Now for the valuation, the company trades at a P/FFO of 18.73x. That's definitely on the lower side for any REIT, but as you'll see SAFE is not really a dividend play, but rather a turnaround play on price upside. The quarterly dividend is $0.177 per share which translates into a 2.8% yield. The downside of this is high interest rate sensitivity which is the primary reason the stock has sold off so much as interest rates went up. Moreover, they have a weighted average debt maturity of 23 years which is a bit plus. In 2026, they have to repay $970k which is debt from their revolver, but since that's quite far in the future, they will have plenty of time to refinance. This is great, because it means essentially no interest rate risk with regards to their interest expense. They have $900 million available on a credit line and in cash combined and no maturities until the end of 2025. SAFE has $4.2 billion of outstanding debt. On the flip side, their balance sheet is healthy and BBB+ rated. But again since SAFE is a unique REIT the results are likely to stabilize and return to normal which I will go into in the valuation. These results are heavily affected by the merger because if it were not accounted for it the net income would have increased by 6% and earnings per share would have decreased by only 2%. YoY, the revenue increased by 30%, however, the net income decreased by 81%, earnings per share by 82%, and their expenses basically doubled. Even if the tenant is unable to pay the rent, which is unlikely since it is quite small in relation to the value of the building, SAFE will then own the building so they are sort of insured in case of tenant defaults.Īs I mentioned before, their Q1 results are a bit unstable but I would still like to go over them. This is not that important though because SAFE is unlikely to be affected by it. The tenants' buildings are mostly office spaces which account for 44% of the portfolio, than multifamily with 37%, and hotel with 12%. Right now, SAFE owns 131 properties with the largest part in Manhattan (24%), Washington D.C. Another great thing is that after the 99 years, SAFE will own anything that stands on the land. Moreover, they have extremely long lease terms so as an investor you are not going to be affected by tenants withdrawing from the contract since SAFE has leases for 99 years resulting in a remaining average lease term of 93 years. Because the tenant does not own the land but only the building on top of it they are sort of bound to pay the rent unless they sell the building. The company recently went through a merger with iSTAR so their most recent results are all over the place, however, the company does have a unique advantage thanks to what they do. Today I want to look at an interesting REIT, Safehold ( NYSE: SAFE), which focuses only on investment grade ground leases.
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