brett Asnas: Lastly, on slide seven, we provide an overview of our capital structure. At the end of the second quarter, we had approximately 4.5 billion of debt comprised of 1.8 billion of unsecured notes, 1.5 billion of non-recourse-secured debt, 956 million on our new unsecured revolver, and 272 million of our progress. We provide a share of debt on ground leases which we own and join ventures. Our weighted average debt maturity is approximately 21 years, and we have no maturities due until 2027. At quarter end, we had approximately 1.1 billion of cash and credit facility availability. Our credit ratings are A-3 with stable outlook at Moody's and triple B plus with positive outlook at Fitch.

Brett: Lastly, on slide 7, we provide an overview of our capital structure.

Brett Asnas: At the end of the second quarter, we had approximately $4.5 billion of debt comprised of $1.8 billion of unsecured notes, $1.5 billion of non-recourse secured debt, $956 million on our new unsecured revolver, and $272 million of our pro rata share of debt on ground leases which we own in joint ventures. Our weighted average debt maturity is approximately 21 years, and we have no maturities due until 2027. At quarter end, we had approximately $1.1 billion of cash and credit facility availability. Our credit ratings are A3 with a stable outlook at Moody's and BBB plus with a positive outlook at Fitch.

Brett: At the end of the second quarter, we had approximately $4.5 billion of debt, comprised of $1.8 billion of unsecured notes, $1.5 billion of non-recourse secured debt.

Brett: $956 million on our new unsecured revolver and $272 million of our pro rata share of debt on ground leases which we own in joint ventures.

Brett: Our weighted average debt maturity is approximately 21 years, and we have no maturities due until 2027.

Brett Asnas: As mentioned earlier, we have several hedges in place to manage interest rate risk and our limited floating reparings. Of the 956 million revolver balance outstanding, 500 million of swap to fix so for at 3% through April 2028. We receive swap payments on a current cash basis each month, and at today's rates, that produces cash. We also have 350 million of long-term treasury locks at a weighted average rate of approximately 3.67%, which at current treasury rates is in a gain position of approximately 37 million. These treasury locks are marked to market instruments, so no cash changes hands each month, and while we do recognize these gains on our balance sheet and other comprehensive income, they are not yet recognized in the PNL.

Brett Asnas: As mentioned earlier, we have several hedges in place to manage interest rate risk and our limited floating rate borrowing. Of the $956 million revolver balance outstanding, $500 million is swapped to fix SOFR at 3% through April 2028. We receive swap payments on a current cash basis each month, and at today's rates, that produces cash interest savings of approximately $3 million per quarter that is currently flowing through the P&L. We also have $350 million of long-term treasury locks at a weighted average rate of approximately 3.67%, which at current treasury rates is in a gain position of approximately $37 million.

Brett: As mentioned earlier, we have several hedges in place to manage interest rate risk and our limited floating rate borrowings.

Brett: Of the $956 million revolver balance outstanding, $500 million is swapped to fix SOFR at 3% through April 2028.

Brett: We also have $350 million of long-term Treasury locks at a weighted average rate of approximately 3.67%, which at current Treasury rates is in a gain position of approximately $37 million.

Brett Asnas: These Treasury locks are mark-to-market instruments, so no cash changes hands each month. And while we do recognize these gains on our balance sheet and other comprehensive income, they are not yet recognized in the P&L. While hedges can be utilized through the end of their designated term, they can be unwound for cash at any point before.

Brett Asnas: While hedges can be utilized through the end of their designated term, they can be unwound for cash at any point prior. As we look to term out revolver borrowings with long-term debt, we have the ability to unwind the hedges, which would then flow through the P&L thereafter. We are levered 1.89 times on a total debt to equity basis. The effective interest rate on permanent debt is 4.0%, and the portfolio's cash interest rate on permanent debt is 3.6%.

Brett Asnas: As we look to term out revolver borrowings with long-term debt, we have the ability to unwind the hedges, which would then flow through the P&L thereafter. We are levered 1.89 times on a total debt-to-equity basis. The effective interest rate on permanent debt is 4.0%, and the portfolio's cash interest rate on permanent debt is 3.6%. So to conclude, we're encouraged to see transaction activity begin to pick up, and we expect rate cuts to be beneficial for our business, both in terms of opportunities and valuation. The balance sheet is well positioned, and we'll look to harness our ample liquidity to deliver value to our customers. And with that, I'll turn it back to Jay.

Brett: As we look to term out revolver borrowings with long-term debt, we have the ability to unwind the hedges, which would then flow through the P&L thereafter.

Brett: We are levered 1.89 times on a total debt-to-equity basis. The effective interest rate on permanent debt is 4.0%, and the portfolio's cash interest rate on permanent debt is 3.6%.

Jay Sugarman: So to conclude, we're encouraged to see transaction activity begin to pick up, and we expect rate cuts to be beneficial for our business both in terms of opportunities and valuation.

Brett: So to conclude, we're encouraged to see transaction activity begin to pick up, and we expect rate cuts to be beneficial for our business, both in terms of opportunities and valuation.

Jay Sugarman: The balance sheet is well-positioned, and we'll look to harness our ample liquidity to deliver value to our customers. And with that, let me turn it back to Jay.

Brett: The balance sheet is well-positioned, and we'll look to harness our ample liquidity to deliver value to our customers.

Jay S. Sugarman: Thanks Brett. Let's go ahead and open it up for questions. Operator?

Jay Sugarman: Thanks, Brett. Let's go ahead and open it up for questions.

Brett: And with that let me turn it back to Jay. Thanks Brett. Let's go ahead and open it up for questions. Operator?

Operator: Operator? Thank you.

Operator: Thank you. Ladies and gentlemen, to ask a question, please press star 1 at this time. We will take as many questions as time permits. Once again, please press star 1 to ask a question. We will pause for a moment to assemble the roster. Thank you. Our first question is coming from Nate Crossett with BNP Paribas. Hey.

Operator: Ladies and gentlemen, to ask a question, please press star 1 at this time. We will take as many questions as time permits. Thanks. Once again, please press star 1 to ask a question.

Speaker Change: Thank you. Ladies and gentlemen, to ask a question please press star 1 at this time. We will take as many questions as time permits.

Operator: We will pause a moment to assemble the roster.

Speaker Change: Thank you.

Speaker Change: Our first question is coming from Nate Crossett with BNP Paribas. Your line is live.

Nathan Daniel Crossett: Hey, good morning. Maybe you could just talk through, like, what does the pipeline look like right now? Maybe what are your expectations for the next three to six months based on the conversations you're having? And I think you mentioned it's still mostly multifamily, is that right?

Nathan Daniel Crossett: Hey, good morning.

Nathan Daniel Crossett: Maybe you could just talk through, like, what does the pipeline look like right now? Maybe what are your expectations for the next three to six months based on the conversations you're having? And I think you mentioned it's still mostly multifamily. Is that right?

Timothy Doherty: Thank you so much for your presentation for the next three to six months based on the conversations you're having. And I think you mentioned it's still mostly multi-family, is that right? Yeah, Tim. Yeah, as you saw, we closed six of the eight deals we announced last quarter; the other two are closing this quarter activity. You know, I walked quarter to quarter can vary. We were actually pretty optimistic on what we're seeing the market both on act just general activity and then the conversion to L.O.I.s has been additional L.O.I.s signed up that will deal with will close likely later this year.

Timothy Doherty: Tim, why don't you go ahead? Yeah. Hey, it's Tim.

Speaker Change: Thank you.

Timothy Doherty: As you saw, we closed six of the eight deals we announced last quarter. The other two are closing this quarter. Activity, quarter to quarter, can vary. We were actually pretty optimistic about what we're seeing in the market, both on just general activity and then the conversion to LOIs. There have been additional LOIs signed up that will close, likely later this year. And yes, it's predominantly multifamily.

Speaker Change: Tim, why don't you go ahead? Yeah, hey, it's Tim.

Tim: Yeah, as you saw, we closed six of the eight deals we announced last quarter. The other two are closing this quarter. Activity, you know, quarter to quarter can vary. We were actually pretty optimistic on what we're seeing in the market, both on just general activity and then the conversion to LOIs, there's been additional LOIs.

Tim: Signed up that will deal that will close likely later this year And yes, it's predominantly multifamily. I think the reason for that is

Timothy Doherty: And yes, it's predominantly multi-family. I think the reason for that is that's predominantly where the activity and liquidity is right now in the market. It's pretty competitive. Obviously starting with the agencies, but also in the banks, the debt funds, life codes, even CNBS. But the good news with air we're seeing is that spreads are tightening, competitions increasing, that pushing capital into other asset classes.

Brett Asnas: I think the reason for that is that it's predominantly where the activity and liquidity are right now in the market. It's pretty competitive, obviously starting with the agencies, but also in the banks, the debt funds, life codes, and even CMBS. But the good news we're seeing is that spreads are tightening, and competition is increasing, and that's pushing capital into other asset classes. So we're seeing activity pick up on those. It's mostly front end right now. But we're pretty optimistic with the clarity and visibility in the market and the increased transaction flow.

Tim: That's predominantly where the activity and liquidity is right now in the market. It's pretty competitive, obviously starting with the agencies, but also in the banks, the debt funds, life codes, even CMBS.

Tim: But the good news there we're seeing is that spreads are tightening, competition is increasing, that's pushing capital into other asset classes.

Timothy Doherty: So we're seeing activity pick up on those mostly front end right now, but we're pretty optimistic with the clarity and visibility in the market and increased transaction flow.

Tim: So we're seeing activity pick up on those, mostly front end right now, but we're pretty optimistic with the clarity and visibility in the market and the increased transaction flow.

Timothy Doherty: Okay, and then just in terms of funding the deal flow, can you guys remind us how much is left on the JV, and then also I just wanted to know on the commercial paper program what's the rate savings versus if you just put it on the revolver. And it's spread in the joint venture a quarter, and there's 353 million. So our partners' share was 159 million dollars remaining that will go towards future investments here over the coming quarters in terms of commercial paper.

