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Other Investments | 12 Months Ended
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Dec. 31, 2018
Investments, All Other Investments [Abstract] |
Other Investments | Other Investments The Company's other investments and its proportionate share of earnings (losses) from equity method investments were as follows ($ in thousands):
| Carrying Value |  | Equity in Earnings (Losses)
| As of December 31, |  | For the Years Ended December 31,
| 2018 |  | 2017 |  | 2018 |  | 2017 |  | 2016
Real estate equity investments |  |  |  |  |  |  |  |  |
Safety, Income & Growth Inc. ("SAFE")(1)(2) | $ | 149,589 |  |  | $ | 83,868 |  |  | $ | 4,711 |  |  | $ | 551 |  |  | $ | — |
iStar Net Lease II LLC ("Net Lease Venture II") | 16,215 |  |  | — |  |  | (333 | ) |  | — |  |  | — |
iStar Net Lease I LLC ("Net Lease Venture")(3) | — |  |  | 121,139 |  |  | 4,100 |  |  | 4,534 |  |  | 3,567 |
Other real estate equity investments(2)(4) | 130,955 |  |  | 102,616 |  |  | (4,112 | ) |  | 6,520 |  |  | 63,875 |
Subtotal | 296,759 |  |  | 307,623 |  |  | 4,366 |  |  | 11,605 |  |  | 67,442 |
Other strategic investments(5) | 7,516 |  |  | 13,618 |  |  | (9,373 | ) |  | 1,410 |  |  | 9,907 |
Total | $ | 304,275 |  |  | $ | 321,241 |  |  | $ | (5,007 | ) |  | $ | 13,015 |  |  | $ | 77,349 |
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(1) | On January 2, 2019, the Company made an additional $250.0 million cash investment in newly designated limited partnership units (the "Investor Units") of SAFE's operating partnership ("SAFE OP") (refer to Note 19). For the year ended December 31, 2017, equity in earnings is for the period from April 14, 2017 to December 31, 2017.
(2) | 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, 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.
(3) | The Company consolidated the assets and liabilities of the Net Lease Venture on June 30, 2018 (refer to Net Lease Venture below).
(4) | During the year ended December 31, 2018, the Company recorded a $6.1 million impairment on a land and development equity method investment due to a change in business strategy. During the year ended December 31, 2016, a majority-owned consolidated subsidiary of the Company sold its interest in a real estate equity method investment for net proceeds of $39.8 million and recognized equity in earnings of $31.5 million, of which $10.1 million was attributable to the noncontrolling interest. In addition, the Company received a distribution from one of its real estate equity method investments and recognized equity in earnings during the year ended December 31, 2016 of $11.6 million.
(5) | For the year ended December 31, 2018, equity in earnings (losses) includes a $10.0 million impairment on a foreign equity method investment due to local market conditions.
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 and through December 31, 2018, the Company purchased 2.4 million shares of SAFE's common stock for $45.7 million, representing an average cost of $18.69 per share, pursuant to 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. The Company also purchased an additional 133,524 shares of SAFE's common stock in open market and negotiated transactions for $2.2 million, representing an average cost of $16.39 per share. As of December 31, 2018, the Company owned approximately 41.8% of SAFE's common stock outstanding. A wholly-owned subsidiary of the Company is the external manager of SAFE and is entitled to a management fee. In connection with the Company's $250.0 million cash investment in Investor Units of SAFE OP (refer to Note 19), the management agreement was amended on January 2, 2019. Highlights of the management agreement terms are included below:
• | We received no management fee through June 30, 2018, which covered the first year of the management agreement;
• | We receive a fee equal to 1.0% of total SAFE equity (as defined in the management agreement) up to $1.5 billion; 1.25% of total SAFE equity (for incremental equity of $1.5 billion - $3.0 billion); 1.375% of total SAFE equity (for incremental equity of $3.0 billion - $5.0 billion); and 1.5% of total SAFE equity (for incremental equity over $5.0 billion);
• | Fee to be paid in cash or in shares of SAFE common stock, at the discretion of SAFE's independent directors;
• | The stock will be locked up for two years, subject to certain restrictions;
• | There is no additional performance or incentive fee;
• | From January 1, 2019 through June 30, 2022, the management agreement is non-terminable by SAFE except for cause; and
• | Automatic annual renewals thereafter, subject to non-renewal upon certain findings by SAFE's independent directors and payment of termination fee equal to three times the prior year's management fee, subject to SAFE having raised $820 million of total equity since inception.
