Safehold Inc. (NYSE: SAFE) announced significant progress in its fourth quarter of fiscal 2025, detailing strategic priorities aimed at enhancing shareholder value in 2026. During an earnings call, executives emphasized objectives including increasing origination volume, improving visibility into the value of Caret, and potentially initiating a share repurchase program as market conditions permit.
Chairman and CEO Jay Sugarman acknowledged ongoing challenges but expressed optimism about the company’s momentum heading into 2026. He highlighted the recent appointment of Michael Trachtenberg as president, the expansion of Safehold’s affordable housing platform, and efforts to strengthen the balance sheet while reducing capital costs.
In the fourth quarter, Safehold completed ten transactions, comprising nine ground leases and one leasehold loan, totaling an aggregate commitment of $167 million. Notably, eight of the ground leases were focused on affordable housing in Southern California, with the remaining deal located in Cambridge, Massachusetts. This transaction also included a leasehold loan, which management described as a comprehensive capital solution for the client.
Brett Asnas, Chief Financial Officer, labeled the fourth quarter as “productive,” particularly in terms of new investments and capital market activities. Safehold received a credit ratings upgrade from S&P to A- with a stable outlook, marking a positive shift in the company’s cost of capital. Additionally, the company secured a $400 million unsecured term loan, which refinanced upcoming debt obligations and enhanced liquidity.
For the entire fiscal year, Safehold achieved total originations of $429 million, with the portfolio valued at $7.1 billion at year-end. Asnas reported that the company closed 17 ground leases and four leasehold loans, with a combined commitment of $429 million. The financial metrics indicated solid performance, with underwritten rent coverage at 3.2x and a ground lease-to-value ratio of 34%.
As of the end of the fiscal year, Safehold estimated unrealized capital appreciation at $9.3 billion, up approximately $200 million from the previous quarter. Asnas explained that this increase was primarily driven by external growth from new investments.
The company reported fourth-quarter GAAP revenue of $97.9 million, resulting in a net income of $27.9 million, or $0.39 per share. The increase in earnings was attributed to net accretion on investment fundings, which partially offset a nonrecurring loss related to early debt extinguishment. For the full year, Safehold achieved GAAP revenue of $385.6 million and net income of $114.5 million, translating to an annual earnings per share of $1.59.
Discussions during the call highlighted key performance indicators, such as a current portfolio cash yield of 3.8% and a 5.4% annualized yield for GAAP earnings. The economic yield stands at 5.9%, with potential for growth from contractual adjustments tied to inflation. Asnas noted that using the Federal Reserve’s long-term break-even inflation rate of 2.25%, the economic yield could increase to 6.1%, further enhanced by unrealized capital appreciation associated with Safehold’s significant ownership interest in Caret.
In response to inquiries about the Caret valuation, Sugarman reiterated that the asset represents a substantial opportunity that has yet to be adequately recognized by investors. He acknowledged the perception of Caret’s value being linked to long-term assets but indicated that Safehold believes it can realize this value much sooner.
Management also discussed plans for share buybacks in 2026, while maintaining a disciplined approach to leverage. Asnas mentioned that the company aims to keep its debt-to-equity ratio around 2.0x or lower, emphasizing that each $240 million in funding increases leverage by one-tenth of a turn.
Looking ahead, Safehold is exploring opportunities to expand its affordable housing initiatives beyond California. Steve Wylder, Executive Vice President and Head of Investments, stated that while California remains a focus due to its large market, the company is investigating various state-specific regulations and has multiple transactions in the pipeline.
Finally, executives provided updates regarding ongoing legal matters related to Park Hotels, indicating that a court date is set for the first quarter of 2027. Sugarman noted that while the company is limited in what it can disclose, the litigation process is expected to incur significant costs.
Safehold Inc. aims to redefine land ownership within the commercial real estate sector, primarily through the acquisition of perpetual ground leases, enabling property owners to maximize land value without losing operational control. The company’s portfolio encompasses various sectors, including office, multifamily, industrial, and retail properties across major U.S. markets.