Brett Asnas: Okay, and then just in terms of funding the deal flow, can you guys remind us how much is left on the JV? And then also, I just wanted to know on the commercial paper program, what's the rate savings versus if you just put it on the revolver?

Speaker Change: Okay and then just in terms of funding the deal flow can you guys remind us how much is left on the JV and then also I just wanted to know on the commercial paper program what's the rate savings versus if you just put it on the revolver?

Brett Asnas: and Ed Spratt.

Caitlin Burrows: Brett. In the joint venture, at quarter end, there was $353 million, so our partner's share was $159 million remaining. That will go towards future investments here over the coming quarters. In terms of commercial paper, we put the program in place at the end of June; there were a couple of days left in the quarter. Now we've hit earnings, so in the near term, we would hope to utilize that in a judicious manner.

Speaker Change: Hey Nate, it's Brett. In the joint venture, at quarter end, there was $353 million, so our partner's share was $159 million remaining. That will go towards future investments here over the coming quarters.

Timothy Doherty: We put the program in place at the end of June. There were a couple of days left in the quarter. Now we've hit earnings. So here in the near term, we would hope to utilize that in a judicious manner. The savings will probably be close to 50 basis points versus our line costs. Right now, we pay adjusted so for plus 85 basis points on our revolving credit facility. So, in the commercial paper landscape, depending on the tenor of what we issue, I'd say the average net savings will probably be around that number.

Speaker Change: In terms of commercial paper, we put the program in place at the end of June . There were a couple days left in the quarter.

Speaker Change: Now we've hit earnings, so here in the near term, we would hope to utilize that in a judicious manner.

Caitlin Burrows: The savings will probably be close to 50 basis points versus our line costs. Right now, we pay adjusted SOFR plus 85 basis points on our revolving credit facility. So in the commercial paper landscape, depending on the tenor of what we issue, I'd say the average net savings will probably be around that number.

Speaker Change: The savings will probably be close to 50 basis points versus our line costs. Right now we pay adjusted SOFR plus 85 basis points on our revolving credit facility.

Speaker Change: So in the commercial paper landscape, depending on the tenor of what we issue, I'd say the average net savings will probably be around that number.

Timothy Doherty: Okay, I'll leave it there.

Timothy Doherty: Thanks.

Timothy Doherty: Thank you.

Speaker Change: Okay, I'll leave it there. Thanks.

Caitlin Burrows: Our next question is coming from Caitlin Burrows with Goldman Sachs. Your line is life. Hi, everyone.

Timothy Doherty: Our next question is coming from Caitlin Burrows with Goldman Sachs. Your line is live.

Speaker Change: Thank you.

Caitlin Burrows: Hi everyone. Maybe just to follow up on the pipeline. I know you guys have obviously been focused on multifamily recently. Just wondering if you could comment on kind of at what point you might get interested in other property types, what they could be, because I feel like the size of the multifamily deals ends up being relatively limited, although maybe there are portfolio deals or something you could do. But yeah, just talking about the types of deals and then the stickiness of those kind of cap rates or yields that you expect.

Caitlin Burrows: Maybe just a follow-up on the pipeline. I know you guys have obviously been focused on multi-family recently. Just wondering if you could comment on kind of at what point you might get interested in other property types, what they could be because I feel like the size of the multi-family deals ends up being relatively limited, although maybe there's portfolio deals or something you could do. But yeah, just talking about the types of deals and then the stickiness of those kind of cap rates or yields that you expect.

Speaker Change: Hi everyone, maybe just to follow up on the pipeline, I know you guys have obviously been focused on multifamily recently, just wondering if you could comment on kind of at what point you might get interested in other property types, what they could be, because I feel like the size of the multifamily deals ends up being

Speaker Change: Relatively limited, although maybe there's portfolio deals or something you could do, but yeah, just talking about the types of deals and then the stickiness of those kind of cap rates or yields that you expect.

Timothy Doherty: Hey, Caitlin, Tim again. So, as I said earlier, there is activity beginning in those other asset classes; hospitality, probably being the one that's leading the rest of them. We're paying attention to all of them, right? Office, hospitality, retail, tracking, what's going on in the fundamentals there, what's going on in the capital markets and the capital being provided there. Transaction flow on the investment sales side remains pretty low in those areas, which is sort of the key to the capitulation of the transaction flow. But again, we're starting to see more activity as the capital markets open up for all the other asset classes.

Jay S. Sugarman: Sure. Hey Caitlin, it's Tim again.

Anthony Paolone: So, as I said earlier, there is activity beginning in those other asset classes, hospitality probably being the one that's leading the rest of them. We're paying attention to all of them, right, office, hospitality, retail, tracking what's going on in the fundamentals there, obviously what's going on in the capital markets and the capital being provided there. Transaction flow on the investment sales side remains pretty low in those areas, which is sort of the key to the capitulation of the transaction flow.

Speaker Change: Sure. Hey, Kaylen. It's Tim again.

Tim: So, as I said earlier, there is activity beginning in those other asset classes, hospitality probably being the one that's leading the rest of them. We're paying attention to all of them, right, office, hospitality, retail, tracking what's going on in the fundamentals there, obviously what's going on in the capital markets and the capital being provided there. Transaction flow on the investment sales side remains pretty low in those areas.

Tim: which is sort of the key to the...

Anthony Paolone: But again, we're starting to see more activity as the capital markets open up for all the other asset classes, so we're ready to go on a lot of those. We're just waiting for the right opportunities and the transaction flow to increase.

Tim: yo

Speaker Change: Transcripts provided by Transcription Outsourcing, LLC.

Timothy Doherty: So, we're ready to go on a lot of those. We're just waiting for the right opportunities and the transaction flow to increase. Got it. Okay.

Brett Asnas: Got it. Okay.

Timothy Doherty: And then we noticed that 135 was 50 as a property where you have a ground lease is being auctioned.

Speaker Change: Got it. Okay, and then we noticed that 135 West 50th, a property where you have a ground lease, is being auctioned. So whether specific to that asset or if you don't want to talk specifics, maybe just in general, I realize the best case scenario would be if a property sells for like a reasonable cap rate. There's a new owner and no change to safehold, but just trying to understand what's the downside risk. So for example, if a property is sold

Timothy Doherty: So, whether specific to that asset or if you don't want to talk specifics, maybe just in general, I realize the best case scenario would be if a property sells for like a reasonable cap rate. There's a new owner and no change to Safehold, but to try and understand what's the downside risk. So, for example, if a property is sold for a low dollar amount, is there any impact to Safehold or if it's returned to lender, like the lender, how does that end up impact? Okay. Let's check. So, obviously, the sponsor is running a process there.

Timothy Doherty: And then we noticed that 135 West 50th, a property where you have a ground lease, is being auctioned. So whether specific to that asset or if you don't want to talk specifics, maybe just in general, I realize the best case scenario would be if a property sells for a reasonable cap rate, there's a new owner and no change to safehold, but just trying to understand what the downside risk is. So, for example, if a property is sold for a low dollar amount, is there any impact on the safehold, or if it's returned to the lender, like the lender, how does that end up impacting you guys?

Speaker Change: For a low dollar amount, is there any impact to Safehold, or if it's returned to lender like the lender, how does that end up impacting you guys?

Mitchell Bradley Germain: Hi Caitlin, it's Jay. So obviously, the sponsor's running a process there. You know, the building has benefited from a lot of investment, and we do think the New York Midtown market is recovering pretty well. So let's see how that process plays out. I think it's fair to say our ground lease should be viewed as very effective capital by an owner, but it's premature to speculate exactly how that one will end up.

Speaker Change: Hi Caitlin, it's Jay. So obviously the sponsor is running a process there.

Timothy Doherty: You know, the building has benefited from a lot of investment. And we do think the New York Midtown market is recovering pretty well. So, let's see how that process plays out. I think it's fair to say our ground lease should be viewed as very effective capital by an owner, but it's premature to speculate exactly how that will end up. A low dollar price does not impact us, but obviously we're more focused on long-term value preservation. So, you know, as we do with all ground leases, we're looking to maximize long-term value. So, we're watching that process closely.

Jay S. Sugarman: You know, the building has benefited from a lot of investment, and we do think the New York Midtown market is recovering pretty well, so let's see how that process plays out. I think it's fair to say our ground lease should be viewed as very effective capital by an owner, but it's premature to speculate exactly how that one will end up.

Mitchell Bradley Germain: A low dollar price does not impact us, but obviously, we're more focused on long-term value preservation. So, you know, as we do with all ground leases, we're looking to maximize long-term value. So we're watching that process closely.

Jay S. Sugarman: A low dollar price does not impact us, but obviously we're more focused on long-term value preservation, so as we do with all ground leases, we're looking to maximize long-term value, so we're watching that process closely.

Timothy Doherty: Got it. Okay. Thanks.

Timothy Doherty: Got it. Okay, thanks.

Anthony Paolone: Thank you. Our next question is coming from Anthony Paoloan with JP Morgan. Your line is live. Yeah, thanks. Good morning.

Speaker Change: Got it. OK, thanks.

Harsh Hemnani: Thank you. Our next question is coming from Anthony Paolone with JP Morgan. Your line is live.

Speaker Change: Thank you. Our next question is coming from Anthony Paolone with JP Morgan. Your line is live.

Jay S. Sugarman: Can you talk about, on the incremental debt side, where your most attractive, just longer-term debt capital would be right now, and sort of that duration and rate, if you had to go into the market?

Brett Asnas: Can you just talk about just on the incremental debt side where your most attractive, just longer-term debt capital would be right now in sort of that duration and rate if you had to go into the market? Sure.

Anthony Paolone: Yeah, thanks, good morning. Can you just talk about just on the incremental debt side where your most attractive just longer term debt capital would be right now and sort of that duration and rate if you had to go into the market?

Ravi Vaidya: Sure. Hey, it's Brett.