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 waived both the management fee and certain of the expense reimbursements through June 30, 2018. For the six months ended June 30, 2018, the Company waived $1.8 million and $0.8 million, respectively, of management fees and expense reimbursements. For the six months ended December 31, 2018, the Company recorded $1.8 million and $0.7 million, respectively, of management fees and expense reimbursements. In the fourth quarter 2018, the Company received 45,941 shares of SAFE's common stock for payment of the management fee for the three months ended September 30, 2018. Subsequent to December 31, 2018, the Company was issued 46,020 shares of SAFE's common stock for payment of the management fee for the three months ended December 31, 2018. 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. Following is a list of investments that the Company has transacted with SAFE: 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 had an initial term of one year and was extended for an additional year and will be used for the renovation of a medical office building in Atlanta, GA. $17.0 million of the loan was funded as of December 31, 2018. During the year ended December 31, 2018, the Company recorded $1.4 million of interest income on the loan. 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. In May 2018, the Company provided a $19.9 million leasehold mortgage 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 acquisition of 100 and 200 Glenridge Point, two multi-tenant office buildings in Atlanta, GA. During the year ended December 31, 2018, the Company recorded $1.4 million of interest income on the loan. The transaction was approved by the Company's and SAFE's independent directors. In June 2018, the Company sold two industrial facilities located in Miami, FL to a third-party and simultaneously structured and entered into two Ground Leases. The Company then sold the two Ground Leases to SAFE. Net proceeds from the transactions totaled $36.1 million and the Company recognized a $24.5 million gain on sale. The transactions were approved by the Company's and SAFE's independent directors. 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 venture on all new net lease investments. The Company and its partner had joint decision making rights pertaining to the acquisition of new investments. Upon the expiration of the investment period on June 30, 2018, the Company obtained control of the venture through its unilateral rights of management and disposition of the assets. As a result, the expiration of the investment period resulted in a reconsideration event under GAAP and the Company determined that the Net Lease Venture is a VIE for which the Company is the primary beneficiary. Effective June 30, 2018, the Company consolidated the Net Lease Venture as an asset acquisition under ASC 810. The Company recorded a gain of $67.9 million in "Gain on consolidation of equity method investment" in the Company's consolidated statement of operations as a result of the consolidation. The Net Lease Venture had previously been accounted for as an equity method investment. The Company has an equity interest in the Net Lease Venture of approximately 51.9% and recorded a $188.3 million increase to "Noncontrolling interests" and $11.8 million increase to "Redeemable noncontrolling interest" on the Company's consolidated balance sheet as a result of the consolidation. The Company acquired the redeemable noncontrolling interest in the fourth quarter 2018. The Company is responsible for sourcing new opportunities and managing the venture and its assets in exchange for a management fee and incentive 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% of any incentive fee received based on the 47.5% partner's interest. During the year ended December 31, 2017, the Net Lease Venture acquired industrial properties for $59.0 million. During the year ended December 31, 2017, the Company sold a net lease asset for proceeds of $6.2 million, which approximated its carrying value net of financing, to the Net Lease Venture and derecognized the associated $18.9 million financing. During the year ended December 31, 2017, the Company made contributions of $49.2 million to the Net Lease Venture and received distributions of $26.0 million from the Net Lease Venture. During the year ended December 31, 2016, the Net Lease Venture acquired two office properties and the Company made contributions to the Net Lease Venture of $37.7 million. In November 2016, the Net Lease Venture placed five year non-recourse financing of $29.0 million on one of its net lease assets. Net proceeds from the financing were distributed to the members of which the Company received $13.2 million. As of December 31, 2017, the venture's carrying value of total assets was $658.3 