Safehold Revenue Rises as Originations More Than Double
The company originated $150 million of ground leases, an $82 million sequential increase.
Safehold (SAFE), the ground-lease company, posted a 22% increase in second-quarter revenue as new hotel operations and higher sales-type lease income lifted its top line.
Revenue reached $114.6 million, up from $93.8 million a year earlier, while net income attributable to common shareholders rose 8% to $30.2 million. Earnings increased to $0.42 a share from $0.39 a share. Sequential revenue growth slowed to 3.3% from 13.3% in the first quarter, even as net income and earnings advanced from $28.9 million and $0.40 a share, respectively.
Year-to-date figures showed a wider gap between top-line growth and earnings. Revenue rose 18% to $225.5 million, while net income attributable to common shareholders increased 3% to $59.0 million. Excluding nonrecurring items, net income and earnings were flat at $59.0 million and $0.82 a share.
New hotel operations contributed $15.9 million of revenue after Safehold assumed responsibility for two former Park Hotels properties whose ground leases expired in December. The Park portfolio generated $3.1 million of quarterly cash net operating income, up from $2.4 million a year earlier, though its year-to-date cash NOI declined to $5.5 million from $8.6 million.
Sales-type lease interest income rose 8.9% to $76.9 million, while operating-lease income fell 5.4% and equity-method investment earnings declined 21.4%. Interest expense increased 7.7% and general and administrative expense rose 10.9%, leaving operating income growth of 18.1% below the pace of revenue growth. The implied operating margin narrowed to about 24.6% from 25.5%.
Safehold completed seven multifamily ground-lease originations during the quarter, more than doubling its first-quarter volume. Of the new commitments, $69 million had been funded by quarter-end and $81 million remained unfunded, compared with $4 million of unfunded ground-lease commitments included in first-quarter originations. Aggregate ground-lease gross book value rose 5.5% to $7.32 billion, while forward commitments more than doubled to $188 million.
Estimated unrealized capital appreciation increased to $9.8 billion from $9.5 billion in the first quarter and $9.3 billion at year-end. Safehold also formed a $348 million joint venture with Brookfield covering seven ground leases, retaining future call options after Brookfield acquired a 49% interest.
The company placed $225 million of 30-year unsecured notes carrying a 4.0% starting cash coupon and a 5.83% effective yield after realized hedge gains. Safehold also repurchased 850,000 shares during the quarter at an average price of $15.17.