Brett Asnas: Hey, it's Brett. So, right now you saw us, as we talked about earlier, put in the commercial paper program. That's really just an alternative to our revolver. We do not view that as incremental capital, and that's not how we're funding the business long-term. I think on a long-term basis, what you've seen us do over the years is go to the public and private debt markets. So, right now, our bonds that we issued back in February, we did that at a spread of 200. Those have tightened about 20 to 25 basis points. So, we've seen some of the benefits of all the hard work that everyone's doing here flow through.

Timothy Doherty: So, right now, you saw us, as we talked about earlier, put in the commercial paper program. That's really just an alternative to our revolver. We do not view that as incremental capital, and that's not how we're funding the business long-term. I think on a long-term basis, what you've seen us do over the years is go to the public and private debt markets. So, right now, our bonds that we issued back in February, we did that at a spread of 200.

Brett: Hey, it's Brett.

Brett: So, right now, you saw...

Brett: As we talked about earlier, put in the commercial paper program, that's really just an alternative to a revolver.

Speaker Change: We do not view that as incremental capital, and that's not how we're funding the business long-term. I think on a long-term basis...

Speaker Change: What you've seen us do over the years is go to the...

Speaker Change: public and private debt markets. So right now, our bonds that we issued back in February , we did that at a

Timothy Doherty: Those have tightened about 20 to 25 basis points. So, we've seen some of the benefits of all the hard work that everyone's doing here flow through. We're still focused on getting Fitch over the hump to get that second A rating.

Speaker Change: Spread of 200. Those have tightened about 20 to 25 basis points.

Speaker Change: So we've seen some of the benefits of all the hard work that everyone's doing here flow through. We're still focused on, you know, getting Fitch over the hump to get that second A rating. We think that will provide additional benefit as well.

Brett Asnas: We're still focused on, you know, getting fit over the hump to get that second A rating. We think that will provide additional benefit as well. Right now, those 10-year bonds trade close to 6%. If you looked at where the 30-year would be in terms of both where the treasury market is as well as from a spread basis, that gets you into the mid-sixes. And where you've seen us originate here recently, you know, over 7% yield. We're creating some nice accretion. So, I think it'll be a mix again of both public and private markets. It could be flat coupons.

Timothy Doherty: We think that will provide additional benefit as well. Right now, those 10-year bonds trade close to 6%. If you looked at where the 30-year would be in terms of both where the Treasury market is as well as from a spread basis, that gets you into the mid-sixes. And where you've seen us originate here recently, at over 7% yield, we're creating some nice accretion. So, I think it'll be a mix again of both public and private markets.

Speaker Change: Right now those 10-year bonds trade close to 6%. If you looked at, you know, where the 30-year would be in terms of both where the Treasury market is as well as from a spread basis, you know, that gets you into the mid-sixes.

Speaker Change: And where you've seen us originate here recently, you know, over a 7% yield, we're creating some nice accretion. So I think it'll be a mix again of both public and private markets.

Brett Asnas: It could be the step-free coupons that you've seen us do in the past. But right now, you know, it certainly feels like where the curve has been and the steepening that's existed, which, you know, when we look to the two-year and 10-year end versus today, you know, that certainly has come down a bunch. It's 40 basis points difference at the year-end. Today, it's about 20 basis points. And I think that is also going to be very important as we move forward and think about our hedging strategy. So, we're constantly thinking about locking in margins and creating some nice accretion for our earnings profile.

Speaker Change: It could be flat coupons, it could be the Step 3 coupons that you've seen us do in the past.

Timothy Doherty: It could be flat coupons. It could be the step-free coupons that you've seen us do in the past. But right now, it certainly feels like where the curve has been and the steepening that's existed, which when we look at the 2-year and 10-year at year-end versus today, that certainly has come down a bunch. It was 40 basis points difference at year-end. Today, it's about 20 basis points. And I think that is also going to be very important as we move forward and think about our hedging strategy. So, we're constantly thinking about locking in margins and creating some nice accretion for our earnings profile.

Speaker Change: But right now, you know, it certainly feels like where the curve has been and the steepening that's existed, which...

Speaker Change: You know, when we look to the two-year and ten-year, at year-end, versus today...

Speaker Change: You know that that certainly has come down a bunch. It was 40 basis points difference at the year-end. Today it's about 20 basis points.

Speaker Change: And I think that is also going to be very important as we move forward and think about our hedging strategy. So we're constantly thinking about locking in margins and creating some nice accretion for our earnings profile.

Brett Asnas: Okay, got it.

Stephen Albert Laws: Okay, I got it. Thank you. And then, just a follow-up question is, as it relates to just these multifamily transactions, you seem to be doing a lot of, can you talk about just, you know, it sounded like a bunch were affordable, but just kind of where the sweet spot is, is it with more affordable type projects? Or is it terming out a lot of the development that's getting delivered these days in multifamily? Or is it class B, just trying to understand You know, the Capstack solution fits most.

Brett Asnas: Thank you.

Brett Asnas: And then just follow-up question is, is it relates to just these multi-family transactions? You seem to be doing a lot of. Can you talk about just, you know, it sounded like a bunch were affordable, but just kind of where the sweet spot is. Is it with more affordable type projects or is it turning out a lot of the development that's getting delivered these days in multi-family or is it class B? Just trying to understand where your cap stack solution fits most.

Speaker Change: Okay, got it, thank you. And then, just follow-up question is, as it relates to just these multi-family transactions you seem to be doing.

Speaker Change: a lot of

Speaker Change: Can you talk about just, you know, it sounded like a bunch were affordable, but just kind of where the sweet spot is. Is it with more affordable type projects or is it terming out a lot of the development that's getting delivered these days in multifamily or is it class B? Just trying to understand where you're...

Speaker Change: You know, Capstack Solution fits most.

Timothy Doherty: Yeah, this is Tim again. It's, look, it spans all multi-family, whether it be, you know, the age of these. It's really based on location of those multi-family and the drivers of, you know, where demographics are moving. So, you see us, you know, closing deals right now, a lot in the Sun Belt. That's where a lot of transactions are occurring in our West. The benefits of the ground lease, is you're seeing across, you know, across, whether it be market rate, affordable, or any other multi-family, remains the same, right, slow cost of capital that we provide incremental proceeds that increase the liquidity for the sponsor, as well as blended cost of capital goes down.

Brett Asnas: Yeah, this is Tim again. It spans all multifamily, whether it be, you know, the age of these; it's really based on the location of those multifamily and the drivers of, you know, where demographics are moving. So you see us, you know, closing deals right now in the Sunbelt. That's where a lot of transactions are occurring out west. The benefits of the ground lease, as you're seeing across whether it be market rate, affordable, or any other multifamily remain the same, right?

Speaker Change: Yeah, this is Tim again. Look, it spans all multifamily, whether it be...

Tim: You know, the age of these is really based on location of those multifamily and the drivers of, you know, where demographics are moving. So you see us, you know, closing deals right now a lot in the Sun Belt. That's where a lot of transactions are occurring out west.

Speaker Change: The benefits of the ground lease, as you're seeing across, whether it be market rate, affordable, or any other multifamily, remains the same, right? It's low cost of capital that we provide, incremental proceeds that increase the liquidity for the sponsor, as well as blended cost of capital goes down. So, we're seeing activity both on the development side, recapitalization side, and even acquisitions.

Brett Asnas: It's the low cost of capital that we provide, incremental proceeds that, you know, increase the liquidity for the sponsor as well as the blended cost of capital goes down. So, you know, we're seeing activity both on the development side, the recapitalization side, and even acquisitions in the multifamily space. So, you know, very positive momentum in that, in multifamily.

Timothy Doherty: So, you know, we're seeing activity both on the development side, recapitalization side, and even acquisitions in the multi-family space. So, you know, very positive momentum in that multi-family.

Tim: in the multifamily space. So, you know, very positive momentum in that in multifamily.

Jay S. Sugarman: All right, so I mean where does the sponsor, like what is the proceeds to the sponsor on their leasehold debt?

Timothy Doherty: I mean, where does the sponsor, like, what are proceeds to the sponsor on their leasehold debt? So, you know, typically, you know, the people that are coming to us are going to our stay with, you know, banks or the agencies to finance their project, depending on where it is and its life cycle. And those institutions, and they see the, you know, the safehold, modern ground lease there are, you know, sizing based on credit metrics they would use for fee simple cash flows because they know that our lease provides them. The lender also with liquidity to be able to be recapitalized in the transaction.

Speaker Change: Alright, so I mean where does the sponsor, like what are proceeds to the sponsor on their leasehold debt?

Kenneth S. Lee: So, you know, typically, the people that are coming to us are going to, or are staying with, banks or the agencies to finance their project, depending on what and where it is in its lifecycle. And those institutions, and they see that, you know, the Safehold modern ground lease there is, you know, sizing based on credit metrics they would use for fee simple cash flows because they know that, you know, our lease provides them, the lender, also with liquidity to be able to be recapitalized in the transaction.

Speaker Change: So, you know, typically, you know, the people that are coming to us are going to, are staying with, you know, banks or the agencies to finance their project, depending on what

Speaker Change: Safehold is a modern ground lease. They are sizing based on credit metrics they would use for fee simple cash flows. They know that our lease provides

Speaker Change: The Lender, also with Liquidity, to be able to be recapitalized in the transaction. So that's one of the benefits that we brought to the market here, is spending a lot of time

Timothy Doherty: So, look, that's one of the benefits that we brought to the market here: spending a lot of time with everyone in the cap stock, in this case, the lenders, to make sure that they have everything that they need. That provides them the liquidity that they require. Therefore, the credit metrics they can provide to the sponsor. Okay.

Kenneth S. Lee: So that's one of the benefits that we brought to the market here is spending a lot of time with everyone in the cap stack, in this case, the lenders, to make sure that they have everything that they need, that provides them with the liquidity that they require, and therefore, the credit metrics that they can provide to the sponsors. Okay, thank you. Our next question is from Mitch.

