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Safehold (SAFE) - 2024 Q4 - Earnings Call Transcript
SAFESafehold (SAFE)2025-02-06 18:25
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Financial Data and Key Metrics Changes - For Q4 2024, GAAP revenue was 91.9million,netincomewas91.9 million, net income was 26.0 million, and earnings per share (EPS) was 0.36.ThedeclineinGAAPearningsyearoveryearwasprimarilyduetoaone−time0.36. The decline in GAAP earnings year over year was primarily due to a one-time 15.2 million derivative hedge gain recognized in Q4 2023. Excluding this, Q4 EPS increased approximately 1% year over year [28][29][70] - For the full year, GAAP revenue was 365.7million,netincomewas365.7 million, net income was 105.8 million, and EPS was 1.48.TheincreaseinGAAPearningsyearoveryearwasdrivenbya1.48. The increase in GAAP earnings year over year was driven by a 145.4 million non-cash impairment of goodwill and 22.1millionofmergerandCarrot−relatedcoststakenin2023[29][30][71]BusinessLineDataandKeyMetricsChanges−In2024,neworiginationactivitywas22.1 million of merger and Carrot-related costs taken in 2023 [29][30][71] Business Line Data and Key Metrics Changes - In 2024, new origination activity was 225 million, including ten new ground leases for 193millionandoneleaseholdloanfor193 million and one leasehold loan for 32 million. The total portfolio was 6.8billion,withanestimatedUCAof6.8 billion, with an estimated UCA of 9.1 billion, GLTV of 49%, and rent coverage of 3.5 times [20][65][66] - The ground lease portfolio has grown twenty times since the IPO, with 147 assets and 85 multifamily ground leases, increasing exposure from 8% at IPO to 58% today [26][69] Market Data and Key Metrics Changes - The company reported strong activity in the affordable housing sector, with a focus on stable cash flows and high occupancy rates. The economic yield for new 2024 originations was 7.3% [11][20][21] - The portfolio's GLTV increased slightly in Q4, and rent coverage remained unchanged at 3.5 times [35][36] Company Strategy and Development Direction - The company plans to double its efforts in the multifamily market, particularly in the affordable sector, aiming to double last year's affordable volume and expand to at least two new states in 2025 [11][12][54] - A new share buyback authorization of up to 50millionhasbeenapproved,withthegoalofbeingleverageneutralandrecyclingcapitalfromexistingportfoliothroughassetsalesorjointventures[13][14][56]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatwhileinterestratesposedheadwinds,theyexpectratestocomedownovertime,turningcurrentchallengesintofutureopportunitiesformoredealsandhighercashflowvalues[10][52]−Thecompanyisfocusedonscalingitsbusinessandbelievesthereissignificantlong−termvalueinitsassetsthatiscurrentlyunrecognizedbythemarket[96][112]OtherImportantInformation−Thecompanyendedthequarterwithapproximately50 million has been approved, with the goal of being leverage neutral and recycling capital from existing portfolio through asset sales or joint ventures [13][14][56] Management's Comments on Operating Environment and Future Outlook - Management noted that while interest rates posed headwinds, they expect rates to come down over time, turning current challenges into future opportunities for more deals and higher cash flow values [10][52] - The company is focused on scaling its business and believes there is significant long-term value in its assets that is currently unrecognized by the market [96][112] Other Important Information - The company ended the quarter with approximately 1.3 billion of liquidity, supported by potential available capacity in joint ventures [24][65] - The credit profile is strong, with ratings of A3 from Moody's, A- from Fitch, and BBB+ with a positive outlook from S&P [62][78] Q&A Session Summary Question: Can you talk about the pipeline and the focus on affordable housing? - Management indicated good activity in the affordable housing sector, with strong momentum in multifamily and conventional markets, particularly in supply-constrained areas [87][90] Question: What are the differences in affordable housing transactions compared to conventional ones? - Management explained that while the cost of capital remains low, affordable housing transactions involve multiple funding sources, making the structure more complex but beneficial for developers [100][102] Question: What is the expected overhead for 2025? - Management expects gross overhead to be in the low 40millionrange,withnetoverheadimpactedbymanagementfees[106][108]Question:Howdoesthecompanyviewbuybacksversusneworiginations?−Managementaimstobalancebothbuybacksandscalingthebusiness,startingwitha40 million range, with net overhead impacted by management fees [106][108] Question: How does the company view buybacks versus new originations? - Management aims to balance both buybacks and scaling the business, starting with a 50 million buyback authorization while pursuing growth opportunities [112][114] Question: Can you provide more details on opening up Carrot to more investors? - Management is working on enhancing liquidity and expanding the investor base for Carrot, with plans to make progress in 2025 [116][118] Question: Are economic yields for affordable multifamily ground leases higher than traditional ones? - Management confirmed that while yields are similar, affordable multifamily ground leases may offer tighter coverage due to their stability [137]