Other Investments

The Company's other investments and its proportionate share of earnings from equity method investments were as follows ($ in thousands):



					Equity in Earnings (Losses)
	Carrying Value as of				For the Three Months Ended March 31,
	March 31, 2018		December 31, 2017		2018			2017
Real estate equity investments
iStar Net Lease I LLC ("Net Lease Venture")	$	132,103	$	121,139	$	2,084		$	981
Safety, Income & Growth Inc. ("SAFE")⁽¹⁾	146,991		83,868		1,472			—
Marina Palms, LLC ("Marina Palms")⁽¹⁾	4,670		2,555		1,489			3,117
Other real estate equity investments⁽¹⁾	126,855		100,061		(1,219		)	1,357
Subtotal	410,619		307,623		3,826			5,455
Other strategic investments	12,234		13,618		(494		)	247
Total	$	422,853	$	321,241	$	3,332		$	5,702

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(1)

On January 1, 2018, the Company recorded a step-up in basis to fair value of its retained noncontrolling interest relating to the sale of its Ground Lease business (refer to note 4) and other transactions where the Company sold or contributed real estate to a venture and previously recognized partial gains. Prior to the adoption of ASU 2017-05 (refer to Note 3), the Company was required to recognize gains on only the portion of its interest transferred to third parties and was precluded from recognizing a gain on its retained noncontrolling interest, which was carried at the Company’s historical cost basis.

Net Lease Venture—In February 2014, the Company partnered with a sovereign wealth fund to form the Net Lease Venture to acquire and develop net lease assets and gave a right of first offer to the Net Lease Venture on all new net lease investments. The Company has an equity interest in the Net Lease Venture of approximately 51.9%. This entity is not a VIE and the Company does not have controlling interest due to the substantive participating rights of its partner. The partners plan to contribute up to an aggregate $500 million of equity to acquire and develop net lease assets over time. The Company is responsible for sourcing new opportunities and managing the venture in exchange for a promote and management fee. Several of the Company's senior executives whose time is substantially devoted to the Net Lease Venture own a total of 0.6% equity ownership in the venture via co-investment. These senior executives are also entitled to an amount equal to 50.0% of any promote payment received based on the 47.5% partner's interest. The Net Lease Venture's investment period was extended from March 31, 2018 to June 30, 2018 during the first quarter 2018.

As of March 31, 2018 and December 31, 2017, the venture's carrying value of total assets was $740.7 million and $658.3 million, respectively. During the three months ended March 31, 2018 and 2017, the Company recorded management fees of $0.6 million and $0.5 million, respectively, from the Net Lease Venture which are included in "Other income" in the Company's consolidated statements of operations.

Safety, Income & Growth Inc.—The Company and two institutional investors capitalized SIGI Acquisition, Inc. ("SIGI") on April 14, 2017 to acquire, manage and capitalize Ground Leases. The Company contributed $55.5 million for an initial 49.1% noncontrolling interest in SIGI and the two institutional investors contributed an aggregate $57.5 million for an initial 50.9% controlling interest in SIGI. A wholly-owned subsidiary of the Company that held the Company's Ground Lease business and assets merged with and into SIGI on April 14, 2017 with SIGI surviving the merger and being renamed Safety, Income & Growth Inc. ("SAFE"). Through this merger and related transactions, the institutional investors acquired a controlling interest in the Company's Ground Lease business. The Company's carrying value of the Ground Lease assets was approximately $161.1 million. Shortly before the Acquisition Transactions, the Company completed the $227.0 million 2017 Secured Financing on its Ground Lease assets (refer to Note 10). The Company received all of the proceeds of the 2017 Secured Financing. The Company received an additional $113.0 million of proceeds in the Acquisition Transactions, including $55.5 million that the Company contributed to SAFE in its initial capitalization. As a result of the Acquisition Transactions, the Company deconsolidated the 12 properties and the associated 2017 Secured Financing. The Company accounted for this transaction as an in substance sale of real estate and recognized a gain of $123.4 million, reflecting the aggregate gain less the fair value of the Company's retained interest in SAFE. As a result of the adoption of ASU 2017-05, on January 1, 2018, the Company recorded an increase to retained earnings of $55.5 million, bringing the Company's aggregate gain on the sale of its Ground Lease business to approximately $178.9 million.

On June 27, 2017, SAFE completed its initial public offering (the "Offering") raising $205.0 million in gross proceeds and concurrently completed a $45.0 million private placement to the Company. In addition, the Company paid $18.9 million in organization and offering costs of the up to $25.0 million in organization and offering costs it agreed to pay in connection with the Offering and concurrent private placement. The Company expensed the portion of offering costs that was attributable to other investors in "Other expense" in the Company's consolidated statements of operations and capitalized the portion of offering costs attributable to the Company's ownership interest in "Other investments" on the Company's consolidated balance sheets. Subsequent to the initial public offering, the Company purchased 2.2 million shares of SAFE's common stock for $41.7 million, representing an average cost of $18.67 per share, pursuant to two 10b5-1 plans in accordance with Rules 10b5-1 and 10b-18 under the Securities and Exchange Act of 1934, as amended, under which the Company could buy shares of SAFE's common stock in the open market. As of March 31, 2018, the Company had utilized all of the availability authorized in the 10b5-1 Plans and owned approximately 39.9% of SAFE's common stock outstanding.