Speaker Change: With everyone in the cap stack, in this case the lenders, to make sure that they have everything that they need that provides them the liquidity that they require, therefore the credit metrics they can provide to the sponsor.

Speaker Change: Okay, thank you.

Mitch Germain: Our next question is from Mitch Germain with Citizens JMP. Your line is nice. Good morning.

Jay S. Sugarman: Thank you. Our next question is from Mitch Germain with Citizens JMP. Your line is live. Good morning.

Speaker Change: Thank you. Our next question is from Mitch Germain with Citizens JMP. Your line is live.

Timothy Doherty: I'm curious about the new sponsors that you did deals with this quarter, and how long did it take from introduction for the relationship to harvest into a transaction. Hey, Mitch, Tim. Great question. That's something we pay attention to a lot as we, you know, try to expand our customer base. It varies. Right. I mean, it depends on what the sponsor is, where they are in the cycle of some of their pipeline themselves. You know, we reach out to a lot of different clients, and there are different parts of their investing window, but look, it can range.

Mitchell Bradley Germain: Good morning. I'm curious about the new sponsors that you did deals with this quarter and how long did it take from introduction for the relationship to harvest into a transaction?

Kelly Whelan Kunath: Hey Mitch, Tim. Great question. That's something we pay attention a lot to as we, you know, try to expand our customer base. It varies, right? I mean, it depends on what the sponsor is, where they are in the cycle of some of their pipeline themselves. You know, we reach out to a lot of different clients, and there are different parts of their investing window. But look, it can range.

Speaker Change: Great question. That's something we pay attention a lot to as we, you know, try to expand our customer base.

Speaker Change: It varies, right? I mean, it depends on what the sponsor is, where they are in the cycle of some of their pipeline themselves.

Speaker Change: You know, we reach out to...

Speaker Change: to a lot of different clients, and there are different parts of their investing window. But look, it can range. Some of these relationships we've started from five-plus years ago, and we're getting transactions done with now. You know, some of this is...

Timothy Doherty: Some of these relationships we started five plus years ago, and we're getting transactions done with them now. You know, some of these are clients that have heard what we've done with other, other ones of their peers, and they want to come in and see how it can work. And those, those relationships tend to bear fruit a little bit quicker. You're starting to see that window narrow as, obviously, we've done, you know, over 140 transactions. You're starting to see that window of time from initial conversation to execution of a first transaction. So it varies quite a bit, but I would say it's, it's, it's narrowed as we've matured as well.

Timothy Doherty: Some of these relationships we've started from five plus years ago, and we're getting transactions done with now. You know, some of this is replic clients that have heard what we've done with other other ones of their peers, and they want to come in and see how it can work, and those relationships tend to bear fruit a little bit quicker. You're starting to see that window narrow, as obviously we've done over 140 transactions. You're starting to see that window of time from initial conversations, execution of a first transaction. So it did vary quite a bit, but I would say it's narrowed as we've matured as well.

Speaker Change: We've had clients that have heard what we've done with other ones of their peers and they want to come in and see how it can work and those relationships.

Speaker Change: We tend to bear fruit a little bit quicker. You're starting to see that window narrow as obviously we've done over 140 transactions. You're starting to see that window of time from initial conversation to execution of a first transaction. So it varies quite a bit, but I would say it's narrowed as we've matured as well.

Timothy Doherty: Thank you.

Matthew Philip Howlett: Thank you. Our next question is coming from Harsh Hemnani on Green Street. Your line is live.

Harsh Hemnani: Our next question is coming from Harsh Hemnani with Green Street. Your line is live. Thank you. Just following up on the pipeline for a second, so you mentioned a lot of the activity and the liquidity continues to be in multi-family. And you know, against that backdrop of maybe tightening capric in the space, rates, rates incrementally coming down, you know, it feels like origination yields on multi-family could come in a little bit. Against that backdrop, maybe if you were to underwrite some other property types, you mentioned hospitality in office. How much additional yield do you think you could pick up on those property types?

Speaker Change: Thank you.

Speaker Change: Our next question is coming from Harsh Hemnani with Green Street. Your line is live.

Timothy Doherty: Thank you. I'm just following up on the pipeline for a second. So you mentioned that a lot of the activity in the liquidity continues to be multi-family. And, you know, against that backdrop of maybe tightening cap rates in the space, rates, rates are incrementally coming down, you know, it feels like. Origination yields on multifamily could come in a little bit. Against that backdrop, maybe if you were to underwrite some other property types, you mentioned hospitality and office. How much additional yield do you think you could pick up on those property types? Could that help sustain sort of the mid-7s all-in yields that you're seeing now?

Harsh Hemnani: Thank you. Just following up on the pipeline for a second. So you mentioned a lot of the activity in the liquidity continues to be multi-family. And, you know, against that backdrop of maybe tightening cap rates in the space, rates, rates incrementally coming down, you know, it feels like.

Speaker Change: Origination yields on multifamily could come in a little bit.

Speaker Change: Against that backdrop, maybe if you were to underwrite some other property types, you mentioned hospitality and office. How much additional yield do you think you could pick up on those property types? Could that help sustain sort of the mid-7s all-in yields that you're seeing now?

Timothy Doherty: Could that help sustain sort of the mid-7s all-in yields that you're seeing now? Yes, I think that the large part is that, you know, our cost of capital still remains the cheapest in the cap stock, no matter which asset class you're discussing right from the multi-family side. Obviously, hospitality and office cap rates are much wider historically and definitely now in the cap rate levels. The cap that spreads have compressed in the multi-family space in terms of the cost of debt. However, you're still seeing cap rates in the mid-5s. It's not drifting higher on a consistent basis.

Jay S. Sugarman: Yes, I think that the big part is that, you know, our cost of capital still remains the cheapest in the cap stack, no matter which asset class you're discussing, right, on the multifamily side. Obviously, hospitality and office cap rates are much wider, historically, and definitely now, in terms of cap rate levels. The spreads have compressed in the multifamily space in terms of the cost of debt. However, you're still seeing cap rates in the mid-fives, if not drifting higher, on a consistent basis.

Speaker Change: Yes, I think that the large part is that

Speaker Change: You know our cost of capital still remains the cheapest in the cap stack no matter which asset class you're you're discussing right from the multifamily side obviously Hospitality and office cap rates are much wider

Speaker Change: historically and definitely now in the cap rate levels.

Speaker Change: The spreads have compressed in the multi-family space in terms of the cost of debt, however, you're still seeing cap rates in the mid-fives.

Timothy Doherty: Yes, there's a couple spots where you've seen some tighter. There's usually an instance of why that occurred. So we're still, you know, capturing the spreads on the multi-family, hospitality, and office shore; there'll be a little extra spread there.

Speaker Change: It's not drifting higher on a consistent basis. Yes, there's a couple.

Speaker Change: spots where you've seen some tighter, there's usually an instance of why that occurred. So we're still, you know, as you see, capturing

Jay S. Sugarman: Yes, there's a couple spots where you've seen some tighter, but there's usually an instance of why that occurred. So we're still, you know, as you see, capturing the spreads on the multifamily. Hospitality and office, sure, there'll be a little extra spread there. However, for us, it's, you know, really, you know, the attachment point and the coverage that we're really focused on, and on those, on every transaction, but those transactions, making sure that we're, you know, providing an efficient cost of capital but also the right attachment point for ourselves.

Speaker Change: The spreads on the multifamily hospitality and office, sure, there'll be a little extra spread there, however, for us, it's, you know, really, you know, the attachment point and the coverage that we're really focused on and on those, on every transaction, but those transactions, making sure that we're, you know, providing an efficient cost of capital, but also the right attachment point for ourselves.

Harsh Hemnani: However, for us, it's, you know, really the attachment point and the coverage that we're really focused on on those on every transaction, but those transactions, making sure that we're providing an efficient cost of capital, but also the right attachment point for ourselves. Got it.

Pearse Hoffmann: Got it. And then could you maybe elaborate a little bit on the thoughts behind the legal reorganization of the legal team? It seems like that was a big part of helping Safehold grow to this point in terms of having a standardized ground lease contract, bringing in leasehold lenders and making them comfortable with the terms. Any thought process behind, maybe, such a big driver of helping the company scale to where it is today and taking that function and outsourcing it? Any thoughts behind that? Mr. Harsh's J.

Brett Asnas: And then could you maybe elaborate a little bit on the thoughts behind the legal reorganization of the legal team?

Speaker Change: Recorded.

Speaker Change: And then could you maybe elaborate a little bit on the thoughts behind the legal reorganization of the legal team?

Jay Sugarman: It seems like that was a big part of helping Safehold growth at this point in terms of having a standardized ground lease contract, bringing in these old landers and making them comfortable with the terms. Any talk process behind maybe such a big driver of helping the company scale better this day and taking that function and outsourcing it or any thoughts behind that. Your heart says, Jay, so as you know, we had a lot of work to do to really build this industry, and we wanted to be the leader. So we spent a lot of time getting the legal structures right and helping the market get comfortable with this modern ground lease format, but I think what we realized is we could run that a little more efficiently now that we're a more mature company and we're running more of a steady state business.

Speaker Change: It seems like that was a big part of helping Safehold grow to this point in terms of...

Speaker Change: Having a standardized ground lease contract, bringing in leasehold lenders and making them comfortable with the terms.

Speaker Change: Any thought process behind, maybe such a big driver of helping the company scale to where it is today and taking that function and outsourcing it, any thoughts behind that?

Operator: So, as you know, we had a lot of work to do to really build this industry, and we wanted to be the leader. So we spent a lot of time getting the legal structures right and helping the market get comfortable with this modern ground lease format. But I think what we realized is we could run that a little more efficiently now that we're a more mature company and we're running more of a steady state business.

Speaker Change: So, as you know, we had a

Speaker Change: A lot of work to do to really build this industry, and we wanted to be the leader, so we spent a lot of time getting the legal structures right and helping the market get comfortable with this modern ground lease format.

Speaker Change: Yeah, I think what we realized is we could run that a little more efficiently now that we're a more mature company and we're running more of a steady state business.