million. During the years ended December 31, 2018, 2017 and 2016, the Company recorded $1.3 million, $2.1 million and $1.6 million, respectively, of management fees from the Net Lease Venture. The management fees are included in "Other income" in the Company's consolidated statements of operations. In addition, beginning after the Company's consolidation of the Net Lease Venture on June 30, 2018 and after the effect of eliminations, the Company earned $0.7 million of management fees with respect to services provided to other investors in the Net Lease Venture, which was recorded as a reduction to "Net income attributable to noncontrolling interests" in the Company's consolidated statements of operations. Net Lease Venture II—In July 2018, the Company entered into a new venture ("Net Lease Venture II") with an investment strategy similar to the Net Lease Venture. The Net Lease Venture II has a right of first offer on all new net lease investments (excluding Ground Leases) originated by the Company. The Company has an equity interest in the new venture of approximately 51.9%, which will be accounted for as an equity method investment, and is responsible for managing the venture in exchange for a management fee and incentive fee. During the year ended December 31, 2018, the Company recorded $0.4 million of management fees from the Net Lease Venture II. In December 2018, Net Lease Venture II acquired four buildings comprising 168,636 square feet (the "Properties") located in Livermore, CA. Net Lease Venture II acquired the Properties for $31.2 million which are 100% leased with four separate leases and which each have 10 years of term remaining. Other real estate equity investments—As of December 31, 2018, the Company's other real estate equity investments include equity interests in real estate ventures ranging from 16% to 95%, comprised of investments of $65.6 million in operating properties and $65.3 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 $63.8 million in land assets. In August 2018, the Company provided a $33.0 million mezzanine loan, of which $28.4 million was funded as of December 31, 2018, to an unconsolidated entity in which the Company owns a 50% equity interest. As of December 31, 2018, the loan is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheet. During the year ended December 31, 2018, the Company recorded $1.1 million of interest income on the mezzanine loan. In December 2016, the Company sold a land and development asset for $36.0 million to a newly formed unconsolidated entity in which the Company owns a 50.0% equity interest. The Company recognized a gain of $8.8 million, reflecting the Company's share of the interest sold to a third party, which was recorded as "Income from sales of real estate" in the Company's consolidated statements of operations. As a result of the adoption of ASU 2017-05, on January 1, 2018, the Company recorded an increase to retained earnings of $8.8 million, bringing the Company's aggregate gain to approximately $17.6 million. The Company and its partner both made $7.0 million contributions to the venture and the Company provided financing to the entity in the form of a $27.0 million senior loan, of which $27.0 million and $25.4 million was funded as of December 31, 2018 and 2017, respectively, and is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheets. The Company received $17.6 million of net proceeds from the sale of the asset. This entity is a VIE and the Company does not have a controlling interest due to shared control of the entity with its partner. During the years ended December 31, 2018, 2017 and 2016, the Company recorded $2.1 million, $1.9 million and $0.1 million, respectively, of interest income on the senior loan. Other strategic investments—As of December 31, 2018 and 2017, the Company also had investments in real estate related funds and other strategic investments in real estate entities. Summarized investee financial information—The following tables present the investee level summarized financial information of the Company's equity method investments ($ in thousands):
|  | As of December 31, |  |  | For the Years Ended December 31,
|  | 2018 |  | 2017 |  |  | 2018 |  | 2017 |  | 2016
Balance Sheets |  |  |  |  |  | Income Statements |  |  |  |  |
Total assets |  | $ | 2,118,045 |  |  | $ | 2,493,798 |  |  | Revenues | $ | 262,970 |  |  | $ | 261,867 |  |  | $ | 272,281 |
Total liabilities |  | 1,016,502 |  |  | 1,169,125 |  |  | Expenses | (187,257 | ) |  | (167,999 | ) |  | (227,720 | )
Noncontrolling interests |  | 2,007 |  |  | 13,258 |  |  | Net income attributable to parent entities | 75,056 |  |  | 91,633 |  |  | 42,209 |
Total equity attributable to parent entities |  | 1,099,536 |  |  | 1,311,415 |  |  |  |  |  |  |  |

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