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, 2019		December 31, 2018		2019			2018
Real estate equity investments
Safehold Inc. ("SAFE")	$	402,052	$	149,589	$	7,316		$	1,472
iStar Net Lease II LLC ("Net Lease Venture II")	5,630		16,215		(86		)	—
iStar Net Lease I LLC ("Net Lease Venture")⁽¹⁾	—		—		—			2,084
Other real estate equity investments	107,090		130,955		(2,123		)	270
Subtotal	514,772		296,759		5,107			3,826
Other strategic investments	7,227		7,516		202			(494		)
Total	$	521,999	$	304,275	$	5,309		$	3,332

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(1)	The Company consolidated the assets and liabilities of the Net Lease Venture on June 30, 2018 (refer to Net Lease Venture below).

Safehold Inc.—Safehold Inc. ("SAFE"), formerly known as Safety, Income & Growth Inc., is a publicly-traded company formed by the Company primarily to acquire, own, manage, finance and capitalize ground leases. Ground leases generally represent ownership of the land underlying commercial real estate projects that is net leased by the fee owner of the land to the owners/operators of the real estate projects built thereon ("Ground Leases"). As of March 31, 2019, the Company owned approximately 42.4% of SAFE's common stock outstanding.

On January 2, 2019, the Company purchased 12,500,000 newly designated limited partnership units (the "Investor Units") in SAFE's operating partnership ("SAFE OP"), at a purchase price of $20.00 per unit, for a total purchase price of $250.0 million. The purpose of the investment was to allow SAFE to fund additional Ground Lease acquisitions and originations.

The Investor Units have the following features:


•	the right to receive equivalent distributions per unit to those paid on one share of SAFE common stock;


•	no voting rights;


•	non-transferable prior to June 30, 2019;


•	no automatic conversion or exchange rights; and


•	limited protective consent rights.

SAFE has agreed to seek stockholder approval to exchange the Investor Units for shares of SAFE common stock, on a one-for-one basis.

The Investor Units represent an approximate 40.6% fully diluted economic interest in SAFE. After giving effect to the issuance of the Investor Units, the Company's aggregate fully diluted economic interest in SAFE (including the shares of SAFE common stock and Investor Units owned by the Company) is approximately 65.8%; however, the Company's voting power in SAFE will remain capped at 41.9%, as a result of the limitations described below.

In connection with the Company's purchase of the Investor Units, it entered into a Stockholder's Agreement with SAFE on January 2, 2019. The Stockholder's Agreement:


•	limits the Company's discretionary voting power to 41.9% of the outstanding voting power of SAFE's common stock until its aggregate ownership of SAFE common stock is less than 41.9%;


•	requires the Company to cast all of its voting power in favor of three director nominees to SAFE's board who are independent of each of the Company and SAFE for three years;


•	subjects the Company to certain standstill provisions for two years;


•	restricts the Company's ability to transfer shares of SAFE common stock issued in exchange for Investor Units, or "Exchange Shares," for one year after their issuance;


•	prohibits the Company from transferring shares of SAFE common stock representing more than 20% of the outstanding SAFE common stock in one transaction or a series of related transactions to any person or group, other than pursuant to a widely distributed public offering, unless SAFE's other stockholders have participation rights in the transaction; and


•	provides the Company certain preemptive rights.

A wholly-owned subsidiary of the Company is the external manager of SAFE and is entitled to a management fee. Following are the key terms of the management agreement:


•	The Company received no management fee through June 30, 2018, which covered the first year of the management agreement;


•	The Company receives 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 is 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.

During the three months ended March 31, 2019, the Company recorded $1.5 million of management fees and during the three months ended March 31, 2018, the Company waived $0.9 million of management fees pursuant to its management agreement with SAFE.

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 certain of the expense reimbursements through June 30, 2018. For the three months ended March 31, 2019, the Company was reimbursed $0.5 million of expense reimbursements. For the three months ended March 31, 2018, the Company waived $0.4 million of expense reimbursements pursuant to its management agreement with SAFE.

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 for the periods presented:

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 is for the renovation of a medical office building in Atlanta, GA. As of March 31, 2019, $18.0 million of the loan was funded. During the three months ended March 31, 2019 and 2018, the Company recorded $0.5 million and $0.2 million of interest income, respectively, 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 a $7.2 million leasehold improvement allowance, which was fully funded as of March 31, 2019; 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 was for the acquisition of 100 and 200 Glenridge Point, two multi-tenant office buildings in Atlanta, GA. During the three months ended March 31, 2019, the Company recorded $0.6 million of interest income on the loan. The transaction was approved by the Company's and SAFE's independent directors.

In January 2019, the Company committed to provide a $13.3 million loan to the ground lessee of a Ground Lease originated at SAFE. The loan is for the conversion of an office building into a multi-family property in Washington, DC. As of March 31, 2019, $11.9 million of the loan was funded. During the three months ended March 31, 2019, the Company recorded $0.2 million of interest income on the loan. The transaction was approved by the Company's and SAFE's independent directors.

In February 2019, the Company acquired the leasehold interest in a net lease property and simultaneously entered into a new 98-year Ground Lease with SAFE (refer to Note 4). The transaction was 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." 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 three months ended March 31, 2018, the Company recorded $0.6 million of management fees from the Net Lease Venture. The management fees are included in "Other income" in the Company's consolidated statements of operations. Beginning after the Company's consolidation of the Net Lease Venture on June 30, 2018 and after the effect of eliminations, the Company earned $0.4 million of management fees during the three months ended March 31, 2019 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 three months ended March 31, 2019, 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 that expire in December 2028.

Other real estate equity investments—As of March 31, 2019, the Company's other real estate equity investments include equity interests in real estate ventures ranging from 16.0% to 95.0%, comprised of investments of $62.4 million in operating properties and $44.7 million in land assets. As of December 31, 2018, the Company's other real estate equity investments included $65.6 million in operating properties and $65.3 million in land assets.

In August 2018, the Company provided a mezzanine loan with a principal balance of $31.2 million and $30.5 million as of March 31, 2019 and December 31, 2018, respectively, to an unconsolidated entity in which the Company owns a 50% equity interest. As of March 31, 2019 and December 31, 2018, the loan is included in "Loans receivable and other lending investments, net" on the Company's consolidated balance sheet. During the three months ended March 31, 2019, the Company recorded $0.7 million of interest income on the mezzanine loan.

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. The Company provided financing to the entity in the form of a $27.0 million senior loan, all of which was funded as of March 31, 2019 and December 31, 2018 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, 2019 and 2018, the Company recorded $0.5 million and $0.5 million of interest income, respectively, on the senior loan.

Other strategic investments—As of March 31, 2019 and December 31, 2018, 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, 2019 and 2018 ($ in thousands):



	Revenues		Expenses			Net Income Attributable to Parent Entities
For the Three Months Ended March 31, 2019
SAFE	$	21,820	$	(10,683	)	$	6,619

For the Three Months Ended March 31, 2018
SAFE	$	11,693	$	(7,950	)	$	3,720