Jay Sugarman: We've kept a lot of those resources in house, but we've also been able to get the same benefit with a little less expense by sharing some of those resources and outsourcing them. So I think it kept the best of both worlds. We got the intellectual property and kept that in house, but we also have the resources of some outside farms now that can lag in when we need them, but not sit on our P&L 100% of the time.

Operator: We've kept a lot of those resources in-house, but we've also been able to get the same benefit with a little less expense by sharing some of those resources and outsourcing them. So I think it keeps the best of both worlds. We got the intellectual property and kept that in-house, but we also have the resources of some outside firms now that can step in when we need them but not sit on our P&L 100% of the time.

Speaker Change: We've kept a lot of those resources in house, but we've also been able to

Speaker Change: You know, get the same benefit with a little less expense.

Speaker Change: by sharing some of those resources.

Speaker Change: and outsourcing them.

Speaker Change: So I think it kept the best of both worlds. We got the intellectual property and kept that in-house, but we also have the resources of some outside firms now that can leg in when we need them, but not sit on our P&L 100% of the time.

Jay Sugarman: Gordon, thank you.

Operator: Thank you.

Speaker Change: Got it. Thank you.

Ravi Vaidya: Our next question is coming from Hendo Sanjuice, Wave, Mizzouple. Your line is life.

Operator: Thank you. Our next question is coming from Haendel Sanjuste with Missouho. Your line is live.

Speaker Change: Thank you. Our next question is coming from Haendel Sanjuste with Mizuho. Your line is live.

Timothy Doherty: Hi, good morning. This is Ravi Vaidya. I'm the line for Handel. I hope you guys are doing well. Just wanted to follow up on another question I was asked earlier. How do you weigh the risk and opportunity of pursuing affordable multi-heading ground leases for traditional ones? Are you requiring a higher return? And is there any noticeable difference in any of the deal terms or market rate? Any risk market rate multi-family?

Operator: Hi, good morning. This is Ravi Vaidya on the line for Haendel.

Operator: I hope you guys are doing well. Just wanted to follow up on another question that was asked earlier. How do you weigh the risk and opportunity of pursuing affordable multi-housing ground leases versus traditional ones? Are you requiring a higher return? And is there any noticeable difference in any of the deal terms or market rate, any versus the market rate on multifamily?

Speaker Change: Hi, good morning. This is Ravi Vaidya on the line for Haendel. I hope you guys are doing well. Just wanted to follow up on another question that was asked earlier.

Speaker Change: How do you weigh the risk and opportunity of pursuing affordable multi-housing ground leases versus traditional ones? Are you requiring a higher return and is there any noticeable difference in any of the deal terms or market rate, any versus market rate on multifamily?

Timothy Doherty: Ravi, Tim, I guess the quick answer is not that big of a difference in terms of how we're underwriting those transactions. At the end of the day, we're looking at what the cash flow that can be generated from those assets. Again, the location of those assets and the path of growth of the area those are in. These are in-fill well located assets that, as you probably know, affordable is needed across the country. And the cash flows that these can generate allow us to come in and help the sponsor to provide the ground lease with the low-cost capital.

Operator: Hey, Ravi. It's Tim.

Tim: Hey Robbie, it's Tim.

Tim: I guess the quick answer is there's is not that big of a difference right in terms of how we're underwriting those transactions at the end of the day we're looking at what the cash flow that can be generated from those assets again the location of those assets in the path of growth

Tim: These are infill, well-located assets that, as you probably know, affordable as needed across the country, and the cash flows that these can generate allow us to come in and help the sponsor to provide the groundless with the low-cost capital. So I think that the short answer here is that our underwriting remains largely the same. There are nuances.

Operator: I guess the quick answer is there's not that big of a difference, right, in terms of how we're underwriting those transactions. At the end of the day, we're looking at the cash flow that can be generated from those assets. Again, the location of those assets and the path of growth of the area those are in. These are infill, well-located assets that, as you probably know, are affordable as needed across the country.

Timothy Doherty: I think the short answer here is that our underwriting remains largely the same. There are nuances to every asset class, structuring. But the end of the day, we're focused on the cash flow generation and what percentage of that cash flow should be utilized to pay the ground rent. I think it's fair to say occupancy obviously very high in that asset class. And I would say generically loaned loan to cost is a little bit lower than straight multi-family.

Tim: To every asset class and structuring, but at the end of the day, we're focused on the cash flow generation and what percentage of that cash flow should be utilized to pay the ground rent.

Operator: I think it's fair to say occupancy is obviously very high in that asset class, and I would say, generically, loan-to-cost is a little bit lower than straight multifamily.

Operator: And the cash flows that these can generate allow us to come in and help the sponsor to provide the ground with low-cost capital. So I think the short answer here is that our underwriting remains largely the same. There are nuances to every asset class and structuring, but at the end of the day, we're focused on the cash flow generation and what percentage of that cash flow should be utilized to pay the ground rent, I think it's fair to say.

Speaker Change: I think it's fair to say occupancy, obviously, very high in that asset class. And I would say generically, loan to cost is a little bit lower than straight multifamily.

Timothy Doherty: Thank you. That's helpful.

Operator: Thank you. That's helpful. Just, just one more here.

Timothy Doherty: Just one more here. Can you, can you remind us again about how, how do you decide which acquisitions go on, on balance sheet, which one goes with the JV? Are there any, are there any asset classes or transactions that are restricted when partnering up with you or JV? Yeah, the construct was originally put in place where the JV has first look, so that construct is still in place here for another quarter or so. There's nothing specific excluded. There are some metrics, though, where if they don't fit those metrics, they're probably not going to get in the JV.

Speaker Change: Thank you, that's helpful. Just one more here. Can you remind us again about how do you guys decide which acquisitions go on balance sheet and which one goes into the JV? Are there any asset classes or transactions that are restricted when partnering up with your investors?

Speaker Change: Thank you. Thank you, Jay.

Operator: Can you remind us again about how you decide which acquisitions go on the balance sheet, which ones go into the JV? And are there any asset classes or transactions that are restricted when partnering up with your JV?

Speaker Change: Yeah, the the construct was originally put in place where the JV has first look.

Operator: Yeah, the construct was originally put in place where the JV has first look. So that construct is still in place here for another quarter or so. There's nothing specific excluded. There are some metrics, though, where if they don't fit those metrics, they're probably not going to get in the JV. But I think those were market-dependent.

Speaker Change: There's nothing specific excluded. There are some metrics, though, where if they don't fit those metrics, they're probably not going to get in the JV. But I think those were market-dependent.

Timothy Doherty: But I think those were market dependent, and so far it's been a really good relationship.

Operator: You know, so far, it's been a really good relationship.

Speaker Change: You know, so far it's been a really good relationship.

Speaker Change: Got it, thank you.

Stephen Laws: Our next question is coming from Stephen Lowes with Raymond James. Your line is nice. Good morning.

Operator: Thank you. Our next question is coming from Stephen Laws with Raymond James. Your line is live. Good morning.

Speaker Change: Thank you.

Speaker Change: Our next question is coming from Stephen Laws with Raymond James. Your line is live.

Operator: Can you talk a little bit about, you know, does the commercial paper program change anything with regard to, you know, where you'll operate from a leverage standpoint? And given the capacity in the JV, you know, running at $1.9 debt to equity here, you know, how do you think about your total investment capacity before you need to raise additional equity capital?

Brett Asnas: Can you talk a little bit about, you know, this is the commercial paper program changed anything with regards to, you know, where you'll operate from a leverage standpoint and given the capacity and the JV. You know, running at one nine cadet equity here, you know, how do you think about your total investment capacity before you need to rate additional equity capital.

Stephen Albert Laws: Thank you. Have a good morning.

Stephen Albert Laws: Can you talk a little bit about...

Stephen Albert Laws: You know, does the commercial paper program change anything with regards to, you know, where you'll operate from a leverage standpoint? And given the capacity in the JV, you know, running at 1.9, kind of debt to equity here, you know, how do you think about your total investment capacity before you need to rate additional equity capital?

Brett Asnas: Hey Stephen, it's Brett. So, from a commercial paper standpoint, we really don't think of it as additional leverage or additional liquidity. It has a full dollar-for-dollar backstop from the revolver. So we're really looking at it as an alternative from a cost savings perspective. So instead of paying a higher spread on our credit line, if we're able to utilize that market and see the depth of that market and issue at different tenors, we'll see what our success is moving forward, but we think there's incremental savings there. So, from a strategy standpoint, there is no change. We just view it as an alternative.

Operator: So, from a commercial paper standpoint, we really don't think of it as additional leverage or additional liquidity. It has a full dollar-for-dollar backstop from the revolver.

Brett: Hey Steven, it's Brett.

Brett: So, from a commercial paper standpoint, we really don't think of it as additional leverage or additional liquidity. It has a full dollar-for-dollar backstop from the revolver. So we're really looking at it as an alternative.

Operator: So, we're really looking at it as an alternative from a cost savings perspective. So, instead of paying a higher spread on our credit line, if we're able to utilize that market and see the depth of that market and issue at different tenors, we'll see what our success is moving forward. But we think there's incremental savings there. So from a strategy standpoint, there's no change. We just view it as an

Brett: From a cost savings perspective. So instead of paying a higher spread on our credit line, if we're able to utilize that market and see the depth of that market and issue at different tenors,

Brett: We'll see what our success is moving forward, but we think there's incremental savings there. So from a strategy standpoint,

Operator: In terms of our leverage profile, we ended the quarter at 1.89 times. You know, you're right in terms of the joint venture and the dollars that are deployed right now based on, you know, our math. It's about every hundred million dollars is about 0.05 turns of leverage. So that takes us through another couple hundred million dollars of deployment. Obviously, there are other levers that we have in terms of being able to utilize both the debt and equity markets.

