Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

The following table presents the carrying value and fair value for the Company’s financial instruments ($ in millions):


	As of March 31, 2023				As of December 31, 2022
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Assets
Net investment in sales-type leases⁽¹⁾	$	3,140	$	3,402	$	3,107	$	3,236
Ground Lease receivables⁽¹⁾		1,431		1,631		1,375		1,501
Loans receivable, net - related party⁽¹⁾		112		112		—		—
Cash and cash equivalents⁽²⁾		20		20		20		20
Restricted cash⁽²⁾		28		28		28		28

Liabilities
Debt obligations, net⁽¹⁾
Level 1		739		584		738		573
Level 3		3,163		2,764		2,783		2,358
Total debt obligations, net		3,902		3,348		3,521		2,931

(1)

The fair value of the Company’s net investment in sales-type leases, Ground Lease receivables and loans receivable, net – related party are classified as Level 3 within the fair value hierarchy. The fair value of the Company’s debt obligations traded in secondary markets are classified as Level 1 within the fair value hierarchy and the fair value of the Company’s debt obligations not traded in secondary markets are classified as Level 3 within the fair value hierarchy.

(2)	The Company determined the carrying values of its cash and cash equivalents and restricted cash approximated their fair values and are classified as Level 1 within the fair value hierarchy.

Schedule of Purchase Consideration for Acquisition of iStar

The table below shows the Company’s purchase consideration for the acquisition of iStar ($ in thousands):


Total Company shares as purchase price⁽¹⁾		1,195,034
Stock price of the Company’s common stock⁽²⁾	$	29.78
Fair value of the Company's stock transferred		35,588
Cash consideration paid by the Company to iStar		88,685
Purchase consideration	$	124,273

(1)

The total post-Merger shares of the Company to be held by iStar shareholders includes 12.7 million shares that were issued as consideration for the investment in Old SAFE previously held by iStar as of December 31, 2022 that were retired in connection with the Merger. Accordingly, these shares are excluded from the purchase consideration as they are reflected as a treasury stock repurchase and retirement by Old SAFE.

(2)	Based on the closing price of Old SAFE’s common stock as of March 30, 2023, representing the final closing price prior to the effective time of the Merger.

Schedule of Identifiable Tangible and Intangible Assets Acquired and Liabilities Assumed


Cash and cash equivalents	$	3,213
Real estate		1,508
Equity investments⁽¹⁾		61,247
Deferred expenses and other assets⁽²⁾		25,442
Total assets acquired		91,410

Accounts payable, accrued expenses and other liabilities⁽³⁾		(22,939)
Debt obligations⁽⁴⁾		(99,995)
Total liabilities assumed		(122,934)

Net identifiable liabilities assumed		(31,524)

Purchase consideration	$	124,273
Add: net identifiable liabilities assumed		31,524
Goodwill⁽⁵⁾		155,797

(1)	Equity investments were valued using discount rates between 7.2% and 13.9% and are classified as Level 3 within the fair value hierarchy.

(2)

Deferred expenses and other assets includes $11.0 million attributable to operating lease right of use assets, $4.7 million attributable to prepaid expenses resulting from the settlement of iStar’s compensation plans, $2.1 million attributable to in-place prepaid contracts, $1.3 million attributable to office furniture and equipment and $6.3 million attributable to other receivables.

(3)

Accounts payable, accrued expenses and other liabilities primarily includes a $14.2 million operating lease liability. In addition, under the Merger Agreement, iStar was required to fund its share of merger-related costs and to provide sufficient cash to fund any unresolved corporate obligations and accrued liabilities or costs yet-to-be incurred prior to the Merger. Accounts payable, accrued expenses and other liabilities includes approximately $8.7 million of obligations assumed from iStar, which are offset with corresponding amounts in cash and cash equivalents and amounts receivable in deferred expenses and other assets, net sufficient to settle such obligations.

(4)	Debt obligations were valued using a discount rate of 6.7% and are classified as Level 3 within the fair value hierarchy.

(5)	Goodwill is calculated as the excess of purchase consideration over the fair value of the net identifiable assets acquired and primarily relates to the acquisition of iStar’s workforce and future synergies expected to be realized after the completion of the merger.

Schedule of Pro Forma Revenues and Net Income (Loss)

The following table summarizes the Company's pro forma revenues and net income (loss) for the three months ended March 31, 2023 and 2022 as if the Merger described in Note 1 was completed on January 1, 2022 ($ in thousands):


	For the Three Months Ended March 31,
	2023		2022
Pro forma revenues	$	97,256	$	69,593
Pro forma net income (loss)		34,288		(73,578)



(1)	The pro forma revenues and net income (loss) are presented for informational purposes only and may not be indicative of what the actual results of operations of the Company would have been assuming the transaction occurred on January 1, 2022, nor do they purport to represent the Company’s results of operations for future periods. For the three months March 31, 2022, pro forma net loss includes $46.7 million of merger expenses (including $20.3 million of merger expenses borne by iStar) and a $42.1 million loss on extinguishment of debt, both of which are non-recurring in nature. Due to the Merger closing on March 31, 2023, the revenue and net income of the acquiree for the three months ended March 31, 2023 had an immaterial impact on the Company’s total revenues and net income for the three months ended March 31, 2023.