Safehold Inc. (NYSE: SAFE) announced significant achievements in its fourth quarter of fiscal 2025, highlighting strategic initiatives aimed at enhancing shareholder value in the coming year. Executives communicated that the company made “good progress on a number of fronts,” with a focus on increasing origination volumes, gaining visibility into the valuation of its subsidiary Caret, and initiating its share repurchase program when market conditions permit.
Chairman and CEO Jay Sugarman acknowledged the ongoing challenges faced by the company but emphasized the positive momentum as it moves into 2026. He noted 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 the cost of capital. Sugarman outlined management’s goals for the upcoming year, including increasing ground lease volume and making Caret’s value more apparent to investors.
In the fourth quarter, Safehold completed ten transactions, including nine ground leases and one leasehold loan, representing a total investment of $167 million. The majority of these ground leases were located in affordable housing projects across Southern California, with one significant deal in Cambridge, Massachusetts, which also incorporated a leasehold loan.
Brett Asnas, Chief Financial Officer, described the fourth quarter as “productive” for both new investments and capital markets. He reported that the company received a credit ratings upgrade from S&P to A-, achieving single-A ratings across all major agencies. This upgrade is expected to positively impact Safehold’s cost of capital.
The company also secured a $400 million unsecured term loan during the quarter, which will help refinance upcoming debt due in 2027, enhance liquidity, and replace existing secured debt with a lower-cost, unsecured option.
For the full fiscal year 2025, Safehold reported total originations of $429 million, closing 17 ground leases worth $277 million and four leasehold loans totaling $152 million. The company’s portfolio grew to $7.1 billion, with an estimated unrealized capital appreciation of $9.3 billion, driven largely by new investments.
Asnas highlighted that the portfolio currently earns a cash yield of 3.8% and an annualized yield of 5.4% for GAAP earnings, while the economic yield stands at 5.9%. He noted the potential for these yields to increase further, particularly in light of inflation adjustments and Caret’s valuation.
In the question-and-answer segment, Sugarman reiterated the significance of Caret, describing it as a “massive asset” that is currently undervalued in the market. He expressed a commitment to enhancing visibility for Caret and exploring various options for monetization or liquidity.
As Safehold eyes 2026, buybacks have become a focal point, with management aiming to execute them in a leverage-neutral manner while remaining disciplined with its debt levels. Asnas stated the importance of maintaining a debt-to-equity ratio around 2.0x, indicating that each $240 million in new funding would raise this ratio by one-tenth of a turn.
The company is also exploring opportunities to expand its affordable housing initiatives beyond California. Executive Vice President Steve Wylder mentioned that while California represents a significant market, Safehold is in discussions to pursue various transactions in other states.
Finally, executives addressed ongoing legal matters related to Park Hotels, revealing limited details but confirming a court date set for the first quarter of 2027. They expect the litigation to incur costs in the “several million” range.
Safehold Inc. continues to redefine land ownership for commercial property owners, offering innovative solutions through perpetual ground leases. The company’s diversified portfolio spans multiple sectors, including office, multifamily, industrial, and retail, all focused on high-quality properties in major markets across the United States.