Brett Asnas: In terms of our leverage profile, we ended the quarter at 1.89 times. You know, you're right in terms of the joint venture and the dollars that are deployed right now based on, you know, our math. It's about every hundred million dollars is about 0.05 terms of leverage. So that takes us through another couple hundred million dollars of employment. Obviously, there's other levers that we have in terms of being able to utilize both the debt and equity markets. So we're going to look to the pipeline, look to our current liquidity, and continue to figure out how best to fund the business.

Brett: There is no change. We just view it as an alternative. In terms of our leverage profile, we ended the quarter at 1.89 times.

Speaker Change: You know, you're right in terms of the joint venture and the dollars that are deployed right now based on, you know, our math.

Speaker Change: It's about every $100 million is about 0.05 turns of leverage, so that takes us through another couple hundred million dollars of deployment. Obviously, there's other levers that we have in terms of being able to utilize both the debt and equity markets.

Operator: So we're going to look to the pipeline, look to our current liquidity, and continue to figure out how best to fund the business. We do think that, you know, the rate environment and what the Fed has indicated here recently, obviously meeting tomorrow as well, are really important. But it feels like, you know, the market's pricing and cuts will begin in September. And I think from a hedging standpoint, over the last year or two, we've put in some really valuable economic hedges.

Speaker Change: So we're going to...

Speaker Change: Look to the pipeline, look to our current liquidity, and continue to figure out how best to fund the business.

Jay Sugarman: We do think that, you know, the rate environment and what the Fed has indicated here recently, obviously, meeting tomorrow as well is really important, but it feels like, you know, the market's pricing and cuts beginning in September. And I think from a hedging standpoint over the last year too, we've put in some really valuable economic hedges. But moving forward, as we, you know, enter the second half of the year here and then into 2025, I think, you know, rate cuts should be a benefit for our business both from an earnings profile standpoint, originations and pipeline, and just from a valuation standpoint, as people get clarity on where the rate environment is.

Speaker Change: We do think that, you know, the rate environment, and what the Fed has indicated here recently, obviously meeting tomorrow as well is really important, but it feels like, you know, the markets, pricing, and cuts.

Speaker Change: Beginning in September . And I think from a hedging standpoint, over the last year or two, we've put in some really valuable economic hedges. But moving forward, as we enter the second half of the year here, and then into 2025,

Operator: But moving forward as we enter the second half of the year here and then into 2025, I think, you know, rate cuts should be a benefit for our business, both from an earnings profile standpoint, originations and pipeline, and just from a valuation standpoint, as people get clarity on where the rate environment is.

Speaker Change: I think, you know, rate cuts should be a benefit for our business, both from an earnings profile standpoint, originations and pipeline, and just from a valuation standpoint, as people get clarity on where the rate environment is.

Jay Sugarman: Thanks for that. And as a follow up, Jay, could you, could you give us an update on the carrots, you know, any, but they're as far as potential investors or liquidity event, or is that really something that you're looking to, you know, accelerate originations, get the UCA moving higher again before you look to do anything with the carrot side of the business. Yeah, that's spot on Steam. It's, it's really going to follow the growth of the origination side. That external growth component is obviously a big component of Carrot's future value.

Operator: Thanks for that. And as a follow-up, Jay, could you give us an update on the carrots? You know, any update there as far as potential investors or a liquidity event? Or is that really something that you're looking to accelerate originations, get the UCA moving higher again before you look to do anything with the carrot side of the business?

Speaker Change: Thanks for that. And as a follow-up, Jay, could you...

Speaker Change: Could you give us an update on the...

Speaker Change: Carrots, you know, any update there as far as potential investors or liquidity event or is that really something that you're looking to, you know, accelerate originations, get the UCA moving higher again before you look to do anything with the carrot side of the business?

Operator: Yeah, that's spot on, Stephen. It's really going to follow the growth of the origination side. That external growth component is obviously a big component of C.A.R.E.'s future value.

Speaker Change: Yeah, that's spot-on, Stephen. It's really going to follow the growth of the origination side. That external growth component is obviously a big component of C.A.R.I.D.'s future value, and so I think once we have a really solid story there and it feels like we're moving...

Operator: And so I think once we have a really solid story there and it feels like we're moving to a better environment, I think you'll see us pick up our activity on the carrot side. We've had, you know, quite a bit of interest. We have not really pursued it until we can tell the whole story the way we want to tell it. But it's it's, you know, it's a when, not if so. It will come as soon as we feel like the origination side is delivering a really clear picture of how this business is going to grow over time.

Jay Sugarman: And so I think once we have a really solid story there and it feels like we're moving, you know, to a better environment, I think you'll see us pick up our activity on the carrot side. We've had, you know, quite a bit of interest. We have not really pursued until we can tell the whole story the way we want to tell it. But it's, you know, it's a, it's a when not if, so. It will come as soon as we feel like the origination side is delivering a really clear picture of how this business is going to grow over time.

Speaker Change: You know, to a better environment, I think you'll see us pick up our activity on the carrot side. We've had, you know, quite a bit of interest. We have not really pursued until we can tell the whole story the way we want to tell it. But it's, you know, it's a when, not if.

Speaker Change: It will come as soon as we feel like the origination side is delivering a really clear picture of how this business is going to grow over time.

Operator: Great. I appreciate the comments this morning.

Jay Sugarman: Great.

Jay Sugarman: Appreciate the comments this morning. Thank you.

Speaker Change: Great. Appreciate the comments this morning.

Operator: Thank you. Our next question is coming from Kenneth Lee with RBC Capital Markets. Your line is live. Hey, good.

Kenneth Lee: Our next question is coming from Kenneth Lee with RBC Capital Markets.

Speaker Change: Thank you. Our next question is coming from Kenneth Lee with RBC Capital Markets. Your line is live.

Jay Sugarman: Your line is Hey, good morning. Thanks for taking my question, somewhat of a follow-up from the previous question. At a high level, just given the outlook for potential rate reduction, how quickly do you think this could potentially further catalyze real estate transaction activity in the markets? Thanks. I would say, look, visibility and clarity produce, you know, transaction flow. And that's what we're seeing, I think, in the last couple of weeks, as some of the reports have come out and people have a lot more visibility. You know, Brett's comment about rate reductions coming in the market that are pretty high for our ability at this point; that provides people with the confidence to go out and execute on transactions, both on the debt and the equity side.

Operator: Hey, good morning. Thanks for taking my question. Somewhat of a follow-up from the previous question. At a higher level, just given the outlook... [inaudible] to further catalyze real estate transaction activity.

Kenneth S. Lee: Hey, good morning. Thanks for taking my question. Somewhat of a follow-up from the previous question. At a higher level, just given the outlook for...

Kenneth S. Lee: Potential rate reductions. How quickly do you think this could potentially further catalyze real estate transaction activity in the market?

Speaker Change: Buckets. Thanks.

Speaker Change: Go ahead, Tim, you're seeing it real-time. I would say, look, visibility and clarity produce transaction flow. And that's what we're seeing, I think, in the last couple weeks as some of the reports have come out and people have a lot more visibility.

Speaker Change: You comment about rate reductions coming in the market that are pretty high probability at this point. That provides people with the confidence to go out and execute on transactions, both on the debt and the equity side. So what are indicators? We have...

Jay Sugarman: So what are indicators? We have, we can make sure we keep in constant dialogue with the market and all the participants. It feels like there's a good swell of transaction flow starting up. It's sort of a three-part cycle. If they stop raising, then they say they're going to cut, and then they actually do cut. And so I think everybody wants to see that last piece fall into place, but as Tim said, definitely a shift in mentality has taken place. But I think there's one more shoe to drop here before we really see the markets begin to accept the opportunity ahead of them.

Speaker Change: We make sure we keep in constant dialogue with the market and all the participants. It feels like there's a good swell of transaction flow starting up.

Operator: It's sort of a three-part cycle. They stop raising, then they say they're going to cut, and then they actually do cut.

Speaker Change: It's sort of a three-part cycle. They stop raising, then they say they're going to cut, and then they actually do cut. And so I think everybody wants to see that last piece fall into place. But as Tim said, definitely.

Operator: And so I think everybody wants to see that last piece fall into place. But, as Tim said, definitely. A shift in mentality has taken place, but I think there's one more shoe to drop before we really see the markets begin to accept the opportunity ahead of them. And so we'll see if that happens in September.

Tim: A shift in mentality has taken place, but I think there's one more shoe to drop here before we really see the markets begin to accept the opportunity ahead of them.

Jay Sugarman: And so we'll see; we'll see if that comes in September. Gotcha. Very helpful there.

Tim: And so we'll see if that comes in September .

Operator: Gotcha. Very helpful there. And then, in terms of the new origination economic yields, I saw that you got 7.5% on the recent deals. Any change to the potential outlook or the spread that you could expect over risk-free rates there? Thanks.

Brett Asnas: And then, in terms of the new origination economic yields, saw that you got the 7.5% on the recent deals. Any change to the potential outlook or the spread that you could expect over risk for your rates there? Thanks. Sure. As you probably can guess, the second quarter had some pretty decent peaks and rates when we close some of those transactions. So if you adjusted to where rates are today, those would be originally slightly lower numbers, still close to over 7%. But really for us, as we're based off the 30-year Treasury, so if you're using roughly somewhere in the 75, 85 over the 30-year Treasury is on average, that's where we'd be originating.

Speaker Change: Gotcha. Very helpful there. And then in terms of the new origination economic yields, saw that you got the 7.5% on the recent deals. Any change to the potential outlook or the spread that you could expect over risk-free rates there? Thanks.

Operator: Sure. As you probably can guess, the second quarter had some pretty decent peaks in rates when we closed some of those transactions. So if you adjusted to where rates are today, those would be originated slightly lower numbers, still close to over 7%. But really, for us, as we're based off the 30-year Treasury, so if you're using roughly somewhere in the 75 to 85 over the 30-year Treasuries on average, that's where we'd be originated. And then obviously, with our 2% bumps, you can get to the ROAs there. So right now, if you close a transaction today, you'd be in the low 7%.

