Safehold Inc. Earnings Call: Growth Amid Challenges

Safehold Inc. ((SAFE)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for Safehold Inc. presented a balanced view, highlighting strong new origination activity and positive pipeline growth, while also acknowledging market challenges and a decline in GAAP earnings. Despite these hurdles, the company maintains a solid financial position, supported by strategic hedging. However, concerns linger over the Park Hotels portfolio and broader market conditions.

New Origination Activity and Customers

Safehold Inc. reported impressive new origination activity, reaching approximately $220 million. This includes four ground leases valued at $123 million and three leasehold loans totaling $97 million. The addition of four new customers to the platform underscores the company’s growth potential and its ability to attract new business.

Increased Pipeline and Engagement

The company has seen a steady increase in the pace of signed Letters of Intent (LOIs), now at its highest level since 2022. This growth is primarily driven by success in the affordable housing segment, indicating strong future growth prospects and increased engagement in the market.

Solid Financial Position

Safehold ended the quarter with approximately $1.2 billion in liquidity, bolstered by potential capacity in joint ventures. The portfolio’s economic yield was reported at a robust 7.2%, reflecting the company’s strong financial health and strategic management.

Strategic Hedging Benefits

The company’s active hedging strategy has yielded significant benefits, producing cash interest savings and gains over the past 18 months. This approach has enhanced Safehold’s financial stability, providing a buffer against market volatility.

Market Challenges

Despite positive developments, Safehold faces challenging market conditions. Macro volatility continues to influence deal closures, particularly affecting larger customers, posing ongoing challenges for the company.

Decline in GAAP Earnings

Safehold experienced a decline in GAAP earnings year-over-year, attributed to a $1.7 million increase in noncash general provision for credit losses. This has impacted the company’s earnings per share, highlighting areas for potential improvement.

Park Hotels Portfolio Concerns

There is uncertainty surrounding two hotels in the Park Hotels portfolio, as the tenant may not renew past the year-end. This situation could potentially affect Safehold’s future income, adding an element of risk to the company’s portfolio.

Forward-Looking Guidance

Looking ahead, Safehold’s guidance for the second quarter of 2025 includes new origination activity of approximately $220 million, with a total portfolio standing at $6.9 billion. The company maintains a strong liquidity position with $1.2 billion available and a well-managed debt profile, with no corporate maturities due until 2027. This positions Safehold well for future growth and stability.

In conclusion, Safehold Inc.’s earnings call reflected a balanced sentiment, with strong new origination activity and pipeline growth countered by market challenges and a decline in GAAP earnings. The company’s solid financial position and strategic hedging provide a foundation for future stability, though concerns over the Park Hotels portfolio and market conditions remain. Investors will be keen to see how Safehold navigates these challenges in the coming quarters.