In addition, subsequent to SAFE's initial public offering, trusts established by Jay Sugarman, the Company's Chairman and Chief Executive Officer, and Geoffrey Jervis, the Company's former Chief Operating Officer and former Chief Financial Officer, purchased 26,000 shares in the aggregate of SAFE's common stock for an aggregate $0.5 million, representing an average cost of $19.20 per share, pursuant to a 10b5-1 plan in accordance with Rules 10b5-1 and 10b-18 under the Securities and Exchange Act of 1934, as amended.

A wholly-owned subsidiary of the Company is the external manager of SAFE and is entitled to a management fee, payable solely in shares of SAFE's common stock, equal to the sum of 1.0% of SAFE's total equity up to $2.5 billion and 0.75% of SAFE's total equity in excess of $2.5 billion. The Company is not entitled to receive any performance or incentive compensation. The Company is also entitled to receive expense reimbursements, including for the allocable costs of its personnel that perform certain legal, accounting, due diligence tasks and other services that third-party professionals or outside consultants otherwise would perform. The Company has agreed to waive both the management fee and certain of the expense reimbursements through June 30, 2018. For the three months ended March 31, 2018, the Company waived $0.9 million of management fees and $0.4 million of expense reimbursements. The Company has an exclusivity agreement with SAFE pursuant to which it agreed, subject to certain exceptions, that it will not acquire, originate, invest in, or provide financing for a third party’s acquisition of, a Ground Lease unless it has first offered that opportunity to SAFE and a majority of its independent directors has declined the opportunity.

In August 2017, the Company committed to provide a $24.0 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan has an initial term of one year and will be used for the renovation of a medical office building in Atlanta, GA. $10.3 million of the loan was funded as of March 31, 2018. The transaction was approved by the Company's and SAFE's independent directors.

In October 2017, the Company closed on a 99-year Ground Lease and a $80.5 million construction financing commitment to support the ground-up development of Great Oaks Multifamily, a to-be-built 301-unit community within the Great Oaks Master Plan of San Jose, CA. The transaction includes a combination of: (i) a newly created Ground Lease and up to a $7.2 million leasehold improvement allowance; and (ii) a $80.5 million leasehold first mortgage. The Company entered into a forward purchase contract with SAFE under which SAFE would acquire the Ground Lease in November 2020 for approximately $34.0 million. The forward purchase contract was approved by the Company's and SAFE's independent directors.

Marina Palms—As of March 31, 2018, the Company owned a 47.5% equity interest in Marina Palms, a 468 unit, two tower residential condominium development in North Miami Beach, Florida. The 234 unit north tower has one unit remaining for sale as of March 31, 2018. The 234 unit south tower has 30 units remaining for sale as of March 31, 2018. This entity is not a VIE and the Company does not have controlling interest due to shared control of the entity with its partner. As of March 31, 2018 and December 31, 2017, the venture's carrying value of total assets was $30.9 million and $32.4 million, respectively.

Other real estate equity investments—As of March 31, 2018, the Company's other real estate equity investments include equity interests in real estate ventures ranging from 20.0% to 95.0%, comprised of investments of $55.9 million in operating properties and $71.0 million in land assets. As of December 31, 2017, the Company's other real estate equity investments included $38.8 million in operating properties and $61.3 million in land assets.

In December 2016, the Company sold a land and development asset to a newly formed unconsolidated entity in which the Company owns a 50.0% equity interest. This entity is a VIE and the Company does not have a controlling interest due to shared control of the entity with its partner. The Company and its partner each made a $7.0 million contribution to the venture and the Company provided financing to the entity in the form of a $27.0 million senior loan commitment, of which $26.0 million and $25.4 million was funded as of March 31, 2018 and December 31, 2017, respectively, and is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets. During the three months ended March 31, 2018 and 2017, the Company recorded $0.5 million and $0.4 million of interest income, respectively, on the senior loan.

Other strategic investments—As of March 31, 2018 and December 31, 2017, the Company also had investments in real estate related funds and other strategic investments in real estate entities.

Summarized investee financial information—The following table presents the investee level summarized financial information of the Company's equity method investments, which were significant subsidiaries, for the three months ended March 31, 2018 and 2017 ($ in thousands):



	Revenues		Expenses			Net Income
For the Three Months Ended March 31, 2018
Marina Palms	$	12,315	$	(7,873	)	$	4,442

For the Three Months Ended March 31, 2017
Marina Palms	$	23,669	$	(14,911	)	$	8,758