Speaker Change: As you probably can guess, the second quarter had some pretty decent peaks in rates.

Speaker Change: when we closed some of those transactions. So if you, you know, adjusted.

Speaker Change: to where rates are today. Those would be originated slightly lower numbers, still close to over 7%, but really for us it's...

Speaker Change: As we're based off the 30-year Treasury, so if you're using roughly somewhere in the 75 to 85 over the 30-year Treasuries on average, that's where we'd be originating. And then obviously with the inflation, or sorry, with our 2% bumps, you can get to the...

Brett Asnas: And then obviously, with the inflation, or sorry, with our 2% bumps, you can get to the our ways there. So right today, if you close the transaction, you'd be in the low sevens. Gotcha. Very helpful there. Thanks again.

Speaker Change: The ROA is there, so right today, if you close a transaction, you'd be in the low sevens.

Speaker Change: Gotcha. Very helpful there. Thanks again.

Kelly Kunath: Thank you. Our next question is coming from Kelly Kuhnath with Morgan Stanley. Your line is live. Thanks. And hi everyone. I know he's spoken about pipeline and ready to go bit here, but I was just curious. I know we've seen a few things that start with respect to the CRE transaction recovery this year.

Operator: Got you. Very helpful there. Thank you. Our next question is coming from Kelly Kunath with Morgan Stanley. Your line is live. Thanks, and hi, everyone.

Operator: Thank you. Our next question is coming from Kelly Kunath with Morgan Stanley. Your line is live. Thanks, and hi everyone.

Speaker Change: Thank you. Our next question is coming from Kelly Kunath with Morgan Stanley . Your line is live.

Kelly Whelan Kunath: Thanks and hi everyone. I know we've spoken about pipeline and rates a good bit here, but I was just curious, I know we've seen a few fits and starts with respect to the CRE transaction recovery this year.

Timothy Doherty: Curious if you could speak to the importance of macroeconomic conditions, rate cuts, et cetera, to your current pipeline versus a more forward-looking larger recovery. Yeah, Kelly with Tim. You know, I think it kind of goes along with what our response has been on the previous questions. It's all helpful. And as again, people are starting to see the potential for rate reductions. They're just getting more confident in how they can invest, which is leading to more transactions flow. I think in terms of rate reductions. You know, the you've seen a lot on the on the debt side of people going on the floating rate side, slow more flexibility, both on free payment and then central rate reductions.

Operator: Yeah, Kelly, this is Tim. You know, I think it kind of goes along with what our responses have been to the previous questions. It's all helpful. And as, again, people are starting to see the potential for rate reductions, they're just getting more confident in how they can invest, which is leading to more transactions. I think in terms of rate reductions, you know, you're seeing a lot on the debt side of people going on the floating rate side. It's a little more flexibility, both on prepayment and then potential rate reductions. But for us, you know, translation, I think where people are seeing long-term rates settle, our capital is very attractive.

Kelly Whelan Kunath: Yeah Kelly, this is Tim. You know, I think it kind of goes along with what our responses have been on the previous questions. It all is helpful. And as, again, people...

Kelly Whelan Kunath: are starting to see the potential for rate reductions.

Kelly Whelan Kunath: They're just getting more confident in how they can invest, which is leading to more transactions flow, I think, in terms of rate reductions.

Kelly Whelan Kunath: You know, you're seeing a lot on the debt side of people going on the floating rate side. There's a little more flexibility both on prepayment and then potential rate reductions.

Timothy Doherty: And, but for us, you know, translation. I think where people are seeing long-term rates settle, that our capital is very tracked. Thank you.

Kelly Whelan Kunath: Translation, I think where people are seeing long-term rates settle, that our capital is very attractive.

Speaker Change: Got it. Thank you.

Matt Holis: Our next question is coming from Matt Holis with B. Reilly.

Operator: Thank you. Our next question is coming from Matt Howlett with B Reilly. Your line is live.

Speaker Change: Thank you.

Speaker Change: Our next question is coming from Matt Howlett with Be Riley. Your line is live.

Timothy Doherty: Your line is nice. Yeah, thanks. Just to follow up on it, I mean, with the talk of all these due sponsors, remind us just again why your structure is so favorable to a syndicator or real estate investor. The GSEs lend up to about 75-80%; then you're talking about your product worth taking on a mezz product, which isn't an 18. Just walk me through that again so we can hear what the pitch is to the new sponsors. Yes, Matt Tim. Yeah, the agencies are largely debt service coverage restricted right now. So typically I think they're ending up in like the banks as well.

Operator: Yeah, hey, thanks. Just to follow up on, I mean, with the talk of all these new sponsors, remind us just again why your structure is so favorable to a syndicator or a real estate investor. The GSEs lend up to about 75-80%, so then you're talking about your product versus taking on an MES product, which is in the mid-teens. Just walk me through that again so we can hear what the pitch is to the new sponsors.

Matthew Philip Howlett: Yeah, hey, thanks. Just to follow up on, I mean, with the talk of all these new sponsors, remind us just again, you know, why your structure is so favorable to a syndicator or a real estate investor.

Speaker Change: The GSEs land up to about 75-80%, then you're talking about your product, we're staking on a MES product, which is in the mid-teens. Just walk me through that again so we can hear what the pitch is to the new sponsors.

Operator: Yes, Matt, and Tim. Yeah, the agencies are largely debt service coverage restricted right now. So, typically, I think they're ending up like the banks as well. I think everyone's really in the debt service coverage restriction level now versus LTC or V. So, you're seeing those usually come to around 60 percent, give or take 5 percent right now on a fee simple transaction. With us coming in on a normal transaction, typically, we're going to be somewhere, as you see, in that 35-ish percent of a capital stack.

Speaker Change: Yes, Matt, Tim, yeah, the agencies are largely

Speaker Change: [inaudible]

Timothy Doherty: I think everyone's really in the debt service coverage restriction level now versus LTC or V. So you're seeing those usually come to around 60%, give or take 5%, right now on a fee simple transaction with us coming in on a normal way transaction. Typically, we're going to be somewhere, as you see in that, you know, 35% of a capital stack. So the leasehold position, then they'll go to the market for the debt. They're going to see receives you heard earlier. Same credit metrics on the debt side. So typically they're going to get around that 65% or so on the leasehold position, which then restricts the reduces their level of equity in the transaction.

Speaker Change: LTC or V so you're seeing those usually come to around 60% give or take 5% right now on a fee simple transaction. With us coming in on a normal way transaction typically we're going to be somewhere as you see in that you know

Operator: So, the leasehold position, then they'll go to the market for the debt. They're going to receive, as you heard earlier, the same credit metrics on the debt side. Typically, they're going to get around that 65 percent or so on the leasehold position, which then reduces their level of equity in the transaction. So, from that transaction, the total for versus 65 percent on the fee simple, now they're closer to 75, approaching

Speaker Change: 35-ish percent of a capital stack.

Speaker Change: So, the leasehold position, then they'll go to the market for the debt. They're going to receive, as you heard earlier, same credit metrics on the debt side, so typically they're going to get...

Speaker Change: around that 60.

Speaker Change: [inaudible]

Timothy Doherty: So from that transaction, but total for versus 65% the fee simple now they're close to 75, approaching 80. So now they're putting in about 20% equity into the transaction versus on the fee simple. They were putting in 35%. So that reduces their need for mezz, craft, and reduces their level of LP equity they need. And then, in turn, due to our cost of capital and the senior cost of capital, blended is a lower cost than just the fee simple debt. And they also have the incremental proceeds to benefit their stack. We're thinking.

Operator: So, now they're putting in about 20 percent equity into the transaction versus on the fee simple, they were putting in 35 percent. So, that reduces their need for MES, PREF, and reduces their level of LP equity they need. And then, in turn, due to our cost of capital and the senior cost of capital blended, it is a lower cost than just the fee simple debt. And they also have the incremental proceeds to benefit.

Operator: [inaudible]

Speaker Change: So now they're putting in about 20% equity into the transaction versus on the fee simple they were putting in 35%.

Speaker Change: So that reduces their need for MEZ, PREF, and then reduces their level of LP equity they need, and then in turn...

Speaker Change: Due to our cost of capital and the senior cost of capital blended is a lower cost than just the fee simple debt, and they also have the incremental proceeds to benefit their stack.

Jay Sugarman: Go ahead. Well, had to say we also always point out that you know our capital has no maturity. So it looks quite different in the capital stack and debt. And so I think you see a lot of customers who've now watched the volatility in the market over the past 10 or 15 years. That long term low price very consistent capital is a benefit in markets like this where rates have moved up pretty quickly and volatility gets added. This is the part of the capital structure that's in a very long term and very stable. So that's also a benefit that I think people are now starting to realize is worth quite a bit.

Speaker Change: Thank you very much.

Operator: But as you say, we also always point out that, you know, our capital has no maturity, so it looks quite different in the capital stack than debt. And so I think you see a lot of customers who've now watched the volatility in the market over the past 10 or 15 years. That long-term, low-priced, very consistent capital is a benefit in markets like this, where rates have moved up pretty quickly, and volatility gets added. This is the part of the capital structure that's very long-term and very stable. So that's also a benefit that I think people are now starting to realize is worth quite a bit.

Speaker Change: Go ahead.

Speaker Change: So as I say, we also always point out that, you know, our

Speaker Change: Capital has no maturity, so it looks quite different in the capital stack than debt.

Speaker Change: And so I think you see a lot of customers who've now watched the volatility in the market over the past 10 or 15 years.

Speaker Change: That long-term, low-priced, very consistent capital is a benefit in markets like this, where rates have moved up pretty quickly, and volatility gets added. This is the part of the capital structure that's—

Speaker Change: You know, very long-term and very stable, so that's also a benefit that I think people are now starting to realize is worth quite a bit.

Jay Sugarman: But it just seems like such an attractor product.

Operator: It just seems like such an attractive product. Where is Mez? I've seen pitch books around on Mez, or preferred financing on apartments. Where are rates today? I know it varies, but are they generally below teens or something?

