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Letter to Shareholders:

By some measures, 2022 was a strong year for Safehold. We saw continued customer growth, we grew revenue and earnings significantly, and we took the first tangible steps to unlock the sizable value of CARET.

2021 2022
Revenue +45% $187.0m $270.3m
Net Income +38% $71.4m
$98.5m(excl ~$37m from one-time gains & merger/CARET costs)
EPS +22% $1.32
$1.61(excl ~$0.60/sh from one-time gains & merger/CARET costs)
CARET sales na $2 billion valuation

In addition, we built on the momentum in the core business by announcing an important strategic combination with iStar, which closed on March 31, 2023, to enable us to become internally managed and materially increase shareholder liquidity. By simplifying our corporate structure, bringing all our intellectual property in house and improving our access to capital, we believe the combination will put Safehold in an excellent position to continue expanding its modern ground lease platform and to drive returns for shareholders. As part of the transaction, we also welcomed a valuable new strategic investor in MSD Partners and saw the ratings agencies put us on positive outlook.

Unfortunately, a worsening macro environment and interest rates moving up at an historic pace resulted in a sharp decline in our share price during the year, overwhelming the many positives above and obscuring the intrinsic value of the existing portfolio and platform we have built. With the logistics of the merger process effectively putting us on pause for the last quarter of the year and most of the first quarter of 2023, we have not been able to effectively counter this negative backdrop. Now that the merger has closed, and as markets stabilize, we expect to get back to business and will work hard to expand the number of investors who we believe will find our business and the ground lease asset class a compelling opportunity.

Safehold’s business

Our goal from the beginning has been to create a better ground lease model – better for customers and better for investors.

Better for customers

Working with a wide array of customers, we have expanded to over 30 markets and grown our portfolio of ground leases from $339m at IPO five years ago to over $6 billion today, demonstrating the value customers are seeing in our new and improved modern ground lease. By providing lower cost capital, reducing maturity risk, and lowering transaction costs in the future, Safehold’s ground lease helps owners and developers of high quality buildings enhance their returns and lower their risk profile. We are especially pleased by the wide range of owners, property types, and leasehold lenders that have worked with us over the past year.

Better for investors

For investors, we take ground leases’ historically proven ability to create generational wealth and make it even better:

Traditional Ground Lease Investment Safehold Ground Lease Business
Location Single location Diversified
Structure Complicated Standardized
Liquidity Private Publicly traded
Portfolio Static Growing

While owners of traditional ground leases located in good markets have enjoyed attractive risk-adjusted returns in many cases, the benefits of owning a diversified portfolio of ground leases versus a concentrated portfolio, and most importantly, owning a continually growing portfolio versus a static portfolio, enable Safehold to deliver an even better fundamental investment opportunity and to do so with more liquidity - all while working to provide customers with lower cost and more efficient capital so they too can maximize their returns.

The ability to create a lower cost of capital for customers and deliver exceptional risk-adjusted returns for investors is possible due to the capital efficiency a modern ground lease provides and the overall value creation that results. The pie gets bigger, and both the property owner and Safehold are beneficiaries. This win-win opportunity gives us conviction that the modern ground lease will continue to grow in importance in the overall real estate industry as more and more owners become familiar with its benefits.


While our ground lease portfolio generates a rent stream that is quite attractive relative to other long term, low risk bond alternatives (ground leases are similarly low risk but have higher IRRs and additional inflation kickers), it also comes with significant embedded capital gains that can be realized in the future. The mark to market value of these embedded future ownership interests can be estimated quarterly and represents a highly attractive source of wealth creation with many positive investment attributes. We have separated out interests in this second value-creating component and call it CARET.

During 2022, we began offering small amounts of CARET for sale to sophisticated investors and were very pleased with the strong levels of interest we received. A first round sale of just under $25m of CARET was done at a $1.75 billion valuation for just this component of Safehold’s portfolio with investors receiving attractive liquidity protections. Later in the year, as part of the merger, a second, similarly sized round was led by MSD Partners with participation from several first round investors. This round was structured to close at the time of the merger completion and did not include the investor protections offered in the first round, yet saw the implied valuation of CARET increase to $2 billion.

With Safehold owning all of the CARET units except for the ~3% of units sold in these two small offerings and the 15% of units set aside in a prior shareholder approved management incentive program, CARET represents a very sizable component of value for shareholders that does not yet appear to be reflected in the share price of Safehold. We will be very focused on the steps we can take to further highlight this value in the coming year.

Final thoughts

Our many successes in 2022 proved to be no match for the macro headwinds that began with the Russian invasion of Ukraine and were amplified by the Fed’s ongoing fight against inflation. Yet the underlying value of our business has never been clearer to us. With a highly skilled and experienced team in place and a continually growing customer base, the strategic actions we took this year are another important step forward as we continue to make ground leases an asset class that anyone can invest in and almost everyone should want in their portfolios.

We thank you for your support and look forward to much success in the future,


Jay Sugarman
Chairman & Chief Executive Officer