Timothy Doherty: Where is Mezz? I've seen pitch books around on mezz or preferred financing on apartment. Where rates today? I know it varies, but they generally don't go teens or something. Yeah, it depends on the asset class. Multi-families again been pressed down pretty far. So you're seeing low double digits there. And then you know if you go into other asset classes or development deals, you start to see it go into the teens and match closer to where prep and LP capital is looking to get returns in the mid, mid teens to upper teens. Jones, not really just an incredible amount.

Speaker Change: It just seems like such an attractive product. Where is Mez? I've seen pitch books around on Mez or preferred financing on apartments. Where are rates today? I know it varies, but are they generally below teens or something?

Operator: Yeah, I mean, it depends on the asset class. Multifamily has again been pressed down pretty far. So you're seeing, you know, low double digits there. And then, you know, if you go into other asset classes or development deals, you start to see it go into the teens and match, you know, closer to where PREP and LP capital is looking to get returns in the mid teens and upper teens.

Speaker Change: Yeah, it depends on the asset class. Multifamily, again, has been pressed down pretty far. So you're seeing low double digits there. And then if you go into other asset classes or development deals, you'll start to see it go into the teens and match closer to where PREF and LP capital is looking to get returns in the mid-teens to upper-teens.

Operator: They're really just incredible. And that just leads me to a bigger picture question. I've asked it before, and it's directed to you, Jay, but in terms of running my model looking at sort of 10 years, the origination forecast, annual origination in June, assuming a 65, you know, sort of 35 debt equity mix. You know, when commercial real estate prices and their clearing levels are established, what do you think the annual origination volume one right is for Safehold? Are we talking a billion, a billion and a half, two billion plus? I mean, you know, just give me some help with plugging in that number, you know, 10 years out.

Jay Sugarman: This leads me to a bigger picture question. I've asked it before, and distracted to you, Jay, but in terms of, I run my model, looking at sort of 10 years, the origination for a casual origination, you know, it's sort of 35 dead equity. When commercial real estate prices and their clearing levels are established, what do you think the annual origination volume one rate is for Safehold? Are we talking a billion, a billion, a half, two billion plus? You know, just give me some help with plugging in that number, you know, 10 years out. Yeah, look, we built the company to do a billion plus a year, so we certainly have the resources, and good years have been north of that.

Jay S. Sugarman: Now really just incredible and that just leads me to a bigger picture question I've asked it before and it's directed to you Jay but in terms of I run my model looking at sort of ten years

Speaker Change: annual origination, assuming a 65, you know, sort of 35

Jay S. Sugarman: When commercial real estate prices and their clearing levels are established, what do you think the annual origination volume one right is for Safehold? Are we talking a billion, billion and a half, two billion plus? Just give me some help with plugging in that number ten years out.

Operator: Yeah, look, we built the company to do a billion plus a year. So we certainly have the resources, and good years have been north of that.

Speaker Change: Yeah, look, we built the company to do a billion plus a year, so we certainly have the resources.

Jay Sugarman: And obviously, right now transaction activity in the market is less than we like, but, you know, if you're plugging in long term, we think, you know, certainly the billion dollar level growing over time is the number we're shooting for internally. This is a big market. This is a big market opportunity. I've used the analogy before between what happened in corporate real estate, where triple net lease, you know, efficiencies have created a multi-trillion dollar industry. Those same efficiencies, we think, should be available to all commercial real estate owners, not just corporate real estate owners. And so we think this is an opportunity to make the entire industry better and more efficient and give them longer term, more stable capital.

Speaker Change: And good years have been north of that, and obviously right now transaction activity in the market is less than we'd like, but, you know, if you're plugging in long-term, we think, you know...

Operator: And obviously, right now, transaction activity in the market is less than we'd like. But, you know, if you're plugging in for the long term, we think, you know, certainly, the billion-dollar level growing over time is the number we're shooting for internally. This is a big market. This is a big market opportunity. I've used the analogy before between what happened in corporate real estate, where triple net lease, you know, efficiencies have created a multi-trillion dollar industry. Those same efficiencies, we think, should be available to all commercial real estate owners, not just corporate real estate owners.

Speaker Change: Certainly the billion-dollar level growing over time is the number we're shooting for internally. This is a big market. This is a big market opportunity.

Speaker Change: I've used the analogy before between what happened in corporate real estate where triple net lease

Speaker Change: Thank you.

Speaker Change: Efficiencies have created a multi-trillion dollar industry. Those same efficiencies we think should be available to all commercial real estate owners, not just corporate real estate owners.

Operator: And so we think this is an opportunity to make the entire industry better and more efficient and give them longer-term, more stable capital. So I think, you know, if we really can break through with all product types and all the markets we've been doing business in, certainly a billion dollars feels, you know, like the minimum we would want to be shooting for as the business stabilizes, matures, and stabilizes.

Speaker Change: And so we think this is an opportunity to make the entire industry better and more efficient and give them longer term, more stable capital.

Jay Sugarman: So, I think, you know, if we really can break through with on all product types and all the markets we've been doing business in, certainly a billion dollars feels, you know, like the minimum we would want to be shooting for as the business stable, you know, matures and stabilizes. But right now, you know, we're still building this business. The biggest opportunities are still ahead of us. And so we're not, we're patient, but we're not patient. So we'd like to get back to what I know our team can do. We've seen it before. And when the market picks up, I think you'll see us, you know, pick up with it.

Speaker Change: So, I think, you know, if we really can break through on all product types and all the markets we've been doing business in, certainly a billion dollars feels...

Speaker Change: You know like the minimum we would want to be shooting for as the business stable, you know matures and stabilizes But right now, you know, we're still building this business The biggest opportunities are still ahead of us

Operator: But right now, you know, we're still building this business. The biggest opportunities are still ahead of us. And so, you know, we're not patient, but we're not waiting. So we'd like to get back to what I know our team can do. We've seen it before. And when the market picks up, I think you'll see us pick up with it.

Speaker Change: And so we're patient, but we're not patient. So we'd like to get back to what I know our team can do. We've seen it before, and when the market picks up, I think you'll see us pick up with it.

Jay Sugarman: Great. I mean, with all your advantages, have you seen any competition? I mean, there was a few guys several years ago, but maybe with the moat around your business, have you seen anyone try to get into this? You know, we're still obviously the only public company. We have seen some smaller private players. It's been a struggle because if you don't have the investment grade ratings and you don't have the access to capital. We have it's a it's a different business, but there will be niches that others can fill. Certainly, as you heard, Tim said we try to stick to our underwriting standards as best we can.

Operator: Great. With all your advantages, have you seen any competition? I mean, I know there were a few guys several years ago, but with the moat around your business, have you seen anyone try to get into this? You know, we're still obviously...

Speaker Change: Great. With all your advantages, have you seen any competition? I know there was a few guys several years ago, but with the moat around your business, have you seen anyone try to get into this?

Operator: You know, we're still obviously the only public company, but we have seen some smaller private players.

Operator: It's been a struggle because if you don't have the investment grade ratings and you don't have the access to capital we have, it's a different business. But there will be niches that others can fill. Certainly, as you heard Tim say, we try to stick to our underwriting standards as best we can. Some others, you know, could certainly take more risk and get higher yields. That's not our play today, but right now, I think we really like our position.

Speaker Change: You know, we're still obviously the only public company. We have seen some smaller private players. It's been a struggle because if you don't have the investment grade ratings and you don't have the access to capital we have, it's a...

Speaker Change: It's a different business, but there will be niches that others can fill. Certainly, as you heard Tim say, we try to stick.

Jay Sugarman: Some others, you know, could certainly take more risk and get higher yields. That's not our play today. But right now, I think we really like our position. We've spent an awful lot of capital really building intellectual property. And I think just scale in this business matters. So we think the public format with investment grade ratings serves our customers best. And we want to really continue to pursue that path. Yeah, and have the market get back to where we saw it when we started the business. This should be a very large business.

Tim: to our underwriting standards as best we can. Some others, you know, could certainly take more risk and get higher yields. That's not our play today, but, you know, right now I think we really like our position. We've spent, you know, an awful lot of

Operator: We've spent an awful lot of capital really building intellectual property, and I think just scale in this business matters. So we think the public format with investment grade ratings serves our customers best, and we want to really continue to pursue that path. You know, and have the market get back to where we saw it when we started the business, which is that this should be a very large business.

Speaker Change: Capital really building intellectual property and I think just scale in this business matters.

Speaker Change: We think the public format with investment grade ratings serves our customers best, and we want to really continue to pursue that path.

Speaker Change: And have the market get back to where we saw it when we started the business, which is this should be a very large business.

Operator: Great, thank you. Thank you.

Speaker Change: Great, thank you.

Pearse Hoffmann: Mr. Hoffmann, we have no further questions. Great.

Operator: Thank you. Mr. Hoffman, we have no further questions.

Speaker Change #100: Thank you.

Speaker Change #100: Mr. Hoffman, we have no further questions.

Operator: Great. If you do have any additional questions on today's earnings release, please feel free to reach out to me directly. Operator, would you please give the conference call replay instructions once again? Thanks.

Operator: If you do have any additional questions on today's earnings release, please feel free to reach out to me directly.

Speaker Change #101: Great. If you do have any additional questions on today's earnings release, please feel free to reach out to me directly. Operator, would you please give the conference call replay instructions once again? Thanks.

Operator: Operator, would you please give the conference call replay instructions once again. Thanks. Thank you, sir. The dial-in information for the replay is 877-481-4010, but the confirmation code is 50921.

Operator: Thank you, sir. The dial-in information for the replay is 877-481-4010, with the confirmation code of 50921. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Speaker Change #102: Thank you, sir.

Speaker Change #103: The dial-in information for the replay is 877-481-4010 with the confirmation code of 50921.

Operator: This concludes today's conference, and you may disconnect your lines at this time. And we thank you for your patience.

Speaker Change #103: This concludes today's conference and you may disconnect your lines at this time and we thank you for your participation.